CHINA BANKING AND FINANCE NEWSLETTER
Vol. 4, No. 9 - August 22, 2003
TOPICS THIS ISSUE:
- Experts: RMB Revaluation 'Unnecessary'
- New Regulations for the Administration of Bankcards to Be Issued
- Insurer Completes Joint-stock Restructuring
- Thresholds for Hong Kong Banks to Enter into Mainland China Market Lowered
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Experts: RMB Revaluation 'Unnecessary'
A group of senior experts and officials warned that China should not bend to the pressure to revalue its currency. Instead, greater flexibility to the yuan's convertibility should be given in terms of the current account, said Li Qingyuan, a renowned economic professor.
China's hefty balance of payments surpluses have put pressure on the central bank as it has to buy hard currency to keep the yuan stable.
China is now the fourth largest importer into the United States, while US manufacturers have complained that the yuan peg is pricing them out of potentially lucrative Chinese markets.
Under the existing system, the yuan is closely pegged within a narrow band between 8.2760-8.2800 per US dollar, but the yuan's forward premiums have hit historic highs in recent weeks, suggesting the market thinks a policy shift is in the offing.
"The Chinese Government needs to send out a clear and strong signal on the rampant speculation about an imminent relaxation on currency to curb such a threat to China's smooth economic growth," said Li.
Agreeing with Chinese scholars, Stephen Roach, chief economist with Morgan Stanley, also refuted that China should be blamed for the world economic downturn and needs to adjust its currency.
"China's competitive prowess has little to do with currency. China competes mainly on the basis of labor costs, technology, infrastructure, human capital, and its passion and commitment to reform. An opening of its capital account and floating of the renminbi will occur only when China has made more progress on the road to financial sector reform," said Roach.
However, despite recent overwhelming calls for resistance to yuan revaluation, analysts say the government is exploring ways to make the currency more flexible by widening the band in the long run.
Source: Business Weekly
New Regulations for the Administration of Bankcards to Be Issued
The relevant official with the People's Bank of China ("PBOC") disclosed recently that the focal Regulations for the Administration of Bank Cards ("Bankcard Regulations"), which has absorbed recommendations and opinions from the industry circle, would hopefully be issued in the near future.
When receiving interview of China Central Television Station, Chen Jing, the Director of Science &Technology Department under PBOC expressed that there still exist some dissents among the parties concerned on the legal status of issuing banks, merchant banks, merchants, holders of bank cards and intermediate agencies.
The official said that, in spite of the existing dissents, the State Council has attached great importance on the formation of the new Bankcard Regulations, which would be issued soon.
The focal points concentrate on the establishment of private credit system, credit management of bankcards, the disposal of bad debts and banks' capability of controlling risks.
Before the new Bankcard Regulations comes out, the Rules on the Administration of Bankcard Business, which was issued by PBOC in 1999, should govern the management of bankcards business and the relationship of all parties concerned in bankcard business.
However, as the provisions in the current Regulations are too general to effectively regulate the bankcard business, PBOC decided to draft the Bankcard Regulations in 2001. It is learned that the new Bankcard Regulations will definitely provide the rights, liabilities and responsibilities of all parties in bankcard business and regulate the issuance of bankcards in foreign currencies and the use of bankcards issued overseas. According to the proposed Bankcard Regulations, foreign-funded banks would be permitted to issue foreign exchange credit cards and debit cards. As to the issuance of renminbi bankcards, foreign-funded banks will have to wait until five years following WTO accession.
Source: Xinhua News Agency
Insurer Completes Joint-stock Restructuring
The People's Insurance Company of China ("PICC"), China's largest non-life insurer, has completed its joint-stock restructuring, meaning a major step closer to its goal of going public.
The PICC was renamed PICC Holding Company, and owns two new subsidiaries: PICC Property and Casualty Co., Ltd. and PICC Asset Management Co., Ltd.
The core operations of PICC were transferred to PICC Property and Casualty, which is widely believed to be the entity seeking to float. The property insurance arm has a registered capital of 8 billion yuan (US$963 million) and more than 60 billion yuan (US$7.2 billion) in assets, according to the general manager of PICC Holding and chairman of the two new subsidiaries.
PICC Holding, which has a capital base of 15.5 billion yuan (US$1.8 billion), will serve as a representative of the State in overseeing the group's State-owned assets.
The asset management firm, with 100 million yuan (US$12 million) in registered capital, will be responsible for managing the group's own assets initially, executives said.
Company executives refused to disclose when and where the property insurance firm is expected to be listed, but one senior executive said the plan to go public had already been postponed by the outbreak of SARS (severe acute respiratory syndrome), adding that the company had prepared a new set of financial statements containing latest company statistics.
Source: China Daily
Thresholds for Hong Kong Banks to Enter into Mainland China Market Lowered
The conclusion of the Closer Economic Partnership Arrangement ("CEPA") between Hong Kong and the Mainland China lowers the thresholds for Hong Kong banks to enter into the market of Mainland China, benefit the expansion of mainland business of Hong Kong banks, and, at the same time, aggravates the competition between banks in China Mainland.
Prior to the execution of CEPA, in accordance with the Regulations on the Administration of Foreign-funded Financial Institutions of the People's Republic of China, the value of the gross assets of the foreign bank, which applies to set up a branch in Mainland China, shall not be less than US$ 20 billion. CEPA lowers the requirement for both Chinese branch and independent legal person entity of Hong Kong banks to US$ 6 billion, which is undoubtedly good news to those small-and-medium-sized Hong Kong banks with relatively less capitalization. Hong Kong Monetary Authority predicted that there would be about 20 more branches of banks incorporated in Hong Kong to be registered in Mainland China in the following three years,
It is learned that after the requirement is lowered to US$ 6 billion, 8 Hong Kong banks would be eligible to enter into Mainland China market, including Citic Ka Wah Bank, Shanghai Commercial Bank, Industrial and Commercial Bank of China (Asia) Limited, Wing Lung Bank, Wing Hang Bank, Dao Heng Bank and Nanyang Commercial Bank. Da Hsing Bank, Wing Long Bank and Citic Ka Wah Bank have already begun making plans for the establishment of their branches in China.
Source: China Business Times
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