CHINA BANKING AND FINANCE NEWSLETTER
Vol. 2, No.2 - May 21, 2001
TOPICS THIS ISSUE:
- Qualified Private or Foreign Firms May Be Permitted To List
- Guangdong - The New Hotspot for Venture Capital
- China to Combine Banking and Securities
- Bank of China and Deutsche Bank to Cooperate
- China Considers Allowing Purchase of SOE Stock by Foreign Funds Qualified
Qualified Private or Foreign Firms May Be Permitted To List
Zhou Xiaochuan, chairman of the China Securities Regulatory Commission (CSRC), said recently that private firms, including foreign firms that meet CSRC criteria, may soon be allowed to publicly list.
Speaking at the Fortune Global Forum, Zhou stated that to date China's planned economy quota system has excluded private and foreign companies from the stock market. In the future, however, the CSRC would treat private and foreign companies the same way it treats state-owned enterprises (SOEs), thus allowing for the possibility of public listing.
Zhou warned that while China's capital markets would offer significant opportunities for companies that meet CSRC qualifications, there was still a lot to do to bring the markets up to speed. Only companies that were sufficiently advanced would be allowed to list, and more stringent requirements for companies wanting to list would be implemented by CSRC.
Sources: China Online; Zhengquan Shibao (Securities Times)
Guangdong - The New Hotspot for Venture Capital
Guangdong has joined Beijing and Shanghai as one of the most popular locations for Chinese venture capitalists. According to the latest statistics, 60 investment institutions exist in the province with a total capital of around 8 billion yuan (US$966.18 million).
The firms typically target high-growth, small and medium-size science and technology firms wishing to raise capital to develop new materials, biotech, medicine, networks, telecommunications, mechanical and electrical integration, chemical engineering and agricultural technology.
Despite providing an increasingly important facility for the development of Guangdong's high-tech industries, venture capitalists are currently troubled by the small amounts of total capital available and narrow fund-raising channels. Given the immaturity of investment markets in China, most venture capital firms are limited to government sources for their capital. Statistics show that 45 percent of total capital derives from government investment, while only 3 percent comes from foreign sources. Experts have argued for the widening of fund-raising channels and for the strengthening of efforts to attract foreign and non-governmental investment.
Sources: China Online; Qihuo Ribao (Futures Daily)
China to Combine Banking and Securities
Chief advisor to the China Securities Regulatory Commission (CSRC), Anthony Neoh, said recently that within the next two years China will work towards combining its operations of banking and securities.
The Chinese government separated the banking, insurance and securities industries in 1993. As capital markets have grown, however, the separation of these financial arms has proved to be an obstacle to further market development.
Neoh said that in the next few years, regulatory authorities will gradually introduce various medium-risk financial instruments, such as investment funds and index funds, in an effort to stabilize the market and enhance investor confidence. The structure of the market is set to improve as unified registration, combined with transparent transaction and settlement systems, are adopted. Mr. Neoh forecasted that in the next decade, the securities market will become the major force behind the Chinese capital market.
Sources: Xinhuashe (Xinhua News Agency); Chinaonline
Bank of China and Deutsche Bank to Cooperate
The Bank of China (BOC) and Deutsche Bank signed a memorandum of understanding during a ceremony held in Hong Kong on May 10, pledging to work together in the future.
The memorandum states that the two sides will provide each other with technical and market knowledge in order to facilitate mutually beneficial business and services. The Deutsche Bank will provide BOC with much needed professional training, whilst the BOC will provide Deutsche Bank with details on how to operate in the China market.
Sources: Chinaonline; Jinrong Shibao (Financial News)
China Considers Allowing Purchase of SOE Stock by Foreign Funds
The Ministry of Finance vice-minister, Lou Jiwei, recently reported that the Chinese government has been actively selling its shares in state owned enterprises (SOEs), and may consider extending such sales to foreign funds. Mr. Lou stated that to date, the government has sold around RMB 10 billion (US$1.21 billion) worth of state owned stocks.
The stocks already sold by the government were mainly those shares sold by SOEs when they went public in overseas markets, Mr. Lou said. These sales were conducted, however, before a complete set of rules and regulations had been implemented by the relevant arms of the State Council. Lou said that once such rules are implemented, overseas investors should be able to participate in the increased sell-off of SOE shares. According to preliminary plans, foreign funds will participate primarily through the use of investment funds, managed by foreign-funded or joint venture investment-funded management firms. Lou said another possible avenue for foreign participation would be in the handling of bad SOE assets.
Sources: Chinaonline; Zhongguo Zhengquan Bao (China Securities)
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