China Digest

Economics and policy from China’s newspapers

Wednesday February 22, 2017

Guidelines set for local governments issuing bonds in 2017

Local governments cannot issue bonds that exceed the ceiling set by the Ministry of Finance, with amounts issued in one quarter not more than 30% of the entire quota this year, reported Caixin on Tuesday evening. The ministry circular comes a day after five provinces were reprimanded for breaching rules. Improved effort should also be made to increase secondary market liquidity in local government bonds, it said. A local government debt credit score system for institutions is also being mooted, with rule breakers going on a “blacklist.”

‘Dynamic changes’ on cards for banks’ reserve requirement ratio rates

The People’s Bank of China (PBOC) said on Tuesday that it was making “dynamic changes” to banks reserve requirement ratio (RRR) rates. The RRR rate is the amount of cash as a percentage of total deposits that banks must park at the PBOC as reserves. The changes will take effect on February 27 and adjustments were possible, depending on whether it is conducive to the “establishment of the positive incentive mechanism.”

PBOC plans to regulate asset management products

The People’s Bank of China is drafting a new regulation to set a leverage ceiling on asset management products issued by banks, securities and fund companies as well as other financial institutions, Caixin reported on Tuesday. The draft rule said the leverage of public financing and private financing products could not exceed 140% and 200%, respectively. The leverage multiple of products investing in fix-assets and stocks should be 3 and 1, respectively.

Timeframe to set central parity rates of yuan cut to 15 hours

The calculation on a basket of currencies to set the central parity rate of the yuan against the US dollar has been cut to 15 hours from 24 hours since Monday, Yicai confirmed in a report. Only exchange rate changes from 16:30 to 7:30 (UTC+8) will affect the daily central parity rate, which means daytime fluctuations in the US dollar will no longer have an affect.

Questions raised over US$2.9b Gree Electric, Zhuhai Yinlong deal

The Shenzhen stock exchange has asked Gree Electric Appliances and Zhuhai Yinglong New Energy to further explain on the risks involved in their 20 billion yuan (US$2.91 billion) agreement on Tuesday evening, The Paper said. Gree Electric announced the deal on Tuesday afternoon, which would see the firms share services and products in the electric vehicles and battery business. The memo set out seven points, including the financial health of the two companies. Both companies are to reply by February 23, the report said.

Baosteel completes takeover of Wuhan Steel; Baosteel’s stock to resume trading on February 27

New shares in Baosteel will be issued on February 27 and trading will also resume following the completion of a takeover of its smaller rival Wuhan Iron and Steel, The Paper said on Tuesday. Baosteel’s acquisition has created the world’s second largest steel company behind ArcelorMittal.