Financial Regulatory Forum

Foreign private equity braces for rough ride to China -ANALYSIS

Helen H. Chan

HONG KONG, May 20 (Business Law Currents) Foreign-invested private equity firms are rallying in Shanghai, eagerly awaiting the results of a second round of applications for the Qualified Foreign Limited Partners (QFLP) scheme. In recent weeks, large international buyout firms such as Blackstone and the Carlyle Group have rejoiced over being some of the first to be awarded a QFLP license.

Although the QFLP seems to have gone one step further in liberalizing private equity deals between foreign investors and domestic targets, perks of the scheme come with a tangle of very sticky red tape. Recently, financial authorities in Shanghai have published several guidelines to facilitate the second round of approvals for QFLP licenses. Aiming to aid domestic entrepreneurial efforts, the newly-issued requirements appear to favor applicants with connections to government-backed funds and homegrown Chinese enterprises.

Established in early 2011, the QFLP permits licensed non-Chinese private equity firms to convert foreign currency into renminbi for onshore investment in China. Once approved, a firm may convert foreign currency, up to a quota permitted by its license, without approval by the State Administration of Foreign Exchange (SAFE).

Previously, SAFE approval was required for every single foreign exchange transaction. Under the QFLP scheme, qualified foreign private equity firms can launch RMB-denominated funds using overseas capital. For more information, please see PRC Private Equity: Destination Shanghai?

Recently, the Shanghai branch of SAFE and the Shanghai Financial Services Offices have issued several guidelines which will be used to review applications for a QFLP license. In addition to considering large buyout firms, authorities have indicated a desire to look at technology-focused funds and firms that support small to medium Chinese enterprises.

COLUMN – China’s export dominance must force US rethink: John Kemp

– John Kemp is a Reuters columnist. The views expressed are his own –

By John Kemp

LONDON, March 23 (Reuters) – Managing the rise of China’s vast economy and healing the U.S. trade deficit will require a new willingness and capacity to boost U.S. technology exports at affordable prices. More importantly it requires a new language from policymakers and a new mindset.

In a recent survey of American businesses, the proportion who felt unwelcome operating in China had risen sharply, amid tense stand offs involving Rio Tinto and Google. But with U.S. legislators in full flag-waving cry about China as a currency manipulator, is it really surprising China is looking to become more self-reliant?

China set to cap funds’ trading in index futures

   SHANGHAI, March 16 (Reuters) – China’s securities regulator is set to clear only stocks-related mutual funds to trade in the country’s first stock index futures, ordering them to trade for hedging rather than speculative purposes, according to draft rules published on Tuesday. (more…)

Taiwan formally OKs China financial investment rules

    TAIPEI, March 16 (Reuters) – Taiwan’s top financial regulator formally announced on Tuesday guidelines on investments between local and Chinese banks and financial institutions after the government gave its approval. (more…)

Days of “special” yuan policy numbered – China central banker

By Zhou Xin and Benjamin Kang Lim

BEIJING, March 6 (Reuters) – China flagged on Saturday it will let the yuan resume its rise at some point as it unwinds the super-loose policies it has been pursuing to prop up the world’s third-largest economy.

China is under intense pressure from the United States and Europe to abandon the exchange rate peg it instituted of around 6.83 yuan per dollar since mid-2008 to preserve the competitiveness of its exporters during the international financial crisis.

Speaking during the annual session of China’s parliament, central bank governor Zhou Xiaochuan said Beijing would eventually have to drop this “special” yuan policy, one of a range of emergency measures taken to cushion the blow to growth.

China launches stock index futures trading accounts

    SHANGHAI, Feb 22 (Reuters) – Chinese investors will be able to begin applying on Monday to open accounts for stock index futures trading, the China Financial Futures Exchange said, in a key step toward the long-awaited launch of index futures trade. (more…)

China indicts Rio staff for bribery, commercial secrets

By Ben Blanchard and Chris Buckley

BEIJING, Feb 10 (Reuters) – China has indicted four employees of Anglo-Australian mining giant Rio Tinto on charges of bribery and stealing business secrets, setting the stage for a trial in the case that has jangled investor nerves.

The four who are set to stand trial in Shanghai include Australian citizen Stern Hu, state news agency Xinhua said on Wednesday.

If found guilty, they could face up to seven years in jail on the commercial secrets charge, and up to 20 years on the bribery charge, said Zhang Peihong, a lawyer for one of the accused Chinese nationals.

China banks call back loans to satisfy regulators

CHINA   BEIJING, Feb 3 (Reuters) – Two of China’s biggest banks aggressively called back loans in the second half of January to fall into line with the government’s directive to slow lending, local media reported on Wednesday. (more…)

EXCLUSIVE – China tells banks to ensure loans are used properly

SHANGHAI, Feb 1 (Reuters) – China’s banking regulator has ordered lenders to conduct checks on whether any of their loans have illegally gone into the stock or property markets, a banking source told Reuters on Monday, the latest step in a clampdown on excessive lending and rising asset prices.

Credit found used for improper purposes must be withdrawn within a certain period of time, said the source, who had seen the relevant notice from the regulator. He did not elaborate on the timeframe.

The order from the China Banking Regulatory Commission (CBRC) marks further efforts by Beijing to rein in rampant lending and ensure that credit is being used to generate genuine economic activity and not simply to fuel speculation in stocks and property.

Taiwan to allow its banks to invest in China lenders

TAIPEI, Jan 27 (Reuters) – Taiwan has given preliminary approval for local banks to invest in Chinese lenders, but Chinese banks will not be allowed to buy stakes in Taiwanese counterparts, a government official said on Wednesday.

In revisions to a cross-strait banking draft as part of a historic financial services agreement signed with China in November, Chinese banks would only be allowed to set up representative offices and branches in Taiwan, the official said, requesting anonymity as he was not authorised to speak to media.

The draft, if finalised, would provide growth opportunities for Taiwan banks, whose return on equity has been among the lowest in Asia for years partly due to stiff competition.