CHINA BANKING AND FINANCE NEWSLETTER
Vol. 3, No.6 - June 5, 2002
TOPICS THIS ISSUE:
- China Revises Laws
- Citibank's Shanghai Branch Sued
- Chinese Court Conducts First Hearing on Stock Market Disinformation Case
- Stricter Laws for Imports and Exports
- JP Morgan Bullish on China Market
China Revises Laws
To fulfill its commitments to the World Trade Organization ("WTO"), China has been implementing legislation concerning intellectual property rights; trade in goods and services, investment and transparency.
According to an official with the WTO Department under the Ministry of Foreign Trade and Economic Cooperation ("MOFTEC"), China has nearly completed the new rules related to the Trademark Law, the Copyright Law and Drug Administration so as to comply with the Agreement on Trade-related Intellectual Property Rights ("TRIPs").
The revised laws also cover a wide range of business sectors, including foreign-invested law firms, telecom companies, financial institutions, insurance companies, international marine firms, Sino-foreign distribution joint ventures, and tourism agencies.
A notification and consulting bureau has also been established to render consulting services in relation to China's trade in goods and services.
In conjunction with revisions to various Laws and Regulations, China has also lowered its tariffs to 12 per cent from 15.3 per cent this year and canceled quota license administration on grain and other materials.
Source: Xinhuanet
Citibank's Shanghai Branch Sued
Wu Weiming, a Shanghai citizen, brought legal action against Citibank Shanghai Branch in the Shanghai Pudong New Area People's Court on April 10, 2002 accusing the bank of imposing restrictions on the consumption rights of the public by charging service fees to clients whose total deposit is below USD 5,000. Wu Weiming asked the court to order Citi- Bank to apologize to him and to compensate him RMB 34 Yuan for expenses.
On April 8, 2002, Wu intended to open a personal account and deposit USD 800 to Citibank's Shanghai Branch. The bank staff told him that the clients whose deposit balance is less than USD 5,000 must pay USD 6.00 or RMB 50.00 monthly as a financing service fee. Wu asked if the financing service fee could be exempted for he only wanted to deposit money and did not need to use the bank's financing service. However, the Bank rejected his request.
After China's accession into the WTO, the opening of financial sector has been broadened further. On March 21 this year, Citibank Shanghai Branch became the first wholly foreign-owned bank entitled to handle foreign exchange business for clients of China mainland and followed the custom of charging a certain amount of service fees to holders of accounts containing small amounts. Such practice made some Shanghai citizens who wanted to open foreign exchange accounts at the bank uncomfortable. But Wu is the only person who went further by bringing a lawsuit against the bank.
The action taken by Wu has aroused different reactions among Shanghai's financial and legal circles.
Some experts said that, in many developed countries, it is a custom that banks will provide extremely low interest rate to or even charge fees to clients that have small amounts on deposit with the Bank.
It is also proposed that Chinese banks should collect no service fees from depositors no matter what the amount on deposit.
Source: www. Sina.com.cn
Chinese Court Conducts First Hearing on Stock Market Disinformation Case
The intermediate people's court in Jinan, the capital city of Shandong Province, has become the first Chinese court to conduct a hearing on a stock market disinformation case.
The case heard by the court is brought by a retail investor suing Bohai Group, a listed company, for disclosing false information, which caused a 9,434 Yuan loss to the plaintiff.
The plaintiff said he bought 1,500 shares of Bohai stocks last August. But as the price of the stock continued tumbling from the date of purchase, he had to sell the shares in January 2002, at a price much lower than the purchase price.
The plaintiff maintains that information that was released by Bohai to him was false and the Bohai Group violated his right of awareness resulting in losses for the Plaintiff.
The defendant denies the plaintiff's accusation saying that its behavior was not an infringement of the investors' rights of awareness for the falsification was of a very minor nature and should not have deceived the investor or affected the investors' judgment.
Bohai Group was penalized last year by the China Securities Regulatory Commission for negligence and for the inclusion of false information in its document disclosure.
The shortage of judges equipped with good financial knowledge has prevented Chinese courts from taking any action against rampant irregularities in information disclosure by China's listed firms.
However, a recent notice by the Supreme People's Court has removed the obstacle for retail investors to commence legal action against listed firms. Currently only cases against firms publicly penalized by the stock market watchdog will be accepted by the court.
Bohai Group is one of the 16 firms listed by the Supreme People's Court that were penalized by the CSRC between March 31, 2000, and November 19, 2001, and hence open to legal action by investors.
The court has yet to rule on the case.
Source: Xinhua News Agency, April 24, 2002
Stricter Laws for Imports and Exports
National legislators approved revisions to the 13-year-old law on the inspection of imports and exports in order to unify inspection standards for foreign and domestic goods.
The amendments to the law on the inspection of imports and exports stipulate that national technical rules, which are compulsory, must be applied to the imports and exports listed in the quarantine and inspection catalogue.
The non-compulsory international standards will be applied when China has no technical regulations concerning the commodities. In this case, the revised law requires an early draft of the national technical regulations.
Source: China Daily, April 29, 2002
JP Morgan Bullish on China Market
The China research division of JP Morgan said Friday that institutional investors our of the opinion that China's economy and stock markets are on the verge of a rally.
Ken Ho, head of China research of JP Morgan in the Hong Kong Special Administrative Region (HKSAR) said mixed macroeconomic numbers for recent months, rising liquidity, both internally and externally and the under valuations of shares, indicate that a "bull market" may be developing.
Mr. Ho also indicted that China's progressive reforms has been recognized by institutional investors in major financial centers around the world.
Ho is also confident that the so called "qualified domestic institutional investors" will appear in the second half of the year, acting as catalyst for the China market. "H" shares will benefit most from their emergence to be followed by the red chips".
Source: People's Daily, May 4, 2002
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The China Finance News is intended to be used for news purposes only. It should not be taken as comprehensive legal advice, and Lehman, Lee & Xu will not be held responsible for any such reliance on its contents.
