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The week in review: China signs free trade deal with Apac countries, regulator loosens insurers’ equity investment restrictions, AllianceBernstein seeks mutual fund licence

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By Addison Gong
16 Nov 2020

In this round-up, 15 countries in Asia Pacific seal one of the largest ever trade agreements, China’s banking and insurance regulator relaxes rules for equity investments by insurers, and AllianceBernstein Hong Kong eyes a mutual fund licence onshore.


China’s industrial output grew 6.9% year-on-year in October, while retail sales accelerated at a slower-than-expected pace of 4.3%, data from the National Bureau of Statistics showed on Monday. Fixed assets investment was up 1.8% compared to a year ago.

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On Sunday, 15 countries in Asia Pacific, including China, signed the Regional Comprehensive Economic Partnership (RCEP) agreement, covering areas including tariffs, customs administration and investment. One of the biggest trade deals ever sealed, RCEP covers around 30% of the world’s population, GDP and trade based on data from 2019.

Chinese premier Li Keqiang said the deal was “a victory of multilateralism and free trade”. The Chinese Ministry of Finance said it will begin working on tariff cuts.

In addition to China and 10 southeast Asian countries, Australia, Japan, New Zealand and South Korea are also part of the bloc. This was also the first free trade deal between China, Japan and South Korea.

The signing of the agreement demonstrates the countries’ “strong commitment to supporting economic recovery, inclusive development, job creation and strengthening regional supply chains” and their support for “an open, inclusive, rules-based trade and investment arrangement”, said a statement by the heads of state or government of the 15 RCEP nations.

The is critical to the region’s response to Covid-19, and is expected to “play an important role in building the region’s resilience through inclusive and sustainable post-pandemic economic recovery process”, added the statement.

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US president Donald Trump signed an executive order prohibiting US investments in 31 Chinese companies that were designated by the Department of Defense as owned or controlled by the Chinese military. The order was first reported by Reuters at the end of last week.

Both China Telecom Corp and China United Network Communications Group Co's subsidiary China Unicom said in Hong Kong stock exchange filings over the weekend that they expect an impact on their share price.

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The China Banking and Insurance Regulatory Commission issued new guidelines for equity investments by Chinese insurance companies.

The scope of insurers’ equity investment has been expanded beyond just the insurance industry, the financial industry and other insurance-related businesses such as elderly care and healthcare. However, insurers are banned from investing in companies directly engaged in real estate development or sales.

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AllianceBernstein Hong Kong has applied to the China Securities Regulatory Commission for a mutual fund licence, according to an update on the regulator’s website. The application was received last Thursday.

The asset manager joins Fidelity International and Neuberger Berman in seeking to set up mutual funds onshore, while others like Vanguard have also shown interest. BlackRock already secured a licence earlier this year.

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The city of Shanghai is expanding the types of entities eligible for the Qualified Domestic Institutional Investors (QDII) scheme to investment management companies — such as securities and fund management companies — that are set up in Shanghai by domestic and foreign institutions, the municipal government revealed last Friday. The investment scope for QDII investors has also been broadened to include overseas direct investment, securities investment, derivatives investment and others.

In addition, Shanghai will support foreign capital looking to invest in Chinese technology companies through the Qualified Foreign Limited Partnership (QFLP) scheme.

Qualified foreign banks are also supported to taking part in the trading of China government bond futures as well as to apply for an underwriting licence for non-financial bonds issued in the interbank market.

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The People’s Bank of China has issued a notice ordering commercial banks to better serve micro and small-sized enterprises, in light of recent complaints that some lenders have been delaying or denying the companies a means to open accounts, onshore media 21st Century Business Herald reported.

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Consumer finance companies in China have received a window guidance from regulators to keep interest rates of new loans within 15.4%, or four times the one-year loan prime rate (LPR), said 21st Century Business Herald. Four times LPR is the revised ceiling for interest rates for private lending protected by law.

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The total assets at Chinese city commercial banks reached Rmb37.3tr at the end of last year, showing an 8.5% increase compared to the start of 2019, said a report by the China Banking Association. Their total debt rose 8.4% to Rmb34.5tr, while the outstanding loan balance jumped 18.4% to Rmb17.6tr.

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Privately-owned enterprises in China have made nearly Rmb21.1bn of donations related to Covid-19, accounting for 60% of all donations, according to a report by the Chinese Academy of Social Sciences. Central government-owned enterprises contributed close to Rmb4.37bn, and foreign companies Rmb2.51bn.

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The Shenzhen Stock Exchange held its 2020 annual meeting on Saturday. The bourse said it plans to build a bond platform for the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) and explore the connectivity between the bond markets within the GBA.

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The stocks of Anta Sports Products and Meituan have been added to the Hang Seng Index, the Hang Seng Indexes Company announced last Friday in its latest index review.

Names including Alibaba Health Information Technology, China Evergrande Group, China Feihe, Haidilao International Holding, JD.com, NetEase and Semiconductor Manufacturing International Corp have been added to the Hang Seng China Enterprises Index. Nine stocks, including China Vanke Co, have been removed.

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Chinese lithium producer and dollar bond issuer Tianqi Lithium said in a Friday stock exchange filing in Shenzhen that it could default on $1.88bn of loans due at the end of November. The company said it has requested a payment extension, which is yet to be approved by lenders.

The borrowing is part of a $3.5bn loan taken to support its purchase of a 23.8% stake in Chilean miner Sociedad Quimica y Minera de Chile in 2018. The acquisition was worth $4.1bn. 


By Addison Gong
16 Nov 2020