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Lehman, Lee & Xu - China Capital Markets in the news

The China Law News keeps you on top of business, economic and political events in the China.
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In the News

China's focus on boosting economic growth lifts capital market

China's capital market got a welcome boost on Monday after Premier Wen Jiabao said the government will focus more on bolstering economic growth and news broke the railway ministry is to receive more than 2 trillion yuan ($316 million) in credit.

"The government may further ease credit supply, start more projects, spend more on social welfare and quicken construction of social housing and infrastructure, especially in railway, subway, urban transit, water system and power grid," Bank of America wrote in a report.

In line with favorable policy, China's securities regulator may speed up the introduction of long term capital such as pension funds into the nation's capital market, the latest move to spur flagging domestic bourses.

The China Securities Regulatory Commission may soon announce a plan of operations for pension funds, according to people familiar with the matter. The pension fund may opt to invest in the capital market through enterprise annuity, potentially injecting up to a third of its 1.92 trillion yuan ($300 billion) funds, or 580 billion yuan, into stocks and bonds.

All this is happening at a time when China's securities regulator is encouraging long-term value investment and trying to squeeze out rampant speculation in stocks

According to the Shanghai Securities News, an official newspaper, foreign financial institutions are beginning to see an end to the bearish performance of China's capital market. Overseas fund managers are showing confidence in China's economic outlook, signalling foreign investors may start to invest in Chinese stocks again.

With the uncertainty in the eurozone, international investors are seeking channels to diversify their portfolios. In contrast to the cautious investment in Europe and the U.S., investors remain positive on the future of China.

The nation's economic significance is having a wider positive impact on global views of China, according to the official English-language Shanghai Daily:

Global views of China's influence have improved this year with the country's fast development expected to bolster the world's economy. Positive perceptions of China increased to 50 percent from 46 percent last year, allowing it to overtake both the European Union and the United States in worldwide popularity, according to the 2012 Country Ratings Poll which interviewed more than 24,000 citizens in 22 countries.

Still, April's poor economic data have cast a slight shadow over institutional optimism in the world's second-largest economy. From Bloomberg:

Morgan Stanley is the latest brokerage to cut its gross domestic product estimate for China for this year. It lowered its forecast to 8.5 percent from 9 percent. Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp. and UBS AG pared their forecasts after April economic data were released.

The Chinese government, however, does have ample room to adjust policy to better stimulate economic growth, economist say.

China is seriously concerned about growth and ready to introduce further stimulus measures, Bank of America Merrill Lynch economist Lu Ting wrote in a note. He expects three more cuts in lenders' reserve ratios before the end of the year as the chance of a cut in interest rates increases.

Web link: http://morningwhistle.21cbh.com/html/2012/FinanceMarkets_0521/212348.html

China Will Quicken Approvals for Qualified Foreign Investors

China will work to speed up approvals of qualified foreign institutional investors looking to buy into its domestic securities, as part of reforms to add depth to the country's capital markets.

The foreign exchange regulator has already accelerated approvals for long-term foreign investors such as pension funds, raising their initial investment quotas and simplifying procedures after the government last month more than doubled quotas for QFIIs to $80 billion from $30 billion, according to a statement on the State Administration of Foreign Exchange's website yesterday.

Introducing more long-term funds from abroad will help improve market confidence, promote stable growth in China's capital markets and provide "robust" investment returns to domestic investors, the China Securities Regulatory Commission said in a statement on its website on May 18. The CSRC is mulling amendments to QFII rules to lower entry requirements, broaden the types of investors and relax restrictions on quota and investment scope, the securities regulator said.

"SAFE has been working closely with China Securities Regulatory Commission to facilitate the capital market reforms," Sun Lujun, head of the capital-account management department at the foreign exchange regulator, said in yesterday's statement. "We'll look to speed up the QFII approval process and enlarge the size of investment."

Slumping Stocks
The benchmark Shanghai Composite Index (SHCOMP) has dropped 4.6 percent from this year's high, set on March 2, amid concerns over the country's slowing economic growth. It has lost nearly two-thirds of its value since its peak in October 2007, a period when Chinese investors widely suffered losses and smaller investors "in general" made no profit, the CSRC said in a Feb. 22 statement.
China has granted $26 billion in QFII quotas for 138 qualified investors as of May 16, according to SAFE. Approvals have reached $4.37 billion so far this year, almost the total for the past two years, it said in yesterday's statement.

QFIIs had combined profit of 151.6 billion yuan ($23.9 billion) over the past 10 years, the China Securities Journal reported today without saying where it got the information.

Web link: http://www.businessweek.com/news/2012-05-20/china-will-speed-up-approvals-for-qualified-foreign-investors

Lehman, Lee & Xu is a top-tier Chinese law firm specializing in corporate, commercial, intellectual property, and labor and employment matters. For further information on any issue discussed in this edition of China IP In The News or for all other enquiries, please e-mail us at mail@lehmanlaw.com or visit our website at www.lehmanlaw.com and Mongolia www.lehmanlaw.mn.

Lehman, Lee & Xu Mongolia is one of the first and only international law firms with a full time presence in Mongolia.  Our Ulaanbaatar office is staffed with resident foreign legal consultants having significant experience in Mongolia and qualified Mongolian attorneys. The firm’s foreign legal consultants and local attorneys are fully acquainted and experienced with Mongolia’s laws and legal system, business climate and political affairs. For any Mongolian legal matters please refer to our Mongolian website www.lehmanlaw.mn.

© Lehman, Lee & Xu 2012.
This document has been created for educational purposes for clients, potential clients and referrers of services to Lehman, Lee & Xu, and to alert readers to the services provided by Lehman, Lee & Xu. It is not intended to serve as definitive professional or legal advice, and should not be relied upon as such. Lehman, Lee & Xu does not endorse any personal opinions which may be contained herein.
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