CHINA BANKING AND FINANCE NEWSLETTER
Vol. 3, No.9 - July 18, 2002
TOPICS THIS ISSUE:
- Restriction on Joint-Venture Stakes Arouses Concern
- Tougher Sentences for Financial Fraudsters
- CITIC to Debut Holdings Group
- China Adopts New Economic Classification Standard
- Financial Firms Explore Potential Opportunities
Restriction on Joint-Venture Stakes Arouses Concern
China's securities industry watchdog, the China Securities Regulatory Commission ("CSRC"), restricts companies from investing in more than two fund-management firms under regulations approved last month.
Many Chinese brokerages that are shareholders in several asset management firms have expressed their concerns about the restriction. They fear they might have to sell profitable stakes in order to establish new Sino-foreign fund management companies.
CSRC said the requirement was set up to help encourage investments in Sino-foreign fund management companies. According to the new rules governing such ventures, a foreign firm may hold up to 33% of a fund management company, with that limit rising to 49% in three years in line with China's World Trade Organization commitments.
Many Chinese brokerages are eager to join with overseas firms. However, some of them have already hold stakes in two or more fund management companies.
Analysts said the CSRC should consider rejecting Sino-foreign joint venture applications where the Chinese partner had investments in a substantial number of fund companies instead of forcing all Chinese companies to reduce their investments to only two fund management firms.
(Source: www.scmp.com)
Tougher Sentences for Financial Fraudsters
To ensure sound market order, Chinese courts are to impose tougher sentences on those involved in illegal financial activities.
Grand Justice Li Guoguang said the Courts would severely punish company fraud. According to Li, special emphasis will be put on fraud involving loans, fund-raising, commercial instruments, letters of credit, credit cards, stock and insurance contracts.
Cases involving financial misappropriation have risen in prominence in China in the past three years. Efforts have been made to stop defaults on bank loans, illegal fund-raising and establishment of financial institutions as well as stack market violations.
The Supreme People's Court has also issued a total of 29 judicial interpretations governing the trial and enforcement of verdicts of such cases in the past three years.
(Source: China Daily)
CITIC to Debut Holdings Group
To confront intensified competition from foreign rivals, China's first financial conglomerate will be launched within months in an attempt to strengthen the competitiveness of the domestic financial sector.
Last October, the State Council approved China International Trust and Investment Corporation ("CITIC") application to combine its business operations and incorporate into a financial holdings group. CITIC is the first Chinese company to get such permission since the commencement of China's Commercial Bank Law in 1996, which stipulates that businesses in the financial sector should be split into different companies in order to lower potential financial risks.
The new financial conglomerate is set to bring together all of CITIC's businesses "under one umbrella", including commercial banking, insurance, securities, trust and other financial arms, which are currently operated as individual companies.
Several other companies, including China Everbright Group and China Merchants Group, are expected to follow CITIC's lead in establishing similar holdings companies.
(Source: Business Weekly)
China Adopts New Economic Classification Standard
China will adopt an internationally recognized standard to classify its economic sectors this year, the Chinese National Bureau of Statistics (NBS) recently reported.
According to the NBS, the new market economy-oriented standard would classify China's economic sectors according to internationally accepted standards, and could then be directly converted into international accepted terms.
The previous classification standard was set up in China for its planned economic sectors in 1984 and amended in 1994. The continued growth of the country's market economy and industrial restructuring had made the previous standard obsolete.
(Source: Xinhua News Agency)
Financial Firms Explore Potential Opportunities
The Industrial and Commercial Bank of China (Asia) Ltd ("ICBC Asia") and the Hong Kong arm of the Industrial and Commercial Bank of China ("ICBC"), recently said they would launch a brand new product to coincide with the expected implementation of the Qualified Domestic Institutional Investor ("QDII") plan this year.
The brand new product will be called "Investment Expert". ICBC Asia will provide investment services to retail clients and will mainly focus on the existing clients of its parent bank who often commute between Hong Kong and the China mainland.
This is the first product ever introduced into the Hong Kong market aimed at managing mainland funds through the long-awaited QDII framework.
Fierce debate has raged since China's Central Bank Governor Dai Xianglong said in March that the central government was thinking about allowing fund managers to invest the country's huge personal foreign currency savings in the Hong Kong stock market using the QDII scheme.
QDII system is likely to be used by Sino-foreign investment banks familiar with conditions on both sides.
Li Ping, a senior analyst with the research department of Guotai Junan Securities Co, said China's market regulators will probably choose qualified institutional investors case by case, and securities brokerages with investment banking businesses in the Hong Kong market would probably be given priority.
However, Wang Jianxi, deputy secretary-general of the China Securities Regulatory Commission ("CSRC"), denied reports that his commission has worked out a timetable to launch the QDII mechanism by the end of the year.
(Source: business weekly)
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