All material subject to strictly enforced copyright laws. © 2021 Euromoney Institutional Investor PLC group
ChinaChina People and Markets

The week in review: China scraps clean coal from green bonds, regulators tighten exchange bond rules, public infra Reits roaring to go

coal_Adobe_575x375_30July2020

In this round-up, Beijing decides to leave ‘clean coal’ out of the latest list of eligible projects for green bonds, stock exchanges in Shanghai and Shenzhen plan to tighten approval for bond issuance, and the first batch of public infrastructure real estate investment trusts (Reits) are being reviewed at the two bourses.

China has kept the loan prime rate (LPR), the benchmark lending rate, unchanged for the 12th consecutive month in April. The one year LPR remained at 3.85%, and the five year and above rate stayed at 4.65%, the central bank announced last week.

*

China’s outbound direct investment (ODI) rose 4.6% year-on-year in the first quarter of 2021 to Rmb206.14bn ($31.8bn), according to the Ministry of Commerce. Non-financial ODI dropped 4.9% to Rmb106.81bn during the same period.

*

Chinese banks recorded a foreign exchange settlement surplus of $88.5bn in the first quarter, according to the State Administration of Foreign Exchange (Safe).

*

China’s GDP is likely to grow 8% in 2021, the Chinese Academy of Social Sciences said in a report published on Sunday. It expects the country’s leverage to remain largely stable but with a slight decline, and thinks the renminbi exchange rate will fluctuate around 6.4-6.5 against the dollar.

*

The People’s Bank of China (PBoC) published its rating of 4,399 financial institutions for the fourth quarter of 2020. It evaluated 24 large banks, 3,999 medium and small sized banks, and 376 non-bank institutions.

The number of institutions that the central bank deemed as having high risks has 132 compared to the previous quarter, and by 103 on an annual basis, to 442. They fell into the ‘red zone’ in PBoC’s evaluation system. The combined assets of firms that were considered as having lower risks and came in the green and yellow zones accounted for 98% of the total assets in China’s banking industry. The provinces of Liaoning, Gansu, Inner Mongolia, Henan, Shanxi, Heilongjiang, Jilin, Shandong and Guangxi are home to more highly risky institutions than the rest of China.

*

The China Banking and Insurance Regulatory Commission (CBIRC) wants Chinese banks to boost lending to small and micro-sized enterprises and keep their funding costs reasonable, according to a notice published on the regulator’s website on Sunday.

The regulator has told banks to lend to more first-time small borrowers this year than 2020, suggesting that large lenders should use the number of such borrowers as one criterion for internal performance evaluation. In particular, the ‘big five’ state-owned lenders — Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank and Industrial and Commercial Bank of China — should “try to ensure” an annual growth of at least 30% in inclusive loans provided to smaller businesses.

*

The PBoC, the National Development and Reform Commission and the China Securities Regulatory Commission (CSRC) last Wednesday published the 2021 list of eligible projects for green bonds, replacing the existing catalogue that had been in place since 2015.

In the updated list, regulators have decided to remove the “clean use of coal” from the project list, in line with the draft new list from last June — a move that was much advocated in recent years by the green community in China and globally. The 2015 list is still effective for bonds that have already been approved or registered and are yet to be issued.

*

Central bank governor Yi Gang said at the Boao Forum for Asia last week that the PBoC will assess the impact of climate change on its monetary policy and take climate change into consideration in its stress tests on financial institutions. China will continue adding green bonds in its foreign exchange reserve investments, and incentives and tools will be rolled out for the financial sector to support green finance and help reduce carbon emissions, according to Yi.

Ma Jun, chairman of China Green Finance Committee, said at the forum that China will gradually ask corporations to provide carbon emission-related information to financial institutions.

*

Applications from four infrastructure real estate investment trusts (Reits) have been received by the stock exchanges in Shanghai and Shenzhen, the first batch after China launched its pilot public Reits programme nearly a year ago, the bourses announced last week. The infrastructure projects to be funded are highspeed roads, clean energy, and industrial park development.

*

The net increase in foreign holding of onshore bonds was $63.3bn for the first quarter of 2021, 11% higher than the amount seen in the October to December quarter, Safe data showed.

*

The Shanghai and Shenzhen bourses published new guidelines tightening the approval for the issuance of bonds sold in the exchange market by corporates and non-bank issuers such as securities companies and financial leasing firms.

Under the new rules, the stock exchanges will pay special attention to four areas when approving companies’ bond issuance plans, including corporate governance and the disclosure of financial information. Specifically, they will evaluate if the issuers have a stable debt structure without having aggressively taken on debt, a stable cash flow, and profitability that can be sustained. They will also pay attention to issuers that are investment holding companies, and those that have been downgraded or defaulted. Additional information disclosure requirements were given to real estate companies and companies that are responsible for urban construction.

*

Last week, the CSRC handed out penalties to two state-owned issuers that were involved in high-profile defaults late last year, according to announcements on Wind.

Liaoning-based Huachen Automotive Group Holdings Co was fined Rmb53.6m for allegedly including false information in its 2017 and 2018 annual reports and bond issuance documents, as well as violating information disclosure requirements. In a statement last Wednesday, Huachen said it had held the first creditors’ meeting on Tuesday for the restructuring of 12 group companies. The claims declared by creditors against the companies, and approved on a preliminary basis by the restructuring manager, total Rmb35.82bn.

Yongcheng Coal and Electricity Group Co, owned by the Henan provincial government, was given a Rmb3m fine for alleged information disclosure-related violations. Earlier in January, Yongcheng Coal was also punished by National Association of Financial Market Institutional Investors (Nafmii), an interbank regulator, and was banned from selling bonds for one year.

*

The province of Guangdong said it wants to grow the exchange bond market in Shenzhen and wants the city of Guangzhou be included in the central bank’s digital renminbi trial in the official 14th ‘five year plan’ published on Sunday.

The provincial government also wants to deepen the financial co-operation between Guangdong, Hong Kong and Macau, boost financial market connectivity, and explore an ‘Insurance Connect’ scheme while continue working on other links such as Bond Connect and Wealth Management Connect. It plans to support Hong Kong strengthening its position as an international hub for offshore renminbi, and for Macau to develop a financial platform that will support the diversified economic development locally.

*

The digital economy was a key contributor to a stable economic growth in China in 2020 during the Covid-19 pandemic, said a report by Beijing-based China Academy of Information and Communications Technology, a government think-tank directly under the Ministry of Industry and Information Technology. China’s digital economy grew at an annual pace of 9.7% last year, more than tripling the country’s nominal GDP growth, according to the report.

*

Between January and March, trading in Shanghai’s financial market — including the exchange, futures and interbank markets — totalled Rmb565.13tr, after an increase of 19.3% compared to a year ago. Renminbi and foreign currency deposits jumped 15.6% year-on-year to Rmb16.05tr, while outstanding loan balance grew 10.5% to Rmb8.85tr.

*

China Huarong Asset Management Co will not be able to publish the audited 2020 annual financial report by the end of the month, the company said in a Sunday filing on ChinaBond.

Huarong’s already delayed annual report at the end of March has spooked the secondary bond market, but Chinese regulators have attempted to calm the market by saying the company’s operations remain normal and its liquidity adequate, and that it will complete the audit work “as soon as possible”. 

China Huarong Financial Leasing Co, a unit of the AMC, has already published its audited 2020 financial statements, but full year reporting were pushed back at subsidiaries Huarong Securities and Huarong Jinshang Asset Management.

*

Issuers of financial bonds in the interbank market are told to complete their 2020 annual reports and the audited financial statements before April 30, the China Central Depository & Clearing said in a notice.

*

Four Chinese online education platforms including US-listed GSX Techedu and New Oriental Education & Technology were fined Rmb500,000 each by the local market regulator in Beijing. They allegedly deceived customers through “illegal price activities” such as false advertising.

*

ByteDance is not ready for an IPO and does not have listing plans, the company said in a social media statement last Friday.

Last week, Bloomberg reported that ByteDance kicked off preparations to float Douyin, the Chinese version of TikTok, in either Hong Kong or the US. According to a story published by the South China Morning Post last Saturday, the company has put a planned IPO “on the back burner for now” as it “has yet to find a satisfactory way to restructure its business to meet regulatory requirements in China and the US”. The management of the company has also “found it hard” to balance various stakeholders’ interests, and that the US-China geopolitical tensions also posed challenges, the report said.

*

Local governments in China issued Rmb477.1bn of bonds in March, including Rmb198.3bn of special purpose bonds. The total outstanding amount of local government bonds stood at Rmb26.2tr by the end of the month. 

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree