Date
19 October 2017
General Images Of Banks On Financial Street

The Big Picture: BIGGER LOCAL BANKS

China’s banking regulator said Thursday that it will maintain a 25 percent cap on foreign ownership in mainland commercial banks. Entities that own stakes in Chinese banks should hold the shares as long-term investment, help improve the lenders’ corporate governance and business and avoid direct competition, the China Banking Regulatory Commission (CBRC) said in a statement.

Any changes to the policy on such investment will be based on industry risks and regulatory needs, the regulator said.

Meanwhile, the CBRC scrapped the minimum requirement for setting up sub-branches. The move is aimed at allowing domestic commercial banks with strong risk controls to establish more branches in rural areas and boost services to the agricultural sector.

Chinese banks seeking overseas acquisitions should have at least 100 billion yuan (US$16.42 billion) in assets as of the end of the previous year.

The new rules were in line with the decision made by top Communist Party leaders at their recent plenum to maintain state entities at the core of the country’s economy.

As foreign investors, such as HSBC Holdings plc (00005.HK), will not be able to have bigger ownership or controlling stake in Chinese banks, they may find it difficult to derive synergy between their mainland branches and local lenders, observers say. 

Also, as domestic banking giants are allowed to open more branches in rural areas, they will enjoy more market share, which will suppress the growth of smaller players. The reform in the Chinese banking sector is likely to remain slow due to the monopoly.

SOE reform guidelines to take time

The long-awaited guidelines on the reform of state-owned enterprises (SOEs) and the state-owned asset management system are unlikely to be unveiled this year as the team assigned to draft the rules is still being set up, the National Business Daily reported Friday, citing an unnamed official at the Ministry of Finance. The team is expected to comprise representatives of the National Development and Reform Commission, the finance ministry and other agencies. The government is considering raising the ratio of profit that centrally administered SOEs must contribute to the state coffers to 30-35 percent from 15 percent at present, the official was quoted as saying.

Chinese said to account for 47% of luxury goods purchases

Chinese people’s consumption of luxury goods may reach US$102 billion this year, accounting for as much as 47 percent of the expected sales of such items worldwide, Xinhua news agency reported late Thursday, citing data from luxury goods research institute Fortune Character. Domestic luxury goods consumption is expected to rise 3 percent to US$28 billion from the previous year while overseas purchases of such items by Chinese may surpass US$74 billion, the report said. However, it said data pointed to a slower growth of the domestic luxury goods market this year. 

– Contact HKEJ at [email protected]

EJI Weekly Newsletter

Please click here to unsubscribe