CHINA BANKING AND FINANCE NEWSLETTER
Vol. 2, No.4 - October 15, 2001
TOPICS THIS ISSUE:
- Ping An Insurance Company to Form a Financial Group
- First Trust Law In China Takes Effect on October 1, 2001
- Judicial Explanations Being Drafted for Company Law, Securities Law and Insurance Law
- Restructured Bank of China Opens in Hong Kong
- Cases Suspended Temporarily
Ping An Insurance Company to Form a Financial Group
The Ping An Insurance Company, China's largest shareholding insurer, will become the country's third financial group by the end of 2001.
According to Sun Jianyi, Ping An's managing director, the State Council is likely to give the green light to Ping An's formation of a group company by the end of the year that will include subsidiaries specialized in life insurance, non-life insurance and trust businesses. He also disclosed that a trust company would be a major shareholder of Ping An Securities.
Sun hinted that Ping An might take on new foreign shareholders in the near future. At present, two international investment banks, Morgan Stanley and Goldman Sachs, hold a combined 15 per cent stake in Ping An.
So far, China has only two financial groups, China Everbright and China International Trust and Investment Corporation, or CITIC. If Ping An's plan to form a financial group is approved by the State, the company will become the third financial group engaging in insurance, trusts and securities. According to insiders, the increase in the number of home financial groups will help to improve the competitive capability of the domestic financial industry in the face of foreign financial groups, who are expected to swarm into Chinese market after China's entry into the World Trade Organization (WTO).
Under China's present laws and regulations, cross-sector operations are not permitted. However, a group company, in which each subsidiary acts independently, is allowed.
(Source: Business Weekly)
China's First Trust Law Took Effect on October 1, 2001
China's first Trust Law, adopted by the country's legislature in April 2001, took effect on October 1, 2001, China's National Day.
The law covering basic principles between trustors [the entities creating the trust] and trustees [the entities administrating the trust] will lead to a series of changes in China's trust businesses.
Trust companies reappeared in China some 20 years ago when the country applied the reform and opening-up policy. However, the absence of legal rules or guidelines for the trust business and Trusts made trusts a poor financial planning option for individuals and companies.
China once had as many as 1,000 trust companies, but only 239 existing in 1999. That number has been further reduced.
The law will provide legal support for domestic trust companies when they develop new trust business with foreign counterparts, said Yao Haixing, general manager of China International Trust & Investment Corp Development, Inc.
Because of competition in the financial market will be sharper after China enters the World Trade Organization both the Trust Companies and the legal framework have to be globally accepted, added Yao Haixing.
The present Trust Law makes no mention of trust companies but Yao expressed her expectation that such stipulations will be added to the law in the near future.
(Source: Xinhua News Agency)
Judicial Explanations Being Drafted for Company Law, Securities Law and Insurance Law
According to Homeway's information, the Supreme People's Court of China is drafting the relevant Judicial Explanations on Company Law, Securities Law and the Insurance Law.
It is expected that the Judicial Explanations on Company Law will mainly focus on the determination of the qualifications of plaintiffs from a procedural point of view. For example, the Judicial Explanations in question will give answers to such questions as whether minority shareholders may bring legal action against majority shareholders and whether shareholders may bring actions against the board of directors.
The drafting of Judicial Explanations on Securities Law was initiated last year.
It is estimated that the Judicial Explanations on Insurance Law will be issued before the end of this year, while the Explanations on the other two Laws will be completed 2002.
(Source: Homeway)
Restructured Bank of China Opens In Hong Kong
The newly restructured Bank of China (Hong Kong) Ltd. commenced operations on October 3 after combining the businesses of the Hong Kong-based banks of the former Bank of China Group (Hong Kong).
The purpose of the restructuring is to sharpen the bank's competitive edge by reorganizing its resources, cutting operational costs and enhancing its competitiveness, according to Liu Jinbao, the bank's chief executive.
The ten banks under the former BOC Group in Hong Kong were combined to form the Bank of China (Hong Kong) Ltd. with the Nanyang Commercial Bank Ltd, Chiyu Banking Group Ltd and the Bank of China Credit Card Ltd to continue operation as three independent subsidiaries.
The merged company is Hong Kong's second largest banking group.
(Source: Peoples Daily)
Cases Suspended Temporarily
China's Supreme People's Court has temporarily suspended lawsuits initiated by shareholders of two listed companies for "necessary legal and judicial preparations".
The legal cases were initiated by shareholders against Guangxia (Yinchuan) Industry Co. and Yorkpoint Technology.
Guangxia, a Shenzhen listed company, was alleged to have fabricated it's earning figures and Yorkpoint Technology was accused of manipulating its share price.
The courts handling the cases in Wuxi and Beijing have postponed the legal proceedings after receiving a circular from the Supreme Court, which said "judicial explanations" of related laws are going to be conducted to guide the handling of such lawsuits.
Despite worries that all legal proceedings against the two listed firms, which have mustered strong support from angry shareholders across the country, may be delayed for at least six months, lawyers expressed hopes that the postponement may eventually result in better handling of these types of cases.
It is expected that the Supreme Court will make improvements to the procedures/rules to facilitate the hearing of these types of cases. Such changes could include tabulation of standards on compensation claims.
Legislators need to clarify rules regarding how the financial losses are quantified and how they can be proved to be a direct consequence of the false information presented by the accused.
(Source: China Daily)
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