CX Daily: China Finally Has a New Foreign Investment Law

Foreign investment /

China passes landmark Foreign Investment Law

After decades of what some have called an outdated framework, China’s top legislature, the National People’s Congress, passed its sweeping new Foreign Investment Law, though questions remain such as the role of local governments.

Zhang Yesui, an NPC spokesperson, previously said the law will “improve the openness, transparency and predictability of the investment environment,” establish equal treatment for foreign and domestic investors, and address concerns of foreign investors around technology transfers — a focal point of trade tensions with the U.S.

The fast-tracked law will go into effect Jan. 1, 2020, and replaces existing decades-old laws. One key change was made to last week’s draft: Government employees are prohibited from leaking business secrets that they had access to while performing their duties.

In addition to mandating “equal treatment” of foreign and domestic companies, the law now applies nationwide restrictions on industries or activities foreign businesses can operate in. It also says that the state should not expropriate assets from foreign investors except in special circumstances, and stipulates remittance freedoms.

FINANCE & ECONOMICS

Premier Li Keqiang answers questions from domestic and foreign journalists at the annual session of the National People's Congress, held in Beijing's Great Hall of the People, on March 15. Photo: Chen Liang/Caixin

Economy /

Tax cuts mean governments need to tighten their belts: Premier Li

Governments should reduce public spending to deal with tight budgets amid tax and fee cuts but must ensure they spend enough on public welfare, Premier Li Keqiang said Friday.

Falling government revenue growth projections for 2019 left local officials looking at all means to plug gaps in their budgets, including slashing some proposed social welfare programs.

Beijing promised to cut taxes and fees this year by nearly 2 trillion yuan ($297.64 billion) to lower the burden on businesses plagued by a slowing economic growth. In addition to reduced spending, official coffers will benefit from a 1 trillion yuan increase in revenue from profits of some state-owned financial institutions and SOEs administered by the central government and from taking back idle fiscal funds that should have been used, Li said.

Check out our in-depth look at the challenges faced by local governments.

Cutting risk /

It’s banks’ turn on the hot seat of supply-side reform

Signs are increasing that the deleveraging campaign has yielded ground to a more pressing structural problem — how to change the financial system so that more credit is channeled to activities that produce real goods and services and to under-served sectors such as small and private companies. It's especially true now that officials are declaring initial success in the original effort while President Xi Jinping is also calling for more supply-side structural reform in the financial sector.

Supply-side structural reform initially focused on components such as cutting industrial overcapacity, reducing leverage in the corporate sector and cutting the stock of unsold homes, but it has now zoomed in on the financial sector after a February meeting of the CCP's most senior members.To some observers, it's a clear sign the government’s drive to reduce risks has entered a new phase.

Markets /

Hong Kong fines brokerages $100 million for failures in vetting listings

Hong Kong's Securities and Futures Commission has fined four global brokerage firms, including an arm of Swiss banking giant UBS AG, a combined HK$787 million ($100 million) for failing to do proper due diligence on companies they sponsored for IPOs.

The fines show that the city’s financial regulator is taking a tougher stance against IPO sponsors that fail to meet their obligations — to the detriment of investors. It slapped UBS Securities Hong Kong with a HK$375 million fine, the highest given to the four firms, and suspended it from sponsoring IPOs for 12 months. The commission also fined Morgan Stanley Asia, Merrill Lynch Far East and Standard Chartered Hong Kong.

P2P /

Online lender says it won’t rely on P2P loans this year

Nasdaq-listed online lender Lexin said it will not rely on its P2P lending business for growth in 2019, marking the latest sign the government isn’t easing off China’s imploding online lending industry.

“Our plan in 2019 is to not rely on P2P for growth,” Lexin CEO Jay Xiao said on a conference call Thursday through a translator. “Since the end of last year, in accordance with the regulators’ wishes, we stopped the growth of the balances on our P2P.” He added that the company is prepared to have all growth this year be driven from funding partnerships with financial institutions. It now has more than 100 institutional partners.

Quick hits /

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• Ken Fisher: Why a grayer China is cause for stock market optimism

BUSINESS & TECH

Photo: VCG