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The week in review: China’s economic recovery continues, Beijing rolls out export control law, revamps commercial bank law

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By Addison Gong
19 Oct 2020

In this round-up, China's economic rebound strengthens in the third quarter, the country’s legislature passes a new law on export control to protect sensitive technology, and the law governing commercial banks faces major revisions.

China’s GDP grew 4.9% year-on-year for the third quarter of 2020, missing expectations of growth over 5%, according to the National Bureau of Statistics. The rebound accelerated from the second quarter’s 3.2%.

“In our view, the number missed the consensus forecast partly because high volatility made forecasting difficult,” said economists at Nomura, who maintained their 5.7% growth projection for the fourth quarter. “[The] September activity data suggest the pace of the domestic recovery of major economic activity was on track.”

September’s industrial production (IP) rose 6.9% compared to a year ago and retail sales by 3.3%, beating consensus forecasts of 5.8% and 1.6%, respectively.

Fixed-asset investment (FAI) grew 7.5% last month, down from 7.6% in August. Property investment growth improved slightly to 12% from 11.8% the previous month, taking the increase in the January-September period to 5.6%

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The National People's Congress, China’s top legislature, has passed a law on export control, effective from December 1. Items subject to controls include military and nuclear products, together with other goods, technologies, services and data related to protecting national security and interest.

Since the 1990s, China has published six different regulations to restrict exports, according to state media Xinhua. The new unified law will provide better legal protection for export controls, Xinhua said.

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China is revising its 25-year-old commercial banking law for the third time. The People’s Bank of China (PBoC) released the new draft law last Friday, giving the public one month to provide their feedback.

Among the proposed changes, China has lifted the minimum requirement for registered capital to Rmb10bn from Rmb1bn for national banks, to Rmb1bn from Rmb100m for city commercial banks, and doubled the current requirement to Rmb100m for rural lenders.

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China has given Shenzhen greater autonomy over reforms in 40 areas, a list published by the National Development and Reform Commission (NDRC) on Sunday showed. The list was in line with a five-year plan rolled out by the central government for the development of the special economic zone.

These include the sale of shares or Chinese Depositary Receipts from innovative companies on the Shenzhen Stock Exchange. More flexibility was also given to the city’s local government bond issuance, including selling offshore renminbi bonds.

China also wants to develop the private fund management industry in the city, providing qualified managers and fund management products with a ‘green channel’ for easier registration and fundraising.

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For the first three quarters of the year, foreign investment in China outside of the financial industry increased 5.2% on an annual basis to Rmb718.81bn, or 2.5% to $103.26bn in dollar terms, according to the Ministry of Commerce (Mofcom). The figures refer to the amount actually invested, rather than previously agreed.

Foreign investment rose for six consecutive months as of September, Mofcom data showed.

China’s non-financial outbound direct investment (ODI) dropped 0.6% yearly to Rmb551.51bn between January and September.

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The total assets of Chinese state-owned enterprises not in the financial sector reached Rmb233.9tr by the end of 2019, according to a State Council report published last Friday. Their total liabilities stood at Rmb149.8tr.

Government-owned financial companies’ total assets and debt stood at Rmb293.2tr and Rmb262.5tr, respectively, at the end of last year.

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China reduced its holding in US treasury bonds for the third consecutive month in August, by $5.4bn to $1.068tr, latest data from the US Department of the Treasury showed.

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The PBoC is actively promoting green finance to help achieve the country’s ‘carbon neutral’ goal, Yi Gang, the central bank governor, said at the International Monetary and Financial Committee video conference held last week.

Yi also said that China supports the G20’s plan of a six-month extension in debt relief for low-income countries, showed an update on the PBoC’s website.

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The China Banking and Insurance Regulatory Commission fined China Construction Bank’s Shenzhen branch Rmb7.31m for illegal lending in the property sector, according to an update on the regulator’s website.

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The Banking Credit Assets Registration and Circulation Center published guidelines for the registration of asset-backed securities (ABS). It requires originators in the banking sector to register with the centre before they start ABS businesses, as well as for the issuance of ABS products. The document detailed the materials and time needed for various registrations.

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Sha Yan, president and chief executive of the Shenzhen Stock Exchange (SZSE), reportedly said the bourse is actively engaged in the trial of real estate investment trusts in the infrastructure sector and has been preparing for the launch of the first batch of these products. More than 20 projects are under review at the SZSE, said Sha, speaking at a conference in Beijing over the weekend.

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The Shenzhen bourse said it has supported the sale of the so-called ‘poverty alleviation bonds’ to help companies in poor areas raise funds. So far, there were 22 such corporate bonds issued on the exchange totalling Rmb12.18bn, it added.


By Addison Gong
19 Oct 2020