Fascinating – cash inflows into China encouraged, hmmm…

WSJ:

China will speed up the timeline for opening its financial sector, Premier Li Keqiang said, an effort to attract more business and investment as the trade dispute with the U.S. continues.

In a speech to the World Economic Forum on Tuesday, Mr. Li said China would let foreigners freely invest in futures, securities and life insurance in 2020, one year ahead of Beijing’s previous schedule, to show its commitment to opening up. He also pitched China to foreigners broadly, saying the country would continue to improve the business environment for all sorts of companies and relax restrictions in the services sector. “Our opening-up pace will only be accelerated,” he said.

Premier Li spoke days after the U.S. and China got trade talks back on track following a six-week hiatus. President Trump agreed to hold off on new tariffs on $300 billion in Chinese imports, and China agreed to buy more U.S. farm goods. The U.S. began imposing punitive tariffs on Chinese goods a year ago to pressure the country into opening its markets and improving treatment of American companies.

Mr. Li didn’t speak directly to the trade dispute, although he said the Chinese economy faces renewed downward pressure, given uncertainties abroad and slowing investment at home.

China began last year to allow foreign companies to own majority stakes in certain financial industries, saying it would remove all restrictions by 2021. A quicker timeline shows how policy makers are addressing concern over their handling of the economy.

This week, two Wall Street banks got closer to obtaining control of key Chinese joint ventures in which they own 49% stakes, as their local partners said they would put 2% holdings up for sale. Majority ownership of businesses in China has been a long-coveted goal for foreign financial institutions.

Morgan Stanley ’s brokerage partner and JPMorgan Chase & Co.’s partner in asset management both said they would take bids this month for the stakes, setting minimum prices of 376 million yuan ($55 million) and 241 million yuan, respectively.

Still, participants at the World Economic Forum expressed worries about China’s treatment of foreign businesses in practice and how they would fare as trade negotiations resume.

Referring to the new 2020 timeline, Zhu Ning, a professor at the People’s Bank of China School of Finance at Tsinghua University, said it would take time for financial companies to gain permission and licenses in their specific business areas. For now, he said, China’s intention to signal its openness to the world is clear: “They might have been too confrontational before.”

Addressing concerns of the international community, Mr. Li said China would treat state-owned, private and foreign enterprises equally, so they could enjoy similar tax cuts and intellectual-property protections. In credit ratings, he said, foreign investors would get “national treatment.” Beijing approved a wholly owned foreign business in the sector for the first time this year.

China is targeting 6% to 6.5% growth for its economy this year, a range Mr. Li expressed confidence in achieving. He said Beijing would deliver on promises to cut taxes and other fees of nearly $300 billion, and support small companies by easing reserve requirements for banks. He said, however, that China would refrain from massive stimulus measures like its credit pumping after the global financial crisis.

On the Chinese yuan, Mr. Li promised a “broadly stable” value. He reiterated Beijing’s stance that it wouldn’t competitively devalue the currency, without mentioning pressures from the trade dispute. The yuan is roughly flat this year against the U.S. dollar after weakening in May when trade talks fell apart.

Over the weekend, China relaxed investment restrictions on foreigners in sectors including oil and natural gas and movie theaters. Forty sectors will remain wholly or partially off-limits to foreigners, including the development of rare earths.

Good moves. Now get that GAAP accounting fixed.

One Response to “Fascinating – cash inflows into China encouraged, hmmm…”

  1. feeblemind Says:

    My comment vanished into the ether.

Leave a Reply