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China policy and markets round-up: Baoshang Bank to start bankruptcy proceedings, Beijing, Hong Kong to expand Stock Connect, India bans more Chinese apps

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By Addison Gong
27 Nov 2020

In this round-up, China’s banking and insurance regulator decides to allow beleaguered Baoshang Bank to go bankrupt, Hong Kong’s chief executive says pre-profit biotech stocks and some Star companies will be added to the Stock Connect programme, and India moves to ban another 43 China-based mobile applications.


Profits at Chinese industrial firms grew 28.2% year-on-year in October to reach Rmb642.9bn ($97.8bn), Friday data from the National Bureau of Statistics showed. The pace of the increase was 18.1 percentage points higher than what was recorded in the previous month.

Industrial profits for the January to October period stood at Rmb5.01tr. The annual growth turned positive for the first time in 2020, at 0.7%. Annual industrial profit growth by the end of September was -2.4%.

Economists at Nomura said in a Friday note that they believe China’s economic recovery “remains largely on track”. “[We] maintain our real GDP growth forecast of 5.7% [year-on-year] for Q4, up from 4.9% in Q3,” they wrote. “We firmly believe Beijing will maintain its policy stance.”

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Chinese state-owned enterprises (SOEs) recorded a 7% annual increase in revenue in October and a 52.5% rise in profits, the latest data from the Ministry of Finance (MoF) showed. For the first 10 months combined, SOE revenues totalled Rmb49.68tr, which was 0.2% higher than a year ago. Profits stood at Rmb2.63tr after a 10% drop year-on-year.

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The total assets of China’s banking industry reached Rmb307.05tr by the end of October after a 10.6% annual increase, showed China Banking and Insurance Regulatory Commission (CBIRC) data. Total debt grew 10.8% year-on-year to Rmb280.91tr.

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The CBIRC has given approval for Inner Mongolia-based Baoshang Bank to begin bankruptcy proceedings, according to a Monday update on the regulator’s website. The approval was dated November 12.

The troubled regional lender was deemed non-viable by the CBIRC and the Chinese central bank. Its Rmb6.5bn onshore tier two capital bonds were fully written down earlier this month.

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The People’s Bank of China (PBoC) published the 2020 third quarter monetary policy implementation report on Thursday. The central bank said it will make prudent monetary policy more flexible and targeted and keep liquidity in the system “reasonably ample”, while staying away from “flood-like” stimulus.

It also plans to help unify corporate bond information disclosure standards, and improve the default risk prevention and disposal mechanism.

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China’s central government supports expanding mutual access between the financial markets in the Mainland and in Hong Kong, said Carrie Lam, the chief executive of the Hong Kong Special Administrative Region, at the annual policy address on Wednesday.

Lam also said that Beijing has agreed to include Hong Kong-listed pre-profit biotechnology companies and certain stocks in Shanghai’s Star market in the Stock Connect programme. In addition, Hong Kong plans to consolidate its position as the “prime platform and a key link” for the Belt and Road Initiative.

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Chen Yulu, deputy governor of the PBoC, said at the China-Singapore (Chongqing) Connectivity Initiative Financial Summit 2020 this week that the central bank will increase communication and regulatory co-operation with the Monetary Authority of Singapore (MAS) to “create better conditions” for the connectivity of the two countries’ financial markets.

Speaking at the summit, Xuan Changneng, deputy director at the State Administration of Foreign Exchange, said that the forex regulator will explore the launch of a Qualified Domestic Limited Partner (QDLP) trial programme in Chongqing.

The China Securities Regulatory Commission will look into the possibility of launching a China-Singapore ETF Connect scheme, its legal head Jiao Jinhong said at the same summit.

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The CBIRC has scrapped the $1bn minimum requirement on total assets for foreign financial institutions to become shareholders in onshore trust companies, beginning January 2021.

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Insurance capital made up 6.49% of the total investment in China’s bond market by the end of the third quarter of 2020, according to the CBIRC.

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UBS Securities has become a secondary dealer in China’s over-the-counter (OTC) options market, according to the Securities Association of China last week, making it the only foreign-controlled securities joint venture allowed to participate in the onshore OTC options market.

The qualification as an OTC derivatives dealer is a reflection of the Chinese securities market’s “encouragement of institutionalised innovative businesses”, and it was “an important step” in the opening up of the country’s financial market to foreign capital, UBS said in a statement in Mandarin.

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The PBoC and the Hong Kong Monetary Authority (HKMA) have renewed their currency swap agreement for another five years while expanding the size to Rmb500bn from Rmb400bn.

“The renewal and expansion of size of the swap agreement will facilitate us to provide liquidity, when necessary, in the offshore RMB market in Hong Kong,” said the HKMA’s chief executive Eddie Yue, in a Wednesday announcement. “This is important in supporting Hong Kong’s continued development as the global offshore RMB business hub.”

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The Chinese MoF sold Rmb5bn of government bonds in Hong Kong on Wednesday. A Rmb3.5bn tap of an existing Rmb7.5bn 2.1% 2022 bond was sold at 99.27 with a yield of 2.55%, and a Rmb1.5bn tap of the government’s outstanding Rmb2.5bn 2.2% 2025 came at 98.03 to yield 2.65%.

Investors placed Rmb10.6bn and Rmb5.65bn of bids for the additional notes, respectively, according to the HKMA.

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Hong Kong Exchanges and Clearing (HKEX) plans to introduce a new settlement acceleration platform for Stock Connect called the HKEX Synapse.

The platform will automate and streamline post-trade processes of the Northbound Connect scheme. Asset managers, brokers, global custodians, local custodians, and clearing participants are all expected to benefit from the “improved connectivity and enhanced capacity to handle the growing volume of trades flowing through Stock Connect”, the HKEX said in a Tuesday announcement.

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China is set to welcome a new listed bank. Shanghai Rural Commercial Bank was given the greenlight by the CSRC for an onshore IPO, the success of which will make it the ninth rural commercial lender to list in the A-share market.

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Taiwanese companies do not face “any regulatory obstacles” to list in the Mainland and enjoy the “exact same treatment” as onshore companies, the spokesperson of the Taiwan Affairs Office of the State Council said in a Wednesday press briefing in Beijing.

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The National Association of Financial Market Institutional Investors (Nafmii) said it has handed over evidence of alleged illegal activities discovered in an investigation into recently defaulted domestic bond issuer Yongcheng Coal and Electricity Group Co to the “relevant securities regulatory departments”.

The Henan government-owned company unexpectedly defaulted on a Rmb1bn bond earlier this month, causing volatility in the onshore debt market.

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The Shanghai Stock Exchange (SSE) published new requirements on listed companies’ information disclosure.

Disclosures should be “reasonable, prudent and objective”, the bourse said, adding that listed companies should focus on their main businesses and “carefully plan” for transactions that have a high premium, high risk or are cross-industry acquisitions.

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The Shanghai bourse has waved through the issuance plans of two Rmb10bn consumer loan asset backed securities by Ant Group’s microlending platforms, Huabei and Jiebei, according to updates on the SSE’s website on Monday and last Friday. The approval came weeks after the unexpected postponement of Ant’s record dual-listing in Hong Kong and Shanghai by Chinese regulators.

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Singapore will award as many as five digital banking licences from a list of 14 eligible candidates including Alibaba’s Ant Group and a joint venture of Bytedance before the end of December, according to a Bloomberg report this week.

“Regulatory tightening that’s happening in China will not have an impact on the digital banks here,” Ravi Menon, managing director of the MAS told the wire in an interview.

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India’s ministry of Electronics and Information Technology announced the ban of another 43 Chinese mobile apps following two rounds of such bans in June and September. The new list features several of Alibaba’s apps, including shopping platform AliExpress and Taobao Live, a streaming site. Apps including Alipay, Baidu and Wechat had previously been disallowed.

“This action was taken based on the inputs regarding these apps for engaging in activities which are prejudicial to [the] sovereignty and integrity of India, defence of India, security of state and public order,” reads a government announcement.

The Chinese foreign ministry said it “strongly opposes” India’s move, urging the country to “immediately correct the discriminatory practice” to “avoid further harm” to the bilateral relationship between China and India.


By Addison Gong
27 Nov 2020