China policy and markets round-up: Beijing sets action plan to hit 2021 targets, PBoC sends dovish credit policy message, CSRC punishes Haitong over risk control
In this round-up, China’s State Council assigns tasks to different regulatory bodies to implement the government’s goals for this year, the central bank confirms its policy stance of ‘no sharp turns’, and Haitong Securities is punished for allegedly failing to control risks.
The State Council has released a plan for the implementation of goals set in the government work report during China’s annual parliamentary meeting earlier this month.
The Ministry of Finance, China Banking and Insurance Regulatory Commission and the People’s Bank of China (PBoC) are expected to provide policy support to boost bank lending to innovative and green sectors as well as smaller businesses before the end of June.
The central bank will also be responsible for coming up with policies and tools to support low-carbon development and carbon emission reduction by June. By September, Beijing will roll out relevant policies to reinforce anti-monopoly and prevent the unchecked expansion of capital.
The National Development and Reform Commission and the Ministry of Commerce (Mofcom) are tasked with shortening the foreign investment negative list by October. The Mofcom has been given the same October deadline to finalise the negative list for cross-border trade in services.
The State Council has decided to extend the moratorium on repayments and interest payments of inclusive loans to small and micro businesses to the end of the year. Banks that agree to delay payments will receive incentives equal to 1% of the loan principal.
“The extension will mitigate potential loan delinquencies from sectors highly impacted by the pandemic,” said Yan Li, analyst, financial institutions group at Moody’s, in a note on Friday.
The PBoC held its quarterly monetary policy committee meeting on Wednesday. The central bank plans to keep the renminbi exchange rate “basically stable” and liquidity “reasonably ample”. It will work to further lower borrowing costs, and step up central bank lending via its relending and rediscounting programmes to support inclusive finance.
In a separate meeting this week with 24 Chinese banks, the PBoC urged the lenders to keep their loan growth stable, curb profit growth to support the real economy, and lower the funding cost for smaller businesses. The banks have also been told to support carbon-related financing and investment activities and help drive capital flows to the green and low-carbon industry.
All of this week’s policy meetings “sent dovish messages on credit policy”, economists at Nomura said in a Friday note. “Given the rising inflation readings and inflation expectations in China, the PBoC appears to be suggesting that it won’t hike policy rates this year,” they wrote.
Chinese banks reported external assets of $1.372tr at the end of 2020, with liabilities of $1.485tr, according to the State Administration of Foreign Exchange.
The PBoC issued Rmb5bn ($765m) of six month central bank bills in Hong Kong at 2.6% on Thursday, after investors put in Rmb25bn of bids.
The China Securities Regulatory Commission (CSRC) has banned Haitong Securities from providing bond investment advisory services to institutional investors for 12 months. Haitong allegedly did not effectively control and prevent risks when conducting investment advisory business, causing “serious negative effects” on the market, the CSRC said in a notice. Affiliate company Haitong Asset Management was also punished by the regulator.
Earlier this year, Haitong, Haitong AM and Haitong Futures were condemned by the National Association of Financial Market Institutional Investors for alleged violations in the interbank market. This followed an investigation into the firms for allegedly facilitating the illegal issuance of bonds by Yongcheng Coal and Electricity Group Co, which defaulted on its debt, and alleged market manipulation.
Tencent Holdings will “actively cooperate” with regulators on compliance matters, its founder, chairman and chief executive Pony Ma reportedly said during the company’s earnings call on Wednesday.
Tencent’s president Martin Lau said during the same call that the technology company has met with regulators several times regarding antitrust issues, and that these voluntary meetings were held with the government regularly to cover a number of topics in the hope to foster a healthy environment for innovation. Lau also reportedly said that the impact of establishing a financial holding company will be neutral on Tencent, given it will mainly lead to changes in the organisational structure.
Their remarks coincided with a Reuters report on Wednesday that Ma met with officials at the State Administration of Market Regulation earlier this month and discussed how Tencent could better comply with antitrust regulations. Ma did not refer to the meeting in his comment.
Tencent is rumoured to be Beijing’s next target for increased supervision of financial technology firms after Ant Group. The company reported a 26% rise year-on-year in revenue for the fourth quarter of 2020, with net profit surging 175%. For the full year, revenue and net profit reached Rmb482.06bn and Rmb159.85bn, respectively, a yearly increase of 28% and 71%, respectively.
China Citic Bank has received approval from the CBIRC to issue up to Rmb40bn of perpetual bonds to replenish its tier one capital, the lender said on Monday.
Beleaguered property developer China Fortune Land Development has added Rmb13bn of new overdue debt — including bank loans and trust loans — over the last two weeks, according to recent stock exchange filings in Shanghai. Its total unpaid debt amounted to Rmb32.38bn as of Wednesday, the company said.
US president Joe Biden said at his first formal news conference on Thursday that China’s overall goal “to become the leading country in the world, the wealthiest country in the world, and the most powerful country in the world” will not happen on his watch, “because the United States is going to continue to grow”.