CHINA BANKING AND FINANCE NEWSLETTER
Vol. 2, No.3 - June 19, 2001
TOPICS THIS ISSUE:
- ICBC to Apply New Credit-Rating System
- Crazy for State T-bonds
- CSRC Clarifies Suspended Trading, De-listing Rules
- Central Bank Issues Guidance on Financial Supervision
- New Ways Explored for Utilizing Foreign Funds
- China Decides to Reduce State Shares to Channel Social Security Funds
- China's Asset Management Corporation Begins International Road-show
New Credit-Rating System for ICBC
The Industrial and Commercial Bank of China (ICBC) has announced a new credit-appraisal system for corporate clients. Implementation rules have also been launched. ICBC will give credit ratings to corporate clients in accordance with the new appraisal indicators.
According to an ICBC official, under the new system the bank's management will analyze a firm's ability to pay debt within a certain operating period to appraise the firm's credit ratings.
The official noted that there already exists an effective indicator to appraise management, and the new system, designed to appraise payment ability, would provide bank managers with a comprehensive and objective appraisal of any particular company.
The new system also enables management to undertake follow-up supervision of companies in accordance with the results of their analysis. The bank will thus be able to quickly judge a credit rating if, for example, a firm engages in operating activities that might affect its payment ability.
(Source: Xinhua News Agency, Chinaonline)
Crazy for State T-bonds
Amid the strong economic development of recent years, Chinese people are becoming more and more interested in purchasing treasury bonds. The majority of the would-be buyers are middle-aged and young people. Some prefer T-bonds as a way of investment because it is not as time-consuming as share trading.
Since bank deposit rates have fallen as part of the national policy to stimulate domestic consumption, many depositors have used a portion of their savings to buy T-bonds. Ordinary salary earners choose to open current accounts with their banks in order to invest elsewhere.
T-bonds have attracted more investors because of their low risk and stable profit. Statistics reveal state T-bonds provide a return 27 percent higher than bank deposits over the same period. State T-bonds, including treasury bonds issued by good-credit enterprises, also present much less of a risk than any other means of investment.
However, the trend also indicates that Chinese people still have fewer investment channels. So far, people only have engaged in foreign currency speculation, share trading, investment in stamps, and state T-bonds.
State treasury bonds are in short supply, while many enterprises find it difficult to raise capital on the stock market. Domestic economists have long urged the utilization of idle social capital to inject vitality into enterprises with great potential. Yet efforts in this regard are still largely lacking.
(Source: www.china.org.cn)
CSRC Clarifies Suspended Trading, Delisting Rules
The China Securities Regulatory Commission (CSRC) has approved new rules to determine how stocks will be listed on the Shanghai and Shenzhen Stock Exchanges.
The revised Rules for Stock Listing at the Shanghai Stock Exchange, which came into effect on June 8, add specific requirements regarding information disclosure, application for a grace period, as well as conditions and procedures for resumption of listing.
Under new rules concerning long-term trade suspension, a suspension will not be able to exceed 30 days for major acquisitions, asset or equity sales and debt rescheduling with uncertain factors. If a suspension exceeds 90 days and the company still has not applied to resume listing, the stock will be traded under particular trade (PT) rules. During the long-term trade suspension period, the listed company must provide progress reports every two weeks.
The new rules also increase the number of events subject to phased disclosure, thereby strengthening supervision of corporate activity.
(Source: Zhongguo Zhengquan Bao (China Security), Chinaonline)
Central Bank Issues Guidance on Financial Supervision
The People's Bank of China (PBOC), China's central bank, has issued a guidance notice regarding the supervision of financial markets in China.
The guidance, which draws on bank's past efforts at supervision and refers to international practice, is comprised of four parts: the review and conclusion of the PBOC's supervision experience, fundamental procedures and key issues of financial supervision, focus and methods of different financial institutions, and the supportive vehicle for the implementation of the guidance.
A PBOC spokesman said the guidance will provide a general introduction while the supervision task itself will be a long and systematic process. He said further measures should also be taken to facilitate the implementation, such as the establishment of financial supervision information networks and risk evaluation systems, and the improvement of laws and regulations.
(Source: People's Daily)
New Ways Explored for Utilizing Foreign Funds
Zhang Xiaoqiang, vice secretary-general of the State Development Planning Commission (SDPC), stated at a recent press conference on major foreign-funded projects that China will actively explore new ways for utilizing foreign funds.
Zhang said that China encourages foreign investors, multinationals in particular, to participate in SOE restructuring and transformation and stepping up opening of service sectors as banking, insurance, business, foreign trade and tourism.
China hopes that more funds would be injected into the central and western regions for local agriculture, restructuring of old industrial bases, infrastructure construction, ecological construction and environmental protection, mineral exploring and tourism, Zhang emphasized. Western enterprises in certain industries are encouraged to attract foreign investment by means of transferring managerial right, selling stock options, merging and regrouping.
Regulations on foreign investment directions and industries are also under amendment to further lift market access restrictions.
(Source: People's Daily)
China to Reduce State Shares to Channel Social Security Funds
China's Central Government has decided to lower state shares in an effort to channel more social security funds.
Any listed enterprises which hold State shares are required to sell 10% of their state shares as they seek listing or issue new shares. All the income should be turned in to the government as social security funds.
(Source: China Security, Homeway)
China's Asset Management Corporation Begins International Road Show
The China Huarong Asset Management Corporation, the largest such company in mainland China, initiated an international roadshow on June 12, 2001, in a move to lure investors in Britain and the United States.
A panel led by Huarong's president will hold talks and negotiations with foreign experts and entrepreneurs on asset sales with the help of Huarong's advisor, Ernest & Young (E&Y), a world leading accounting firm. The road show will introduce to foreign investors the investment potential of China's non-performing assets and its policies and legal framework regarding the sales of the assets, a company official said.
China's four state financial asset management companies have purchased non-performing loans totaling RMB1.3 trillion from state-owned commercial banks. Huarong leads the way, having purchased RMB407.7 billion worth of loans, with more than 70,000 debtors.
By the end of last year, Huarong had retrieved RMB3.28 billion worth of assets, including RMB2.06 billion in cash, by handling RMB7.86 billion of the non-performing assets.
(Source: Xinhua News Agency, Homeway)
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