Historically speaking, it has been very difficult for Chinese investors and institutions to invest their money overseas. The Chinese government has several reasons for tightly regulating capital outflows, the most important of which is controlling the value of the yuan. However, as a continuation of China’s broad plan to become more integrated into the globalized economy, the government has been encouraging cross-border investment through programs that allow Chinese investors to invest overseas, and programs that allow foreign institutions to invest in the mainland.
The Chinese bond markets are becoming more accessible through regulatory initiatives and greater foreign investor participation.
Following more stringent regulation on hydrocarbon emissions and new economic stimulus, 2016 has been characterized by a notable shift in the Chinese commodities market from extraction to processing. The new trend can be seen in rising indices of oil refineries, steel, aluminium and copper in tandem with a cut of supply of crude and coal. This phenomenon will have far reaching implications for construction companies, tech firms, China’s commodity exchanges and the macro economy as a whole in 2017.
On December 31st the State Administration of Foreign Exchange (SAFE) of China announced more stringent rules on individual purchases of foreign currencies, alarming the Chinese citizens with increased restrictions on forex-related investments at the start of the New Year.
Leaders of the world's largest economies gathered at the G20 summit in Hangzhou, China this past week. For the first time, 'Green Finance' was written into the agenda among other topics. Clearly, there is more that we could do as a global society to manage climate and environment change, a fact recognised by many of the attendees. The effort also showed China’s determination to move towards a low carbon and more sustainable development track.
Beijing has approved a new trading link between Shenzhen’s and Hong Kong’s stock markets to be opened by the end of the year. With the start of the Shenzhen-Hong Kong link, 880 companies will be added to the already available 567 through the Shanghai link that opened in 2014.
Inclusive finance is one of the most focused on issues for the Chinese government this year. In January, authorities issued a five-year plan for the development of inclusive finance in the country, and since then, the term has appeared multiple times in government reports and is still gaining traction.
One of the significant implications of the Brexit EU referendum is that over 40 years of political and commercial contracts and relationships will need to be reviewed. Once Article 50 of the 2007 Lisbon Treaty, which specifies the procedure for the exit from the EU, has been implemented, the UK will then have two years to negotiate its withdrawal as well as its participation in all of the existing UK-EU arrangements. Although the new Prime Minister, Theresa May, has stated will only happen next year, the UK will need to re-establish its current trading interests and create new ones. One of the most critical partnerships to be re-negotiated will be the one that it has with China.
Kapronasia was co-organizing the PitchIt part of the LendIt 2016 event in China and we had a chance to talk to a number of exciting fintech start-ups. Two of the pitching start-ups are targeting Chinese retail investors but they do this in a very different ways, which, in fact, tells us a lot about the mindset of retail investors in China; the start-up which understands the market better wins.
On May 27th, the People’s Bank of China (PBoC) released the implementation details that will govern foreign investment in China’s interbank bond market. The new rules make it much easier for certain foreign investors to participate in Chinese bond market activities, such as borrowing/lending, futures/forwards, and swaps, including interest rate agreements.
On May 6th, the People’s Bank of China (PBOC) changed its policy for investors in the interbank bond market. These modified regulations will open up the market to new types of investors including asset managers, housing provident funds, pension funds and charities.
Friday, May 20th was the first day when foreign commercial banks were allowed to trade yuan on the recently opened inter-bank forex market. The first batch of the banks will be able to trade both spot RMB and derivatives.
Last week in China, the China Securities Regulatory Commission (CSRC) prohibited listed companies from raising capital earmarked for investment in the following four industries: Internet Finance, Video Games, Film and TV, and Virtual Reality. The new prohibition is an attempt to steer money into the real economy, which is defined as industries producing tangible products and services. Permissions for mergers, acquisitions, and refinancing in those ‘unreal industries’ have been halted, as well.
China plans some new rules for the Qualified Domestic Institutional Investor program to further facilitate the cross-border investment and help the fundraising environment.