The week in review: Credit growth jumps in August, China tightens screws on financial holding firms, Microsoft loses TikTok bid
In this round-up, China’s August credit data offers a positive surprise, the government introduces greater control on domestic financial holding companies, and ByteDance rejects Microsoft’s offer for TikTok’s US operations in favour of a possible tie-up with Oracle Corp.
Total social financing (TSF) in China increased by Rmb3.58tr ($524bn) in August to Rmb276.74tr, according to data released by the People’s Bank of China (PBoC) last Friday.
New renminbi loans extended to the real economy reached Rmb1.42tr, while outstanding renminbi loans grew 13.3% year-on-year.
“Among major TSF components, government bonds net issuance contributed the most to the acceleration in August,” analysts at Goldman Sachs wrote in a report. “Corporate bond issuance increased from last month despite higher interbank interest rates, suggesting further growth recovery.”
Net new local government and central government bonds hit Rmb1.38tr in August, the highest level on record.
Foreign direct investment into China surged 18.7% year-on-year in August to reach Rmb84.13bn, according to the Ministry of Commerce (Mofcom). In dollar terms, the amount was $12.03bn after a 15% increase. The figures refer to the amount actually invested, rather than previously agreed.
For the first eight months of 2020, FDI stood at Rm619.78bn, which was 2.6% higher than a year ago.
The State Council and the PBoC jointly unveiled rules governing domestic financial holding companies on Sunday. A set of draft rules was published in July last year.
The new regulation requires non-financial companies which control at least two financial institutions doing business across financial sectors to apply to the central bank to set up a financial holding company. They should apply within 12 months of the effective date of the new regulation. The rules will take effect on November 1.
The rules clarified a range of issues including financial holding companies’ market access, registered capital, shareholder qualifications, capital replenishment and risk management.
The new guidelines fill a regulatory loophole that has been exploited by some non-financial companies engaged in the financial industry. For example, the regulation increased the maximum amount of penalty that can be levied on financial holding companies. It also banned financial holding companies from conducting related-party transactions within the financial group, accepting guarantees and funds from subsidiaries and excessively raising funds through selling bonds.
China will allow foreign firms to invest in companies providing virtual private network (VPN) services. More specifically, non-Chinese telecom firms can own up to 50% in VPN joint ventures to provide services to Beijing-based foreign companies, according to Wang Shouwen, vice minister at the Mofcom. The move is part of a plan to further open up the services sector in Beijing city.
Earlier this year, China encouraged local governments to use the proceeds from special purpose bonds to recapitalise smaller banks. The province of Shaanxi has now submitted a plan to use Rmb4.6bn of these bonds to support its rural and city commercial banks. It has asked the China Banking and Insurance Regulatory Commission for approval, according to the 21st Century Business Herald.
The China Securities Regulatory Commission (CSRC) is taking public feedback for regulations on the private fund management industry. The regulator requires private fund managers to concentrate on their core businesses — including fundraising, investment management and advisory — rather than engaging in areas not directly related to private fund management, like financial leasing and lending.
The first batch of four Shanghai Star Market 50 ETF was launched last Friday, the CSRC announced. These ETFs will be benchmarked on the Shanghai Stock Exchange Star 50 Index, which was released in late July.
The four fund management companies are China Asset Management, E Fund Management, Huatai-Pinebridge Fund Management and ICBC Credit Suisse Asset Management.
Jingdong Digits Technology Holding Co, an affiliate of JD.com, has filed an application to list on the Shanghai Stock Exchange’s Star market. The company plans to raise Rmb20bn from its debut. It has hired Guotai Junan Securities and Minmetals Securities as the joint IPO sponsors and lead underwriters.
ByteDance, TikTok’s parent company, has rejected Microsoft’s takeover offer, the US company announced on Sunday local time.
“We are confident our proposal would have been good for TikTok’s users, while protecting national security interest,” Microsoft said in the statement. “To do this, we would have made significant changes to ensure the service met the highest standards for security, privacy online safety, and combatting disinformation, and we made these principles clear in our August statement.”
Oracle Corp has reportedly been selected as the winning bidder for TikTok’s US operations, according to The Wall Street Journal, citing people familiar with the matter. The two will now seek approvals from the White House and the US Committee on Foreign Investment.
Ant Group issued a statement denying that it had provided any facial recognition data to Megvii Technology, a Chinese artificial intelligence company.
The denial came after Lee Kai-Fu, a Taiwanese-born American businessman who is currently based in Beijing and runs Sinovation Ventures, said in a Saturday event that in Megvii’s early days, he helped the company find partners, including Ant and Meitu, and that Megvii acquired “a lot” of facial data from these partners for industry analysis.
Ant also said the company had never been in contact with Lee regarding its cooperation with Megvii. Lee apologised on social media on Saturday evening for the troubles his “slip-up” caused for the three companies.
US senator Marco Rubio urged a national security review to scrutinise Harbin Pharmaceutical Group’s bid to buy GNC Holdings, a Pittsburgh-based vitamin and health supplement retailer.“The acquisition of a major health and nutrition chain with over 5,200 retail stores in the US and an expansive customer base presents the opportunity for state-directed actors to purchase this information legally,” Rubio wrote in a letter to US treasury secretary Steven Mnuchin.