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China markets and policy round-up: CCP unveils new five year plan, regulators mull Shenzhen bourse reform, Beijing increases oversight of large developers

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By Addison Gong
30 Oct 2020

In this round-up, the Chinese Communist Party has set goals for the country’s development over the next five years, regulators are ready to streamline the Shenzhen Stock Exchange, and some big property developers have been asked for their monthly financial data.


China’s GDP is expected to exceed Rmb100tr ($14.9tr) in 2020, shows minutes from the Fifth Plenum of the Chinese Communist Party’s 19th Central Committee concluded on Thursday.

The Fifth Plenum outlined a five year plan for 2021-2025, known as the 14th Five Year Plan. China promised to continue opening up “on a larger scale, in wider areas and at a deeper level”, and push for free trade and investment. The country also said it will promote green development.

Compared to the last five year plan, the new one has a more explicit focus on boosting domestic demand as part of the dual circulation strategy, noted economists at HSBC. China’s dual circulation model emphasises domestic production, consumption and distribution, as well as supporting domestic innovation.

“We expect Beijing to speed up on reforms on urban household registration and rural land transfer to boost household consumption in both urban and rural areas,” HSBC said in a Friday report. “More tax cuts and lower barriers to entry for private sector corporates will also be key to boosting overall investment in China in our view.”

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The National Development and Reform Commission, People’s Bank of China (PBoC) and four Chinese ministries jointly published guidelines aimed at speeding up reform of privately-owned enterprises (POEs).

Commercial banks have been asked to provide more credit support to the companies and more medium-to-long term loans to the manufacturing industry. POEs are being encouraged to sell more bonds and list on the National Equities Exchange and Quotations and regional stock exchanges.

Government-related entities have also been told to lower fees for guarantees on financings by POEs.

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The PBoC is taking public feedback for revisions to the central bank law to help “prevent and resolve financial risks and maintain financial stability”.

The revised law will continue to ban the PBoC from buying treasury bonds or extending loans to local governments. It has increased the maximum penalty for illegal activities in the financial markets to Rmb20m. In addition, the law said that no companies and individuals are allowed to create or launch digital currencies.

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Profits at Chinese industrial firms grew 15.9% in the third quarter of 2020, 11.1 percentage points faster than in the previous quarter, according to the National Bureau of Statistics (NBS).

That said, industrial profits for the first nine months dropped 2.4% year-on-year to Rmb4.37tr. Revenues at industrial firms stood at Rmb74.23tr, an annual decrease of 1.5%.

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Revenues from the car manufacturing industry in China reached Rmb5.6tr for the January-September period, representing a 0.5% yearly increase, NBS data showed. The growth for the first eight months had been negative.

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The PBoC conducted a Rmb5bn central bill swap on Wednesday. The three month bills have a coupon of 2.35% and a fee of 0.1%.

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The State Administration of Foreign Exchange (Safe) plans to assign $10bn of new Qualified Domestic Institutional Investor (QDII) quotas, the deputy administrator and spokesperson Wang Chunying said in an interview with state media Xinhua.

The foreign exchange regulator also plans to expand the Qualified Domestic Limited Partnership and Qualified Domestic Investment Enterprise pilot programmes in Beijing, Shanghai and Shenzhen, said Wang.

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Chinese regulators are mulling the merger of Shenzhen Stock Exchange’s board for small and medium-sized enterprises (the SME board) with the mainboard, said onshore media house Caixin.

The mainboard is home to 469 listed companies, with 982 listed on the SME board. The merged board will have a market capitalisation of Rmb21.8tr. In addition to the two, the start-up focused ChiNext board is also under the Shenzhen bourse.

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The China Securities Regulatory Commission (CSRC) has released draft rules on the issuance and trading of corporate convertible bonds, as part of an effort to cool down the country’s overheated CB market.

The rules outlined the issuing conditions and the procedures, and set out requirements regarding the conversion price. Stock exchanges have been asked to come up with trading rules to curb CB speculation and protect investor interest. The new regulations also included measures to improve information disclosure and enhance protection for holders of CBs.

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The central bank plans to lower the requirements for market makers in the interbank bond market and scrap the regulatory approval process. Banks and securities firms will only need to sign a business agreement with the trading platforms to provide bond quotes, instead of having to seek approval from the PBoC to enter the market.

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The Shanghai Technology Exchange, an exchange to trade technologies and promote innovation, was officially launched on Wednesday. It was jointly set up by the Ministry of Science and Technology and the Shanghai municipal government.

There are over 5,000 scientific and technological products ready to enter the exchange, said an announcement. The buy-side demand from institutions — including universities and state-owned companies — that have partnered with the exchange is worth around Rmb400m, and sell-side demand is worth Rmb1bn.

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The total market capitalisation of overseas listed Chinese internet companies reached Rmb16.8tr by the end of September, representing a 12% quarter-on-quarter increase, according to the China Academy of Information and Communications Technology.

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Chinese regulators have told 12 property developers, including China Evergrande Group, Sunac China Holdings and China Vanke Co, to submit monthly reports on their financing, debt and operational data on the 15th of each month, Bloomberg reported.

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Beijing has decided to impose sanctions on three US companies for providing weapons to Taiwan, the Chinese foreign ministry said. Boeing Defense, Space & Security, Lockheed Martin, and Raytheon sold $2bn of missiles to Taiwan.

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A US appeals court rejected a request from the Department of Justice for an immediate removal of WeChat for download from app stores of Apple and Google, according to a Reuters report.

The rejection was on grounds that the US government had failed to demonstrate that it would “suffer an imminent, irreparable injury during the pendency of this appeal, which is being expedited,” said the report.

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Hong Kong-listed Nongfu Spring and Andre Juice have been added to the southbound trading of the Shanghai-Hong Kong Stock Connect, the Shanghai Stock Exchange said.


By Addison Gong
30 Oct 2020