CHINA BANKING AND FINANCE NEWSLETTER
Vol. 3, No.4 - March 8, 2002
TOPICS THIS ISSUE:
- Direct B-share Trading Open to Foreigners
- China Strengthens Financial Supervision and Reform
- New Practice To Protect Foreign Investors
- ICBC Undergoes Restructuring
Direct B-share Trading Open to Foreigners
Foreign securities brokerage firms have obtained permission to directly trade hard-currency denominated B shares on the Chinese stock market.
Before China's entry into WTO, foreign brokerages were only allowed to trade B shares through local brokerages.
However, some experts say the move will hardly trigger any sudden inflows of funds from foreign brokerages in the near future, due to weak market sentiment, the small size of markets and undesirable performances of listed companies.
Other researchers believe the B-share market still has a bright outlook for the year.
(Source: China Daily)
China Strengthens Financial Supervision and Reform
China has set priorities for its financial sector in the coming few years, which involve improved supervision, more financial reforms and regulation of the financial system to reduce financial risk and improve financial services.
The priorities were determined at a three-day national conference on finance held by the Central Committee of the Communist Party of China (CPC) and the State Council.
The meeting called for more effort in dealing with the problems plaguing the country's financial sector, such as inadequate supervision and regulation, a lack of sound operational skills in financial companies, an indifferent sense of social credit, loose management, a shortage of financial professionals, insufficient financial services and a lack of new ideas.
The meeting also set out major targets for the country's financial sector during the period from 2002-2005, which include vigorous and efficient supervision and improved regulation, sound operational methods for financial companies, significant improvement in asset quality and financial returns, as well as in financial markets, financial services and corporate competitiveness.
The state-owned banks were called on to improve constitutional reforms and follow prudent accounting principles and strict information disclosure systems, to lower their ratios of non- performing assets, and improve their profitability.
The meeting noted qualified commercial banks solely owned by the state might be reorganized into share-holding commercial banks in which the state has the controlling share. The shares may be listed when the time is right.
The meeting repeated that the policy of regulating and cultivating the securities market will remain unchanged, while increasing efforts should be made to crack down harder on irregularities.
It also called for the construction of a social credit system, including corporate and individual credibility.
(Source: Homeway)
New Practice To Protect Foreign Investors
The Supreme People's Court announced on February 25 that it would designate a number of courts to handle commercial cases involving foreign parties in order to provide a judicial environment of high quality for foreign investors.
Such courts will include the high courts, intermediate courts in municipalities and capital cities of provinces and autonomous regions, special economic zones and cities directly under State planning, and some courts in economic and technological development areas in cities. The Supreme People's Court will also authorize intermediate courts in other cities if necessary.
However, the new practice, which will be adopted next month, will not be applicable in cases of border trade, real estate and violation of intellectual property rights violations involving foreign parties. According to Mr. Wan, vice-president of the Supreme People's Court, this is because border trade disputes are few, real estate cases are not trade disputes while intellectual property right disputes have already fallen into the jurisdiction of specially designated courts.
Under current practice, grassroots and intermediate courts are authorized to hear commercial cases involving foreign parties. However, the traditional overlapping of administrative and judicial divisions has made local courts in China constantly plagued by local protectionism, an obstacle to the fair handling of cases.
(Source: China Daily)
ICBC Undergoes Restructuring
China's largest State-owned commercial bank, the Industrial and Commercial Bank of China (ICBC), plans to go public in the next five years restructuring itself into a modern financial enterprise, ICBC President Jiang Jianqing said at the bank's recent national conference.
According to Jiang, ICBC will also try to reduce its non-performing asset (NPA) ratio by 15.7 per cent in the next five years.
Regarding ICBC's listing, Jiang said the bank will first map out a general plan with detailed implementation methods to restructure itself into a shareholding bank in accordance with the Corporation Law and the Commercial Bank Law.
Jiang did not elaborate on the shareholding plan, but the central bank Governor Dai Xianglong said at an earlier conference that eligible State-owned commercial banks could be restructured into shareholding banks with the State as the majority holder.
"Domestic enterprises, Chinese individual investors and foreign investors will be allowed to hold stakes in State-owned commercial banks," Dai said. "And after a certain period, some eligible banks will float stocks on the market."
The ICBC's five-year plan also includes turning the bank into a multinational player by creating a global operational network with outlets in every major international financial center, said Jiang.
He noted that ICBC's plan followed China's central government's financial industry development guidelines that were finalized during the Central Financial Works Conference held at the beginning of February.
(Source: Business Weekly)
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