Copying and distributing are prohibited without permission of the publisher.

Watermark

The week in review: Beijing calls for better Sino-US relationship, regulator restricts banks’ online lending

Renminbi_PA_575X375_31Jul20
By Addison Gong
22 Feb 2021

In this round-up, China urges the US to help improve their bilateral relationship, the banking and insurance regulator sets restrictions on lenders participating in the online loan market, and FTSE Russell decides to include 11 Star market stocks in its global equity benchmarks.

China is open to more dialogue and cooperation with the US to “put the Sino-US relationship back on track”, Chinese foreign minister Wang Yi said at an event on Monday. Beijing is willing to contribute together with the US in fighting the Covid-19 pandemic and climate change, as well as in the global economic recovery, said Wang, calling these the “most urgent tasks facing the international society”.

But Wang also urged the US to stop slandering the Chinese communist party and China’s political system, and take a step back from engaging in issues related to Taiwan, the Hong Kong Special Administrative Region, Xinjiang and Tibet. Washington should drop the “unreasonable additional tariffs” imposed on Chinese goods and sanctions on Chinese companies and research and education institutions, and abandon the “unreasonable suppression” of China’s development in science and technology, Wang added.

*
The tariffs imposed on Chinese goods by the administration under former US president Donald Trump will remain in place for now, but the country plans to conduct a thorough review and evaluate how to proceed, said Janet Yellen, US Secretary of the Treasury, in a CNBC interview last week.

*

The Group of Seven (G7) countries plan to increase cooperation with China, according to a statement published after their virtual meeting last Friday.

“With the aim of supporting a fair and mutually beneficial global economic system for all people, we will engage with others, especially G20 countries including large economies such as China,” said the statement. The G7 leaders will “consult with each other on collective approaches to address non-market oriented policies and practices” and “cooperate with others to address important global issues that impact all countries”.

*

The China Banking and Insurance Regulatory Commission (CBIRC) has published a new notice on internet loans by commercial banks. The latest restrictions are in line with Beijing’s recent draft rules for the online micro-lending sector and the revised commercial bank law.

For example, for joint lending between Chinese commercial banks and other institutions, the non-bank lender will need to contribute at least 30% of the loan principal, said the Friday notice. Similarly, the November rules require a minimum 30% contribution from microloan companies in online joint lending.

Banks will also be forbidden from providing online loans outside of the regions they are based in, in line with the revised commercial bank law that restricts cross-region lending activity.

The latest notice requires commercial banks to make sure their online loan balance does not exceed 25% of their net tier one capital if such loans are provided with just one other partner. The ratio of their outstanding joint online loans — with all partners — must be kept within 50% of all outstanding loans.

The CBIRC has given lenders until July 2022 to comply with the requirements.

*

The People’s Bank of China left the loan prime rate (LPR) unchanged in February. The one year LPR remains at 3.85% and the five year and above rate at 4.65%.

The central bank conducted Rmb10bn of seven days reverse repo at 2.2% on Monday morning.

*

China posted a current account surplus of $298.9bn for 2020, or about 2% of the country’s GDP, according to the State Administration of Foreign Exchange (Safe).

*

Chinese banks recorded a foreign exchange settlement surplus of $40.8bn in January, after $199.5bn of forex settlements and $158.7bn of forex sales, Safe data showed.

*

The net increase in foreign investors’ holding of Chinese stocks and bonds stood at $41.6bn last month, according to Safe. Meanwhile, domestic accounts saw $40.1bn of net purchase of H-shares through the Stock Connect programme.

*

A senior Safe official said in an article last week on China Forex, a bimonthly magazine under the Safe, that the regulator is studying the possibility of assigning $50,000 of annual investment quota to domestic retail investors to participate in the overseas securities and insurance markets.

*

The China Securities Regulatory Commission (CSRC) received application from Schroders for a mutual fund licence last Thursday, shows an update on the regulator’s website.

The UK-based asset manager adds to a growing list of global firms — including AllianceBernstein and Neuberger Berman — mulling access to China’s domestic mutual fund industry. BlackRock received approval last August from the CSRC to set up a wholly-owned mutual fund business onshore, a first for a foreign asset manager.

*

FTSE Russell has decided to add 129 A-shares to its flagship FTSE Global Equity Index Series (GEIS), effective after the market close on March 19.

The new stocks featured 11 from Shanghai’s Star market, including Advanced Micro-Fabrication Equipment Inc China, China Railway Signal & Communication Corp, Montage Technology Co, Raytron Technology and Zhejiang HangKe Technology Incorporated Co. The UK-based index provider expects the move to attract of $100m of incremental funds to the Nasdaq-style tech board.

*

The government of Shenzhen plans to support private companies and small and medium sized enterprises to gain capital market access. Those that have completed the pre-IPO education process for a domestic listing will be rewarded up to Rmb1.5m, and companies that are able to list overseas will receive no more than Rmb800,000 in support.

*

Five domestic bond issuers, including defaulted firm Shandong Ruyi Technology Group Co, have been punished by the National Association of Financial Market Institutional Investors (Nafmii) for failing to publish their financial results within the deadline.

Shandong Ruyi did not disclose its 2020 interim and third quarter earnings, and was told to fully rectify its problems. Its chief accountant was singled out by the regulator. The other four companies, which were also ordered to fully comply with the rules, were invited for a regulatory chat, Nafmii said.

*

HNA Group announced it will hold the first creditors’ meeting on April 28 regarding a restructuring plan. The debt-laden conglomerate officially entered a court-ordered bankruptcy reorganisation that covers more than 60 subsidiaries earlier this month. 

*

The Ministry of Finance and the CSRC analysed internal control reports published by companies listed in Shanghai and Shenzhen in 2019. Nearly 96% of the listed firms released internal control reports, the MoF said, adding that close to 96.5% of those companies demonstrated that they have effective internal controls. 

By Addison Gong
22 Feb 2021