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The week in review: China, US join hands to tackle climate crisis, Citi to exit Mainland consumer banking, CBIRC calms market over Huarong worries

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By Addison Gong
19 Apr 2021

In this round-up, Beijing and Washington pledge to fight climate change together, Citi plans to set up onshore securities and futures companies as it ends consumer banking operations in 13 markets including China, and the banking and insurance regulator reassures the market that Huarong Asset Management Co’s operations are stable.

China and the US have issued a joint statement on climate change, after a meeting in Shanghai between US special presidential envoy for climate, John Kerry, and China’s special envoy for climate change, Xie Zhenhua, last Thursday.

The climate crisis must be addressed “with the seriousness and urgency that it demands” and the two countries are committed to working together as well as with other countries and parties, said the statement published by the US Department of State. This will include enhancing their respective actions and cooperating in multilateral processes, such as the United Nations Framework Convention on Climate Change and the Paris Agreement.

The short-term actions the two countries plan to take include taking “appropriate actions to [maximise] international investment and finance in support of the transition from carbon-intensive fossil fuel based energy to green, low-carbon and renewable energy in developing countries”, and implement the phasedown of hydrofluorocarbon production and consumption, according to the statement.

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Citi plans to pull its consumer banking operations from 13 markets globally including China, chief executive Jane Fraser said late last week.

The move will allow the bank to make “more targeted investment to businesses” where it has “the competitive advantages and scale necessary to drive higher returns for shareholders”, Citi said in a statement seen by GlobalCapital. The US lender plans to put more focus on its wealth and institutional franchises in Asia, including growing its integrated wealth, payments and banking businesses in the Hong Kong and Singapore hubs, according to Peter Babej, CEO for Citi Asia Pacific.

China remains “crucial” to Citi’s strategy and growth, and the consumer banking exit does not change its commitment to China, nor will it have any impact on its institutional businesses in the country, Citi said. The bank added that it is seeking new business opportunities onshore, including setting up a securities company and a futures company.

“Our priority is on supporting all our clients as we transition our franchise towards further opportunities to grow Citi’s institutional franchise in China,” said Christine Lam, CEO of Citi China and president of Citibank (China) Co. She pledged for the bank to continue to assist its Chinese clients in their global expansions and helping foreign companies “tap into the vast opportunities in China”.

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The Shanghai Stock Exchange issued guidelines on Friday to limit IPOs from financial technology companies in the Star market, and ban real estate companies and those that “primarily” engage in financial and investment businesses to list on the Nasdaq-style board.

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The People’s Bank of China has finalised new regulations on anti-money laundering and anti-terrorism financing for financial institutions, having released draft rules at the end of last year. 

Compared to existing regulations which have been in place since 2014, the central bank made a series of revisions, including expanding the types of institutions governed to cover non-bank payment institutions, online microloan companies, banks’ wealth management arms and consumer finance companies. The rules will become effective on August 1. 

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The China Banking and Insurance Regulatory Commission (CBIRC) held a press conference in Beijing on Friday.

The total assets of China’s banking industry increased 9.2% year-on-year in the first quarter of 2021 to Rmb329.6tr, while net profits rose 1.5%, according to the regulator. Total assets at Chinese insurance firms reached Rmb24.3tr after a 11.7% annual increase.

The capital adequacy ratio at commercial banks stood at 14.7% by the end of the first quarter, with insurers’ comprehensive solvency adequacy ratio and core solvency adequacy ratio at 246.3% and 234.3%, respectively.

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Compared to the start of the year, banks’ non-performing loan ratio dropped by 0.02 percentage points to 1.89%, the CBIRC said.

Banks are being encouraged to boost their capital ratios via “appropriate” earnings retention and the issuance of local government special purpose bonds, perpetual capital bond issuance and tier two bonds.

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The CBIRC and the PBoC plan to release measures assessing financial institutions’ performance in inclusive finance in rural areas in China soon. 

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The CBIRC wants more insurance capital to be deployed to equity investments “in an orderly fashion”, said CBIRC’s vice chairman Xiao Yuanqi at the Friday press conference.

Xiao also said that Chinese asset management companies (AMCs) have stable operations, and that their regulatory indicators are within a “normal and reasonable range”. This comment was in response to questions about China Huarong Asset Management Co, which has delayed publishing its 2020 annual report.

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Huarong AMC is “actively co-operating” with auditors to compete the audit of its delayed annual report “as soon as possible”, and the company’s operations remain normal and its liquidity adequate, onshore newspapers including the Shanghai Securities News reported, citing the banking and insurance regulator.

Separately, Chinese regulators have asked some banks not to withhold loans to the AMC, according to a Reuters report.

Its subsidiary, China Huarong Financial Leasing Co, has published its audited 2020 financial statements, Huarong AMC said in a Monday stock exchange filing in Hong Kong.

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The China Securities Investor Service Centre has filed a lawsuit against Kangmei Pharmaceutical Co on behalf of more than 50 investors, making it the first class-action lawsuit against a listed company, China Securities Regulatory Commission (CSRC) said on Friday. Kangmei allegedly committed “intentional and systematic” financial fraud worth Rmb30bn between 2016 and 2018, the regulator said.

The event marks a “milestone” in the development of the onshore capital markets, said the CSRC in an online statement. It added that the introduction of the class-action mechanism to capital markets will help reduce financial crimes, protect the rights of smaller investors who otherwise find it difficult and expensive to sue for damages in securities-related crimes, and improve corporate governance at listed companies.

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The CSRC said it has investigated 59 financial fraud cases since 2020. It urges listed companies in China to abide by what it calls ‘the four bottom lines’, including no disclosure of false information, no insider trading, and no manipulation of stock prices.  

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Net profits at central-government owned enterprises (central SOEs) jumped 220% to Rmb415.3bn for the first quarter of 2021 compared to a year ago, according to the State-owned Assets Supervision and Administration Commission (Sasac). Their revenues climbed 30.1% year-on-year, while the debt-to-asset ratio fell by 0.8 percentage points to 64.7%.

The central SOEs’ fixed income investments (excluding real estate) increased 36.5% annually to Rmb497.9bn.

The Sasac said it will work with relevant government bodies to put together guidelines aimed at helping central SOEs contribute to China’s goal to reach peak carbon emissions by 2030 and become carbon neutral by 2060.

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The Securities Association of China said it is working on an action plan for the securities industry for green finance in response to China’s carbon neutral pledge, and boost the sector’s ability to serve a green economy.

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Prices on new residential properties in 62 of 70 medium and large Chinese cities rose month-on-month in March, according to the National Bureau of Statistics (NBS). The monthly price increase for the four ‘tier one cities’ — Beijing, Shanghai, Guangzhou and Shenzhen — was 0.4%, 0.1 percentage points slower than what was recorded in February, NBS data showed.

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Chinese airline companies are expecting a total loss of Rmb30.05bn for the first quarter, which is Rmb4.58bn less than what was recorded a year ago, according to the Civil Aviation Administration of China (CAAC).

The number of domestic passengers carried in March saw an increase of 215.7% to 47.68m, exceeding the March 2019 level, the CAAC said.

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Ant Group is exploring options for Jack Ma to divest his stake in the company and give up control, Reuters reported, citing a source familiar with regulators’ thinking and two people with close ties to the company.

The report said that whether Ant and Ma would proceed with a divestment option — and if so, which one — is unclear, but Ant has denied that Ma’s divestment was ever under consideration. “Divestment of Mr. Ma's stake in Ant Group has never been the subject of discussions with anyone,” an Ant spokesman said in a statement to Reuters. 
By Addison Gong
19 Apr 2021