CX Daily: PBOC Suspends Mandatory Ratings For Interbank Market Bond Issuers

Antitrust /

New regulation plan pledges ‘consistency,’ respect for rule of law amid roiling markets

China’s top policymakers sought to reassure jittery investors that they will respect the rule of law, process and contracts as they unveiled a broad five-year plan for the regulation of vast parts of the economy.

The second five-year guideline on rules-based governance, issued late Wednesday by the State Council and the Communist Party’s Central Committee, is the first to use the term “antitrust” and include a section dedicated to corporate monopolies.

It emphasizes cross-ministry coordination and policy consistency as goals and the use of legislation rather than administrative measures, saying “once a major administrative decision has been made, it shall not be arbitrarily changed or suspended” without going through proper legal procedures.

Ratings /

PBOC suspends mandatory ratings for interbank market bond issuers

China’s central bank suspended almost all credit rating requirements for companies that sell bonds and other debt financing instruments on the interbank market as regulators continue their overhaul of the credit rating industry to stamp out problems such as inflated rankings.

The halt on the need for an issuer rating will apply to all nonfinancial companies as part of a pilot program to promote the market-oriented revamp of the industry, the People’s Bank of China (PBOC) said in a statement (link in Chinese) Wednesday. The interbank market is China’s main bond market, accounting for 86% of outstanding onshore bonds (link in Chinese) as of the end of last year.

FINANCE & ECONOMY

The headquarters of the People’s Bank of China in Beijing. Photo: IC Photo

Lending /

PBOC offers $31 billion in cheap loans to boost struggling regions

China’s central bank is providing an additional 200 billion yuan ($30.9 billion) of cheap funds to banks as an incentive to boost credit in regions where lending has been lagging.

The money is being allocated under a new relending quota for banks to support agriculture, micro and small businesses and the private sector in 10 provincial-level regions where credit has risen at a relatively slow pace, the People’s Bank of China (PBOC) said in its second-quarter monetary policy implementation report (link in Chinese).

Although the central bank didn’t name the 10 regions, sources with knowledge of the matter told Caixin they include the northeastern rustbelt provinces of Heilongjiang, Liaoning and Jilin, the northwestern provinces of Shaanxi and Gansu provinces, and Henan province in Central China.

Insurers /

China expands scrutiny of online insurance sector

China’s banking and insurance regulator is stepping up scrutiny of the nation’s online insurance platforms, further expanding the government’s crackdown on the internet sector.

The China Banking and Insurance Regulatory Commission (CBIRC) ordered insurers to curb improper marketing and pricing practices and step up user privacy protection, the commission said Wednesday in a notice on carrying out rectification work for online insurance violations.

Tax /

China raises the bar for tech tax break

China raised the requirements for tech companies to qualify for a tax break in a move that aims to foster true innovation so China can become a global tech powerhouse.

Since last year under the policy (link in Chinese), qualified domestic software companies and integrated circuit design businesses have been able to get exemptions from corporate income tax for the first five years after they turn a profit. After that they need to pay only a 10% rate, well below the standard rate of 25%.

To qualify for the preferential tax policy under the new requirements (link in Chinese) issued earlier this year, software enterprises have to spend at least 7% of their annual revenue on research and development, up from 6% under the previous rules (link in Chinese). The new rules also raise other requirements.

Covid-19 /

East China city scrambles to control virus outbreak linked to testing site and games parlor

Authorities in Yangzhou, East China’s Jiangsu province, are scrambling to contain the latest Covid-19 outbreak, which has infected nearly 500 people over more than the past two weeks.

The outbreak, which mainly spread from a mahjong parlor and a Covid testing site, forced local authorities to raise the risk levels in several dozen areas and carry out its seventh round of mass testing.

Quick hits /

Hong Kong bourse reports drop in quarterly profit as IPOs slow

China Huarong unit rating now deep into junk territory at Fitch

Schwab: Young people hold the key to creating a better future

BUSINESS & TECH

Evergrande disclosed it’s in discussions with “several independent third-party investors” on selling assets.

Property /

Rivals in talks to buy debt-ridden Evergrande’s property management unit

Two of China’s largest property developers and Shenzhen’s subway operator are in talks to buy assets from troubled property giant China Evergrande Group, Caixin learned from people close to the talks.

China Vanke Co. Ltd.’s property management unit Onewo and Country Garden Holdings Co.’s property management unit CG Services are among several potential buyers for assets of Evergrande Property Services Group Ltd., according to the people.

Some of the potential buyers have been in discussions for nearly a month, and details of possible deals are not clear, the people said.

Cosmetology /

Regulatory headwinds take luster off beauty industry stocks

Twin regulatory headwinds for China’s booming “medical beauty” industry — one focused on financial and another on medical risks — battered associated stocks.

Regulators are bearing down on the potentially risky practice of lending cash to people to undergo cosmetic medical procedures, then bundling those loans into asset-backed securities traded on Chinese exchanges, Caixin learned.

Steel /

China’s top steel hub to slash 16% of capacity in second half

Hebei province, northern China’s steel industry hub, aims to cut its crude steel production capacity by 21.7 million tons this year, equivalent to a drop of 8.8% from last year’s level, as part of a national campaign to reduce pollution.

To meet that target, Hebei, China’s largest steel production base, needs to cut crude steel production capacity by 16% during the second half. According to an official document seen by Caixin, about 57% of the capacity reduction will take place in Tangshan, the world’s biggest steel-producing city.

Education /

China’s capital bans foreign textbooks

China’s capital banned its primary and middle schools from using overseas textbooks in a regulation (link in Chinese) designed to further control the selection of school teaching material.

The regulation, issued by the Beijing Municipal Education Commission Monday, also asks high schools to employ foreign textbooks only in accordance with relevant national and city policies.

Ling Huawei: Can China’s after-school tutoring crackdown stop excessive competition in education?

Quick hits /

Lenovo’s profit more than doubles in second quarter

Cathay Pacific’s dire run eases as first-half losses narrow

Jack Ma-linked startup seals deal to hunt for EV battery materials in Greenland

Energy Insider /

Renewable power plants encouraged to add storage, peak-shaving units

GALLERY

On World Elephant Day, wandering herd heads home

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