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China policy and markets round-up: Beijing to boost digital economy, local government bonds top Rmb6tr, Nafmii launches tender offer trial

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By Addison Gong, Pan Yue
06 Nov 2020

In this round up, China plans to expand its digital economy, local governments issue over Rmb6tr ($906bn) of bonds by October, and the National Association of Financial Market Institutional Investors announces a trial programme for cash tender offers for corporate bonds in the interbank market.


The Caixin China services Purchasing Managers’ Index (PMI) for October was 56.8, its sixth consecutive month of expansion and up from 54.8 in September. The Caixin China manufacturing PMI released earlier this week reached 53.6.

The October Caixin general PMI stood at 55.7 after a 1.2 percentage point increase from September — the fastest since December 2010.

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China is expected to maintain a 15% annual growth in the digital economy between 2020 and 2025, according to the China Development Institute’s forecasts. By 2025, the country’s digital economy will reach Rmb80tr or 55% of China’s GDP. The number will hit Rmb100tr by 2030.

The country plans to accelerate the development of the digital economy and promote the “deep integration” of the digital economy and the real economy, according to the 14th five year plan.

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China will publish a negative list for cross-border trade in services, president Xi Jinping said at the opening ceremony of the China International Import Expo on Wednesday. He added that China will continue to open up in sectors including digital economy and internet, and is looking forward to signing free trade agreements with more countries.

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The Central Comprehensively Deepening Reforms Commission, headed by Xi, has called for the establishment of a delisting system, a crackdown on illegal activities in the securities market, and better cross-border regulatory co-operation. The current delisting procedures should be simplified and more avenues for companies to exit the market need to be introduced, read the minutes from a Monday meeting.

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The China Banking and Insurance Regulatory Commission (CBIRC) asked Chinese banks in a Monday meeting to have a “forward-looking response” to a resurgence of non-performing assets. The regulator plans to continue its risk-disposal work at high-risk financial institutions, as well as cracking down on shadow banking and illegal financial activities.

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The National Association of Financial Market Institutional Investors (Nafmii) announced a trial programme for cash tender offers for corporate bonds issued in the interbank market.

Issuers conducting cash tenders are required to give bondholders between five and 20 business days to participate. Bonds repurchased by the issuers need to be cancelled within five business days after the tender deadline. Cash tenders cannot be conducted before or within two working days of the disclosure of any major events, or within 10 working days before financial results announcements, according to Nafmii’s rules.

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Local governments in China sold nearly Rmb443bn of bonds in October, including Rmb190bn of new issues and Rmb253bn for refinancing, shows Ministry of Finance data.

For the first 10 months of 2020, local governments had raised a total of Rmb6.1tr, with around Rmb4.5tr of new bonds.

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Foreign institutional investors traded Rmb545.4bn of bonds in China’s interbank bond market in October, accounting for around 3% of the total trading activity in the market, according to data from the China Foreign Exchange Trade System. The average daily turnover was Rmb32.1bn.

The net purchase of bonds in October by foreign accounts reached Rmb120.2bn.

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The Shanghai Stock Exchange announced a three year action plan to improve the quality of listed companies. The plan focuses on company governance, information disclosure, system improvement and regulation.

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The Shanghai Futures Exchange will deepen the connectivity between the domestic and international futures markets, its chief supervisor Lu Wenshan said. The exchange will help investors under the Qualified Foreign Institutional Investor (QFII) and RQFII schemes to participate in commodity futures transactions. It also plans to develop more venues for foreign capital to participate in the domestic futures market.

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Tencent-backed Meituan Dianping is considering a secondary listing on either Shanghai’s Nasdaq-style Star market or Shenzhen’s ChiNext board, Caixin reported, citing anonymous sources.

The Hong Kong Stock Exchange-listed food delivery company is consulting with multiple Chinese securities houses, including Citic Securities, Huatai Securities and Huajing Securities, for the listing, said the report. But the company has denied the plan for the time being.

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The State Council has published a plan to develop China’s new energy vehicle (NEV) industry. It plans for the sale of NEVs to make up 20% of total car sales by 2025, and for electric cars to become a mainstream choice of new vehicles by 2035.

In the draft plan published in 2019, China had envisioned NEVs taking up a higher 25% market share.

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The passenger car sales volume of major Chinese automakers rose 10% year-on-year in October, according to data from the China Passenger Car Association.

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The Hang Seng Indexes Company has introduced the Fast Entry Rule for early inclusion of sizable newly listed Mainland stocks in the Hang Seng China Enterprises Index, or the HSCEI.

The rule allows sizable new listings to be added to the index after the close of the 10th trading day, if its market capitalisation on the first trading day – at the market close – ranked within the top 10 among existing HSCEI constituents.

Also subject to the Fast Entry Rule are the Hang Seng Tech Index and the Hang Seng Composite Index.

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The MSCI will include Lufax Holding in its MSCI Global Standard Indices and the MSCI China All Shares Index, starting November 13. Ping An Insurance-backed Lufax priced its $2.4bn IPO of American depositary shares on the New York Stock Exchange at the end of last month. 


By Addison Gong, Pan Yue
06 Nov 2020