19 February-4 March 2023

Fortnightly newsletter tracking China's financial policy news and announcements

Overview

The last fortnight saw two major measures introduced affecting Chinese companies looking to list shares: first, new arrangements for domestic IPOs, and second measures paving the way for the resumption of overseas listings by Chinese firms.

Under rules announced by the China Securities Regulatory Committee (CSRC), companies wanting to list on Chinese share markets will now no longer have to seek approval from the CSRC, but can simply register instead, providing they meet the necessary criteria for listing.

In contrast, the other measures, also issued by the CSRC, grant the commission powers to oversee all offshore listings of Chinese firms with variable interest entity (VIE) structures, the format used by almost all of China’s big technology firms.

Regulators also issued a number of rules tightening their oversight of banks.

The China Banking and Insurance Regulatory Committee (CBIRC) and the People’s Bank of China (PBoC) issued new capital management regulations, following up rules on the financial risk regulation issued in January. The rules divide all banks into one of three categories according to their size and financial risk. Each tier will be subjected to a specific set of rules.

PBoC and CSRC published new regulations for money market funds (MMFs), also aimed at risk reduction.

To offer support to China’s beleaguered real estate market, the CSRC issued its “Real Estate Private Equity Investment Funds Pilot”, aimed at helping small to medium-sized real estate developers with debt financing.

The CBIRC announced penalties imposed on five banks for falsifying data or violating asset management regulations.

Shenzhen’s Qianhai financial district received further high-level backing with the People’s Bank of China, China Securities Regulatory Commission, China Banking and Insurance Regulatory Commission, State Administration of Foreign Exchange and Guangdong provincial government jointly released an “Opinion” document on strengthening Qianhai-Hong Kong ties.

1. IPO reforms released, put into effect全面实行股票发行注册制制度规则发布实施

17 February 2023

The China Securities Regulatory Commission (CSRC) released regulations revising the IPO registration system on 17 February, with the rules coming into immediate effect.

The reforms make new listings registration-based rather than approval-based as they had been previously and so should make IPOs considerably easier and less costly. They govern all stock markets in China.

The measures also remove price limits five days before a stock goes public, overhaul the processes involved in temporary trading suspensions and allow margin trading on the same day as a stock starts trading.

CSRC announcement: Full text / Machine translationFull rules:  Text / Machine translationXinhua report: Full text / Machine translation

2. Trial rules issued for overseas IPOs境外上市备案管理制度规则发布实施

17 February 2023

The China Securities Regulatory Commission (CSRC) issued trial rules on 17 February covering offshore listings, opening the way for overseas listings by Chinese companies to resume after an 18-month hiatus.

Under the rules, due to come into effect on March 31, the CSRC and other relevant government agencies, such as the National Development and Reform Commission and Cyberspace Administration of China, will have to approve offshore listings before they can go ahead.

The regulations comprise six documents: the “Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies”, plus five supporting guidelines.

CSRC Trial Measures in full: TextCSRC Measures’ guidelines in full: TextCSRC translation of the Trial Measures: TextCSRC translation of the Measures’ guidelines: Text

3. Five banks punished for violating regulations中国银保监会依法查处5家金融机构违法违规行为

17 February 2023

The China Banking and Insurance Regulatory Committee (CBIRC) has fined five banks for violating data and other procedural regulations.

Bank of China, Minsheng Bank, and Bohai Bank were found to have falsified data and failing to follow procedures when making major deals. China Construction Bank and Hong Kong’s Standard Chartered violated debt and asset management regulations.

CBIRC fined the five banks and responsible staff a total of 388 million yuan (US$56 million). It also confiscated all funds received from CCB and Standard Chartered’s debt and asset-management related activities.

4. CBIRC, PBoC issue regulations on banks’ capital management加强商业银行资本监管

19 February 2023

Following the release of new measures on how banks should classify assets by financial risk in early February, the China Banking and Insurance Regulatory Committee and the People’s Bank of China have now released further regulations on how banks should manage their capital and conduct risk management.

The revisions are aimed at improving commercial banks’ capital management and encouraging them to strengthen their risk management and improve the quality and efficiency of their services.

The new regulations divide banks into three groups according to size and financial risk of each bank. Each group has its own capital supervision requirements.

The regulations are also aimed at maintaining economic stability by helping banks identify and manage risky assets more easily. Greater transparency, with plans to increase the amount of data that banks will have to publish, is an important tool to this end.

The CBIRC and PBoC are currently requesting comments from the public on the new rules. After being finalized, the new rules are due to come into effect on 1 January 2024.

CBIRC: Full text / Machine translationShenzhen Post: Full text / Machine translation

5. CSRC to launch real estate private equity pilot不动产私募投资基金试点 利好地产

21 February 2023

The China Securities Regulatory Commission said on 20 February it would be launching the “Real Estate Private Equity Investment Funds Pilot” as a way of offering support to China’s troubled real estate sector.

The scheme allows investment in residential, commercial and infrastructure projects. Each investor must at least invest 10 million yuan (US$1.4 million) and no investor can invest more than 20% of what the company is worth. Each round investment round must have total investment of more than 30 million yuan.

CSRC: Full text / Machine translationNational Business Daily report: Full text / Machine translation

6. PBoC issues financial bills in Hong Kong中国人民银行在香港成功发行250亿元人民币央行票据

21 February 2023

On 21 February, the People’s Bank of China released financial bills totalling 25 billion yuan (US$3.6 billion)  in Hong Kong.

The bills were divided between 10 billion yuan three-month bills paying interest of 2.4% and 15 billion yuan one-year bills paying 2.7%.

Following the release of bills from Shenzhen and Hainan late last year, Hong Kong remains the biggest offshore yuan trading hub.

Buyers of the bills included banks, central banks, funds, insurance companies and other institutional investors from around the world.

Total bids for the bills were added up to 70 billion yuan, 2.8 times the planned issuance.

PBoC: Full text / Machine translation

7. CSRC, PBoC issue regulations for money market funds证监会、央行联合发布《重要货币市场基金监管暂行规定》

17 February 2023

To strengthen the supervision of money market funds, the People’s Bank of China and the China Securities Regulatory Comission, released the “Interim Provisions on the Supervision of Important Money Market Funds” on 17 February.

The new rules define what constitutes an “important” money market fund (MMF) and set specific requirements for the MMF market aimed at reducing financial risk for both product and fund managers.

The regulations also lay out the steps “important MMFs” should follow to resolve high-risk situations.

The regulations are due to come into effect on 16 May.

CSRC, Interim provisions Link to PDF / Machine translationXinhua report: Full text / Machine translation

8. Central bank, regulators up backing for Qianhai前海构建多层次金融科技生态圈

25 February 2023

The People’s Bank of China, China Securities Regulatory Commission, China Banking and Insurance Regulatory Commission, State Administration of Foreign Exchange, and Guangdong provincial government jointly released the “Opinion on Qianhai-Hong Kong Reform to Modernize Reforms and Deepen Collaboration” on February 23.

The Opinion lists 30 measures on how to develop Qianhai into an international fintech center, including making it a location for trialing cross-border yuan services.

The Opinion proposes that financial institutions from Hong Kong be encouraged to operate in Qianhai’s cooperation zone. International financial institutions already present in Qianhai include PayPal, Mitsubishi Bank and Generali Group.

Qianhai had 4,632 locally registered financial organizations as of December 2022. Its fintech industry includes virtual banks such as Ping An’s OnePay and Hong Kong’s WeLab Bank, and online insurer ZhongAn.

The value of Qianhai’s financial sector grew 13.4% in 2022.

Summary of the Opinion: Full text / Machine translationFull Opinion: Full text / Machine translationShenzhen Economic News: Full text / Machine translation

9. Banks to limit how many credit cards an individual can hold and suspend inactive Cards [BORDERLINE ITEM]信用卡业务整顿力度加大 将逐步迈入精细化管理

24 February 2023

The China Banking and Insurance Regulatory Committee and People’s Bank of China released new regulations limiting the number of inactive credit cards and prevent consumers from applying for multiple credit cards in July 2022.

The regulations limit banks from allowing total of inactive credit cards to be more than 20% of all credit cards issued and prevent consumers from applying for new credit cards to cover heavily indebted credit cards. Banks must also clearly list all transaction and handling fees.

Since then, several banks have issued statements on how they are handling inactive credit cards, the maximum number of cards an individual may hold, and procedures for standardizing automatic installment payments and correcting erroneous transactions.

Both state-owned and privately held institutions, including Bank of China, Ping An Bank, and Rural Commercial Bank, now classify inactive credit cards as those not used for 18 months. They also bar individuals from holding more than 20 credit cards.

Securities Post: Full text / Machine translationCBIRC and PBoC credit card regulations: Full text / Machine translation

10. China Association for Science and Technology to partner with major financial institutions [BORDERLINE ITEM]中国科协启动”科创中国”金融伙伴计划

22 February 2023

The China Association for Science and Technology announced it would be partnering with more than 10 major financial institutions for the “Science and Technology Innovation China Financial Partnership Plan”.

Under the plan, these financial institutions will offer specialized financial products and loans to ‘science and technology enterprises’, an apparent response to the central government’s promotion of indigenous science and technology innovation enterprises.

The CSRC defines ‘science and technology innovation enterprises’ as those in the information technology, advanced equipment, new materials, renewable energy, environmental protection, and biotechnology industries, along with enterprises that combine manufacturing with big data, artificial intelligence and cloud computing.

China Information Post: Full text / Machine translationCSRC Work Plan: Full text  / Machine translationCSRC’s Definition on Science and Technology Enterprises: Full text  / Machine translation

For more information about this newsletter, visit China: Financial Policy Update or email [email protected].