CHINA BANKING AND FINANCE NEWSLETTER
Vol. 3, No.8 - July 5, 2002
TOPICS THIS ISSUE:
- Bank of China HK Ready to Launch IPO
- State Holdings Sell-off Plan Stopped
- Chinese Aviation Opens Further to Foreign Investors
- Insurance Law under Revision
- PBOC Official: China Should Further Open Banking Sector
Bank of China HK Ready to Launch IPO
The Bank of China Hong Kong may issue its initial public offering ("IPO") in mid-July, two months earlier than market expectations. The IPO is expected to raise US $2-3 billion.
Insiders indicate that the IPO marketing report is currently being drafted and pre-marketing to institutional investors would begin the week of July 24.
According to the bank's original plan, it was to list in both New York and Hong Kong. However, due to the enormous volume of non-performing loans (NPLs) and a series of scandals involving its parent company, the bank has give up the ambitious listing scheme choosing only to be listed in Hong Kong.
Four Chinese banks, to date, have already gone public and listed on the stock market and many more have plans to follow.
Most of the banks that have disclosed their intentions to list, including the ICBC, have insisted that the primary goal of listing is to improve corporate governance and management under the pressure of market supervision.
(Source: Business Weekly News)
State Holdings Sell-off Plan Stopped
The Chinese government has formally scrapped its plan to sell off massive State holdings in listed companies through the domestic stock market.
Under a controversial reform launched by authorities in June last year, in order to raise funds for the non-financed social security fund, the State ordered listed firms to sell State shares accounting for 10% of its holdings in the form of initial public offerings (IPOs) and new share offerings at market prices.
However, the move triggered sharp criticism from investors, which forced the authorities to suspend the reform four months later pending further consideration.
According to a Xinhua report dated June 23, the State Council officially rescinded a provisional regulation demanding listed companies to sell a portion of their State holdings through domestic IPOs and additional share offers, confirming a market rumor that drove share prices up on June 21. The sell-off requirement still applies for Chinese firms being listed on overseas markets.
"The sale of State-held shares is an important reform move that is moving in the right direction," but "it is hard to formulate an appropriate plan that is systematic and widely accepted by the market in a short time," said a joint spokesperson for both the Ministry of Finance and the China Securities Regulatory Commission (CSRC).
According to brokers, China's policy change on the state's disposal of shares could lead to a rush of private sales of government stock by domestic and foreign investors.
(Source: China Daily)
Chinese Aviation Opens Further to Foreign Investors
According to a new regulation, foreign investment in China's aviation industry will be expanded.
The General Administration of Civil Aviation in China ("ACAC") has revealed that the Regulation on the Foreign Investment in Civil Aviation Industry, which is jointly enacted by ACAC, the Ministry of Foreign Trade and Economy Cooperation ("MOFTEC") and the State Developing and Planning Commission ("SDPC"), will come into effect as of August 1, 2002.
An ACAC official said that the new regulation expands the scope of possible investment by abolishing the quantity limitation on experimental foreign-invested enterprises ("FIE") in the public aviation transport industry. The new regulation will also allow foreign investors to invest in any existing public aviation enterprise and opening all areas, except those listed as state confidential projects, to foreign investment.
In addition to the current investment modes of sino-foreign equity joint venture and sino-foreign cooperative joint venture, foreign investors can buy stakes in Chinese aviation companies or use other investment models as approved by the relevant authorities. The regulation also raises the proportion of foreign investment allowed in Sino-foreign joint-stock ventures.
Business, agricultural and industrial flights will now be open to foreign investors, though defence-related flights will still be restricted. Chinese investors can hold major shares in air services involving business and tourism, while foreign companies can hold major shares in agriculture and forestry.
The investment percentage of ground services is redefined in the new regulation. The 49% share-holding limitation in aviation oil supply and aircraft maintenance remains, while the limitations in cargo storage, aviation food supply and ground services are being liberalized.
(Source: Xinhua News Agency)
Insurance Law under Revision
Regulators have submitted the proposed revisions, which, among other things, are designed to lift restrictions on the investment of insurance assets and reduce regulators' control over premium rates.
China's existing Insurance Law took effect in October 1995. Changes proposed by the watchdog of China's insurance industry, the China Insurance Regulatory Commission (CIRC), are now pending before the standing committee of the National People's Congress. The amendments would allow insurance companies to invest their assets in companies, even though they are still not permitted to operate as securities companies.
Under the current legal framework, insurers are required to invest most of their funds in bank deposits and state bonds while only a maximum of 15% of life insurers' assets may be invested in the higher-return stock markets through investment funds.
The proposed changes would enable insurance companies to invest in other financial bonds. However, under the proposed changes, financial market regulators will have wide powers over whether, when and how insurance companies could invest in the stock market.
According to the new proposal, the CIRC's power would also be relaxed. Under the existing rules, the CIRC is entitled to draft insurance clauses and determine all premiums. After the revisions are approved, the CIRC's power will be limited to ''insurance products connected with public interests and new life insurance products''.
(Source: www.scmp.com)
PBOC Official: China Should Further Open Banking Sector
A senior central bank official said China should accelerate the pace of opening the banking sector to both foreign banks and domestic private investors.
Some of the smaller commercial banks are looking for private investors, and the Big Four State banks also need to bring in qualified strategic investors, said Yi Gang, deputy secretary-general of the Monetary Policy Committee of the People's Bank of China, at a seminar organized by the China Center for Economic Research at Peking University held recently.
According to Yi, the non-state sector has made remarkable contributions to China's economic growth and has provided many jobs, but they lack access to the financial sector and that should be changed.
Yi said he was cautiously optimistic about China's economic prospects. He predicted China's economic growth rate could reach 7.5 % this year and said he was hopeful that the consumer price index, a barometer for inflation, would be pulled out of negative territory.
(Source: China Daily)
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