Category Archives: Policy

Nansha’s Mingzhu Bay gets eco-tourism focus

Guangzhou’s Nansha district government has released a plan for the subdistrict of Hengli, specifically related to its Mingzhu Bay area. Under the plan, Mingzhu Bay will be developed into an eco-tourism demonstration zone.

Hengli itself is being built as a World Financial Island (read our primer here.) But a key part of the plan is to attract international financial companies and talent, which is why Hengli also has a big area along its waterfront designed for lifestyle attractions. Therefore, with its abundance of high-quality ecological resources and a quaint rural culture, Mingzhu Bay is seen as an ideal spot to foster a new kind of tourism in the region – one that is low-impact, low-density and high value-added. 

Hang Seng jumps into new LPR-based lending market

Now that China has a benchmark interest rate, called the Loan Prime Rate (LPR), Guangdong banks and companies are wasting no time using it.

The LPR is set to be launched today and then published on the 20th day of every month. It will be set based on quotations submitted by 18 commercial banks. The central bank has added eight medium and small banks, including two foreign-funded banks, to the existing list of 10 nationwide banks that are allowed to submit quotations to the previous national one-year LPR.

Although Hong Kong’s lending behemoth, HSBC, was left off the list, its subsidiary, Hang Seng Bank, has already jumped into the fray and launched a tranche of loans to companies in Guangdong based on the LPR. Over 30% of the RMB150 million the bank is handing out will go to private enterprises, encompassing trade financing and revolving credits, according to the bank.

“The private sector is highly active in Guangdong and SMEs’ financing needs are strong,” said Qu Weiquan, head of commercial bank at Hang Seng Bank (China). “Thanks to the openness of Guangdong’s finance market, the financing solutions targeted at these companies have always had more flexibility and the market is more acceptable to the new LPRs.”

According to the state media, under the new system, banks will submit their prices in terms of basis points added to the interest rates on funding they receive from the central bank in the open market to form an LPR, which represents a shift away from the current practice of referring to the more expensive one-year benchmark lending rate.

The move, aimed at lowering borrowing costs for the economy, is considered as a milestone in reforms started four decades ago to loosen state control of the economy.

The banks’ lending interest rates will be linked to the interest rates on the PBOC’s lending to the banks through open-market operations, giving the central bank a way to still affect the cost of borrowing.

The PBOC said the goal of the move is to make the national LPRs a more market-oriented mechanism so as to lower borrowing costs in the real economy.

Some analysts believe the new LPR regime could favor big state-owned borrowers while delivering few benefits to SMEs as looming growth headwinds and financial risks have been making banks more risk averse.

Still, few banks will be able to turn their nose up at the PBOC. Economists from Nomura were quoted by Caixin Global as saying banks may need to do some “national service” by lowering their average loan rates, but they may try to make up for their lower profits by increasing the price of riskier loans to the private sector and SMEs.

Economists at China Merchants Securities also think that if the implicit floor on lending rates is eliminated, the borrowing costs of big companies will probably decline substantially. But more policies will be needed to lower the borrowing costs of SMEs, which are relatively high risk and have little bargaining power.

Guangdong to boost retirement communities

We have been tracking news related to the liberalization of the elderly-care market in Guangdong for some time. Now, the provincial government has issued some guidelines that look promising for investors, although the emphasis is clearly on non-profit organizations first.

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HK launches data governance framework

Hong Kong has introduced a new framework for big-data management, establishing governance principles and forming an independent evaluation system. Overseen by the Hong Kong Institute of Big Data Governance (IBDG), the push is on for setting standards in how information is used online as the city ramps up its transition to a digital economy. 

But it is not only for Hong Kong: the initiative is widely seen as building a foundation for data to flow more freely, while at the same time being better managed, within the Greater Bay Area. 

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Stock Connect to include dual-class HK stocks

Stock exchange operators in Hong Kong, Shanghai and Shenzhen have agreed on conditions that will allow mainland investors to trade Hong Kong-listed dual-class shares of some popular technology companies, such as Xiaomi or Alibaba, through the Stock Connect programs, reports Caixin Global. 

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Qianhai takes another bold step in forex reform

The hits keep coming from Qianhai, the special economic zone in Shenzhen that appears to be the spearhead of the next stage of major reform for the country.

The Shenzhen Foreign Exchange Bureau has issued detailed implementation guidelines for pilot reforms of foreign exchange in the zone, located in the Shekou district. These put forward a batch of initial trial policies that include allowing the use of forex earnings in domestic equity investment, a type of cross-border financing for local enterprises.

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Majority of enterprise loans go to private sector

Loans to private companies in Guangdong rose 15.12% to RMB4.29 trillion in the first half, accounting for the majority (54%) of total lending to companies, official data shows. 

Guangdong banks remain the country’s richest. At the end of June, the province’s balance of domestic and foreign currency loans was RMB15.88 trillion, a year-on-year increase of 16.2%; the balance of various deposits was RMB22.54 trillion, a year-on-year increase of 11.9%.

Private SMEs are getting the attention they deserve, apparently. As of the end of June, the balance of small and micro loans was RMB1.35 trillion, up 17% since the beginning of the year. 

Protesters’ aim: bring HK to standstill

Hong Kong’s anti-government protesters have been blocking streets and MTRtraffic today, with further sit-in protests planned for the HKIA. Meanwhile, the government has made clear it will not meet any of their demands, especially not the one that agitates them the most: setting up an independent commission of enquiry. It is becoming more obvious each day that life is not going to return to normal anytime soon in this city, despite what the HKMAO in Beijing says it hopes to see.

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