The aim of an equity market circuit breaker is to provide safeguards to address market volatility and inspire investor confidence. It’s hard to argue with the rationale, but this week’s new measure in China has had unintended consequences for the world’s second largest economy. And it’s not the first time that the China Securities Regulatory Commission (CSRC) has made such an error of judgement.
Under previous rules, trading in individual mainland Chinese stocks had to remain within a 10 per cent price limit based on the prior day’s close. Monday’s innovation extended restrictions to the entire CSI 300 index, however; this time at even tighter boundaries of 5 per cent and 7 per cent. In essence, if an upward or downward move exceeds 5 per cent, the index goes into auction mode (when trades may be submitted but not executed). A subsequent move to the 7 per cent boundary means all stocks are suspended. Read more
By Dominic Jephcott, Vendigital
The Chinese Government’s decision to embark on a fresh round of industry consolidation as part of a move to strengthen state-owned enterprises (SoEs) and increase their global competitiveness has been a long time coming. It is an understandable response to the slowdown in economic growth, over-capacity in many sectors and poor returns on huge capital investments over the last ten years.
The Made in China 2025 initiative, which was outlined last week at the National People’s Congress, is a 10-year plan for transforming the country’s disparate manufacturing sector in order to create a smaller number of large-scale businesses capable of competing internationally in the higher added-value and strategic industries. Calls to address the endemic inefficiencies of China’s SoEs and increase their global competitiveness are nothing new, of course, but this time it seems there is a clear commitment to make sure it happens. Read more
By Liang Xiaozhong of the China Banking Regulatory Commission
Internet Finance is a term drawing massive attention from cities to villages across China. By broad definition, internet finance – which includes Peer-to-Peer (P2P) lending and crowd funding – includes any organisation that extends their financial applications to the public over internet or any other IP network. Heated discussion surrounds the question of whether internet finance may replace conventional banking in China, unlike in many countries where it has undergone an evolution alongside conventional banking.
To see the future of this competition, we first need to understand the fundamental differences between them. Read more
Imagine you are bidding for an item on eBay, and the lowest bid wins while the highest bid loses. Impossible? That is what is happening in the world of Chinese initial public offerings. Read more
It’s tough being China’s top regulator. As if trying to rein in the country’s shadow banking system and dubious wealth management industry wasn’t enough, Xiao Gang, the new chairman of the China Securities Regulatory Commission, now has to fend off personal comments about his appearance. Read more
There are several things you might associate with Bitcoin: freedom from central banks; criminal activity; boom and bust; the Winklevii. How about China?
Although most Bitcoin enthusiasts and pioneers are US based, China has emerged as a big centre of Bitcoin users. The question is: why, and will the authorities allow it to flourish? Read more
French food products group Danone has said it will cut prices of its infant formula products in China by up to 20 per cent, after the Chinese government launched an investigation into possible price-fixing and anti-competitive practices by foreign manufacturers.
But the government crack-down is unlikely to restore confidence in domestic Chinese brands of infant formula, a commerce ministry official warns. Read more
Filial piety has been a central pillar of the Chinese moral code for centuries. But Chinese lawmakers and judges seem to believe ethic principles alone are not quite enough to ensure the country’s elderly are properly taken care of.
This week, a court in eastern China ruled that a woman surnamed Zhu had the duty not only to give financial support to her 77-year-old mother (pictured) but also to visit her at least once every two months. Read more
The China Food and Drug Administration has promised to get tough on health foods before, with little result. This time, it seems, it is serious.
The recently-reformed CFDA has promised a five-month campaign from May to September to crack down on illegal activity in the health food industry, part of a broader drive by authorities to stamp out corruption and unethical business practices. Read more
When might the Chinese authorities lift the ban on domestic IPOs imposed last year to accelerate reforms and stabilise a weak stock market?
With the wonderful benefit of hindsight, it wasn’t surprising that predictions that the October suspension might be lifted in March proved wrong. After all, Beijing was in the throes of its leadership change.
But now that the new team is in place, there are signs that officials are preparing the ground for a resumption – albeit with tougher regulatory standards for issuers and sponsors alike. Read more
Chinese people are used to hearing about the extraordinary benefits enjoyed by employees of big state-owned enterprises. But the size and scope of such benefits still delivered a shock when the National Audit Office released its annual reports on 10 SOEs and further exposed the extent of the problem.
Among the 10 were China Mobile, China Huaneng Group, China Publishing Group and other SOEs and, notably, their subsidiaries. They were found to have violated financial regulations by offering staff a variety of “invisible benefits”, according to audit reports for 2012 on the NAO’s website. Read more
In the pantheon of financial news, China’s decision to open its interbank bond market to foreign investors may seem a small item. But the announcement, made on Wednesday, is a big one for two reasons.
First, it gives foreign institutions access to a major asset class. Second, its timing signifies that China’s financial reform train is still very much in motion just a few days after the dust finally settled on the country’s leadership reshuffle. Read more
For the tens of millions of Chinese who will journey back home next month for the Chinese New Year, fighting over the limited supply of train tickets is nothing new. But this year, the fight has moved online, and somewhat controversially. Read more
By Ben Simpfendorfer of Silk Road Associates
The fate of China and the world’s multinationals are bound tightly together, both having benefited from the spectacular growth in global trade and investment over the past two decades.
So it’s no surprise then that the global crisis has challenged that once cozy relationship: China is rethinking its open-door policy to foreign firms, while the world’s multinationals are equally discovering opportunities in India, Brazil, and other fast growing emerging markets. Read more
China Development Bank, the state-owned lender known for funding infrastructure projects like the Three Gorges Dam, is providing more than $1bn to help small Chinese companies leave the US stock market, according to Bloomberg.
Beyondbrics can’t help but wonder whether CDB’s foray into the US has something to do with the political battle between Washington and Beijing over cross-border regulation of accounting firms. Read more
Others may worry that the Chinese economy is on rocky foundations, but not Deloitte Touche Tohmatsu, which has decided to invest another $160m in the mainland over the next three years – notwithstanding concern about economic growth, or Beijing’s plans to localise the foreign auditing firms. Read more