CX Daily: The China Development Forum's Biggest Takeaways
China aims to give foreign investors sufficient hedging tools: Central banker
Ensuring that domestic and foreign investors have access to sufficient hedging tools to effectively manage risks will be a major task for the country’s financial regulators this year, China’s central bank Governor Yi Gang said over the weekend.
Overseas investors have long complained about the insufficiency of hedging tools in China as well as regulatory limits, while their demand for yuan-denominated financial assets has increased significantly in recent years.
One frequent target of complaints is the tough limits on stock-index futures, a tool for investors to hedge their bets. Previously, regulators had blamed short-sellers using this tool for worsening the 2015 stock market crash. Since early 2017, China has gradually loosened these restrictions.
Less government intervention in the derivatives market is also required for further opening-up, such as the inclusion of Chinese mainland shares in global index compiler MSCI’s indexes, multiple analysts said.
FINANCE & ECONOMICS Regulators are requiring companies seeking listings on China's new high-tech board to clarify their valuation adjustment mechanism with private equity and venture capital investors.
Regulators are requiring companies seeking listings on China's new high-tech board to clarify their valuation adjustment mechanism with private equity and venture capital investors.
High-tech board gets more detailed rules
A second set of rules for applicants to the Science and Technology Innovation Board were issued for companies looking to list on the new Nasdaq-style high-tech board Sunday, indicating that it has clearer listing requirements than the country’s two main boards — the Shanghai Stock Exchange and the Shenzhen Stock Exchange — which have only informal verbal advice on listing rules.
The regulations issued by the SSE Sunday say companies applying to list on the board cannot have major or controlling stakeholders that are asset management plans, trust plans and private equity funds managed by financial institutions because such complex ownership structures make companies more opaque. If any of these entities are major stakeholders, the applicant companies must ensure sufficient regulatory oversight and particularly that anti-dumping rules are followed.
China vows to hold yuan stable
China will keep the yuan basically stable at reasonable and balanced levels, Pan Gongsheng, vice governor of the central bank, said at the China Development Forum Monday. The exchange rate is among key issues of trade talks between the United States and China. U.S. officials have said any trade deal will include a provision to bar China from competitively devaluing its currency to help exporters.
Pan, who is also the director of the State Administration of Foreign Exchange, attributed the yuan’s strength to China’s continued strong economic fundamentals, which will remain resilient, he said. He cited several uncertainties facing the yuan, including the possibility of a global economic slowdown, trade protectionism and geopolitical conflicts.
Online lending /
P2P sites in transition to become facilitators for institutional lenders
Amid a crackdown, recent financial statements of several P2P lenders show a trend of diversifying funding sources away from individual investors and toward licensed financial institutions. Those making the transition include Lexin Fintech Holdings Ltd., 360 Finance Inc. and Alibaba-backed Qudian Inc.
Institutional partners for the P2P platforms include banks, trust companies and licensed consumer finance companies. The shift of funding sources means default risks of online platforms will be spread across the broader financial sector. Local governments including Shanghai and eastern Zhejiang province have issued guidance on how to regulate institutional funding for online lenders.
History lesson /
Joseph Stiglitz says China must learn lessons of Reagan-era reforms
Nobel prize-winning economist Joseph Stiglitz issued a warning to Chinese policymakers — learn well the lessons of the U.S. administration of the 1980s when it comes to enacting supply-side reform, or face spiraling inequality.
Speaking at the China Development Forum in Beijing over the weekend, Stiglitz said supply-side reform should benefit the nation as a whole, rather than enriching rent-seekers and allowing one group of people to exploit others. Reagan-era tax cuts and deregulation ultimately resulted in slower economic growth, increased inequality and concentrating ownership in some industries, Stiglitz said.
Quick hits /
Sluggish demand can’t break swine fever’s grip on pork prices
Economists debate downside of deleveraging campaign
BUSINESS & TECH This is a landmark case for foreign carmakers challenging alleged intellectual property rights violations in China. Photo: VCG
This is a landmark case for foreign carmakers challenging alleged intellectual property rights violations in China. Photo: VCG
Jaguar Land Rover wins case against Chinese copycat — in China
A Beijing court ruled in favor of automaker Jaguar Land Rover PLC's claim that Jiangling Motors Corp. Ltd. violated its IP on the design of several major features of its Evoque model, in what the U.K. company is calling a “first” for international car manufacturers in China.
On Friday the court ordered Jiangling to cease the production, sale and marketing of the its Landwind X7, a sport-utility vehicle, though distributors told us that as of Sunday they had yet to receive a suspension notice. The case grows out of the 2016 launch of the X7, which bore a striking resemblance to the Evoque, which hit the China market in 2011.
Jiangsu explosion /
At blast site in Yancheng, witnesses describe carnage
The death toll from Thursday afternoon’s chemical plant explosion in Yancheng, eastern China’s Jiangsu province has risen to 78, officials said, while 556 people were being treated in hospitals, including 79 who were in critical condition as of Monday.
Factories throughout the industrial park were closed when we visited Friday. A pungent smell hung in the air. Police and special security personnel, some of whom were wearing gas masks, had set roadblocks around the blast site. One volunteer told us he had entered the blast site Friday. Buildings in the direct vicinity had been flattened, and the ground was covered in debris and blood, he said. The explosion had also created pools of black and yellow liquid.
Swine flu turns dream of star pig farm into a nightmare
Mingshui County in the northern hinterland of Heilongjiang province was once considered an ideal place for raising pigs. So ideal, in fact, that it was selected back in 2016 to be the site of a showcase farm by a Chinese-Danish partnership that aimed to introduce Denmark’s advanced pig-raising technology and farm management practices to China.
Today, Heilongjiang Eurasian Animal Husbandry Co. Ltd.'s dream has turned into a ghastly nightmare. China’s outbreak of African swine fever led to the annihilation of all 73,000 pigs on this farm alone, the biggest death toll recorded on a single pig farm in the epidemic, according to officials. The disaster has led to allegations of failed protocol compliance, departures of the Danish experts, lawsuits and legal punishments.
How is it that the disease spread so rapidly even at a star farm like Eurasian, supposedly equipped with the highest biosafety standards? Check out our deep dive.
Electric cars /
Faraday Future launches JV with gaming operator to sell electric cars
Debt-ridden entrepreneur Jia Yueting's electric car startup Faraday Future will create a joint venture with mobile-gaming company The9 Limited to launch a fully electric vehicle brand in China, Faraday Future announced Monday.
The9 said it will invest as much as $600 million in the 50-50 joint venture, $5 million of which has already been paid. The joint venture will produce and sell Faraday Future's new model, the V9, in China. The two companies predict an eventual annual production capacity of 300,000 cars a year, with rollout beginning in 2020.
Quick hits /
Kaifu Lee: Despite its numerous possibilities, AI won’t create many more unicorns
Latest Didi killing sparks further safety fears – for drivers
Apple’s Cook says essential that China continue to open its economy
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