Record economy september 2014 - China Policy
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record month 2014
economy
september 2014
1economy
september 2014
september position this month's themes
The banking sector shuddered at troubling signals from fiscal policy 财政政策
credit markets at the end of Q3. Accelerating NPLs suggest —PPP to serve as litmus test
economic transition is a false start. new Budget Law disappoints 3
In theory, ameliorating credit market risk and redirecting
economic activity should be mutually reinforcing processes. In monetary policy 货币政策
practice, banks’ heightened risk protocols are a tourniquet on —SMEs failing to thrive
targeted stimulus. mid-year credit growth drop does not sway PBoC 5
Impervious to pleas for more liquidity, the centre is determined pledged supplementary lending: too indirect to guide
not to resort to a proven but short-sighted formula of interest rates
broad stimulus and investment. But the 'new normal' is a
destination, not a roadmap. Monetary policymakers and capital market 资本市场
economic planners have few ready alternatives. —insurance fund investment goals contradict
'ten opinions' lend official endorsement to insurance 8
New strategies are being tested. PBoC's cautious
experimentation with intermediate monetary tools, and banking 银行业
CBRC's conservative multi-pronged approach to disposing of —tight credit preventing structural shift
toxic assets, are unlikely to have a marked effect short-term. non-performing loans prompt asset price worries 10
Mid- and long-term, economists are divided.
Ambitious reform plans for the fiscal system and insurance monopoly 垄断
industry stay tentative, if not vague, leaving open the —anti-monopoly will not always insulate SOEs
possibility for an easy exit. The new Budget Law will prompt a anti-monopoly campaign stirs domestic debate 12
pickup in infrastructure projects. To be executed via carefully
scrutinised franchise operations, this is still policy-driven,
fixed-asset investment—a far cry from endogenous innovation
aspired to in the 'new normal'.
2economy
fiscal policy 财政政策 september 2014
new Budget Law disappoints
The Budget Law amendment meets key objectives but is less stringent books, but still permits 'special use accounts'. It enhances budget review,
than some hoped. It lifts the ban on local bonds and imposes sharp con- affording local legislatures more power and enabling easier cancellation of
trols on local debt management, but is vague on bond use; sets stricter dubious items, but fails to demand detailed budgets. Whether it has the
accounting standards, putting more government expenditure on the desired effect, awaits interpretations from SC, ministries and localities.
Six highlights of the new Budget Law; nine Whose interests do the Budget Law amendments Budget Law amendments pass fourth reading:
restrictions for local bonds target? setting up unified national accounts
People's Daily Online 1 Sep 2014 National Business Daily 1 Sep 2014 21st Century Business Herald 2 Sep 2014
Gu Shengzu 辜胜阻 Ye Tan 叶檀 Yang Zhijin 杨志锦
The original Budget Law... had a distinct planned econo- ... Representatives... complained these budgets are hard The issue right now is how to comprehensively include in
my feel... The revised law clearly proposes 'regulating gov- to understand, and if people's representatives [find them each budget all types of income. Apart from SASAC-con-
ernment revenue and expenditure'... This indicates more confusing], then how can the People's Congress hope to trolled assets, most revenue from government-managed
emphasis has been placed on restricting the government's supervise? Local governments need fiscal power appropri- funds, e.g. income from state-owned concerns, never ap-
budget-related behaviour, with the Budget Law transitioning ate to their responsibility, [but] this should be premised on pears in the budget.
from a law that reinforces control to... confining its power. setting up an open and detailed budget, he says
Gu Shengzu 辜胜阻 Jiang Hong 蒋洪 Xu Shanda 许善达
NPC Financial and Economic CPPCC National Committee, State Administration of
Affairs Committee SHUFE School of Public Taxation (former)
Economics and Administration
Vice chairman Gu regularly comments on fiscal, hukou and An advocate of government budget disclosure, Jiang ar- Former director Xu remains active in fiscal policy discussion.
SOE reform. Gu admits SC must clarify vague terms in fol- gues the law's passage was premature: bond use provi- He argues NPC cannot effectively supervise budgets: they
low-up regulations. Set a red line for local government bor- sions too vague, itemised lists neglected; state agencies have little say in tax legislation; its members lack fiscal
rowing, he says; establish early warning mechanisms, and left too much discretion. Localities gain regulation but not policy experience. Budget categories ought not neglect
develop contingency plans for heavily indebted regions. authority. government revenue currently off the books.
NPC Financial and Economic Affairs Committee State Council State Administration of Taxation
Reviews macroeconomic plans and draft laws. Published Issues further implementation regulations following passage Set up as part of the 1994 tax-sharing system. Focused on
the final Budget Law amendment, seen as a rare show of of laws. It will quickly respond to Budget Law amendment redirecting tax revenue to localities; its function and structure
political clout by the NPC given conflicting agency interests. concerns to maintain fiscal reform momentum. is a key target for interim fiscal reform.
3economy
fiscal policy 财政政策 september 2014
mid-term outlook: PPP to serve as litmus test
Local debt is State Council and MoF's top priority following the Budget special transfer payments, or were reduced to local government finance
Law. Public-private partnerships PPP, MoF's favoured solution for financ- vehicles LGFVs. Provincial plans should establish strict oversight and ap-
ing infrastructure, are explicitly encouraged in the law. Loosely defined praisal—via feasibility studies, open bidding processes, clear contracts—
and unsupervised in the past, PPP projects have been a means to secure and ensure local legislatures ultimately wield these tools.
ugust september october november december january february march april may june july augu
september november march april 30 jun 2014
18 sep 2013 13 nov 2013 6 mar 2014 2 apr 2014 Politburo adopts sweeping
fiscal and tax reforms, calling for
Chaotic, volatile revenue-shar- Liu Shangxi 刘尚希 MoF clarifies Prioritise regulation over trans- State Council extends tax
transparent budgets and align-
ing system creates local that 3P reforms will not end parency in budget reform, urges breaks for SMEs and raises
ing central-local tax share with
government financing problems, central-local tax-sharing, but will Gao Peiyong 高培勇 National qualifying upper limit as part of
administrative responsibility
argues Jia Kang 贾康 MoF rationalise administration and Academy of Economic Strategy targeted microstimulus
expenditure, and leave localities director july
23 sep 2013 to develop specific fiscal policy may
6 mar 2014 6 jul 2014
Centre should rely on VAT and 15 nov 2013 30 may 2014
income taxes, while local gov- Liu Shangxi 刘尚希 praises Cementing expenditure through
Li Keqiang 李克强 criticises
ernments rely on consumption Shi Zhengwen 施正文 China proposed shift from a binding to budgets is a highlight of refoms,
local officials for 'sheer inepti-
and property taxes, suggests University of Political Science an anticipatory revenue budget says finance minister Lou Jiwei
tude' due to their reluctance to
NDRC economist Chen Chang- and Law applauds 3P focus on and medium-term planning in 楼继伟
spend on local GDP-boosting
sheng 陈昌盛 public finance new budget reform
investment projects august
october 18 nov 2013 6 mar 2014
june 31 aug 2014
17 oct 2013 A nationwide property tax must Amend 1985 NPC decision
be underpinned by legislation allowing State Council to deter- 14 jun 2014 NPC passes a Budget Law
Constitutionalist Liu Jianwen and public consultation, agree mine and legalise existing taxes amendment to take effect on
Cadres urged to spend more,
刘剑文 China Tax Law Soci- Wang Yongjun 王雍君 University with NPC approval by 2020, 1 January 2015. Key chang-
but with no land financing have
ety, says fiscal systems are of Finance and Economics and urges Hao Ruyu 郝如玉 NPC es involve increased scope
less tax revenue, and are or-
for redistributing income, not Qin Hong 秦虹 MOHURD of budget, local government
dered not to increase local debt,
macroeconomic control debts, and transfer payment
observes China Times
we are watching for officials scholars commentators
- details of provincial and local PPP plans Lou Jiwei 楼继伟 Wang Xiaolu 王小鲁 Ma Hongman 马红漫
- local legislatures rejecting budgets Gu Shengzu 辜胜阻 Liu Shangxi 刘尚希 Tan Haojun 谭浩俊
- credit rating agencies appraising local governments Xu Shanda 许善达 Liu Jianwen 刘剑文 Hu Shuli 胡舒立
4economy
monetary policy 货币政策 september 2014
mid-year credit growth drop does not sway PBoC
Weak credit growth figures for July and August triggered a concerned overcapacity and high-risk industries is part of its plan. Analysts baulk at
discussion over causes and policy implications. Suggesting fluctuations banks' heightened risk protocols, worrying commercial lenders have lost
are routine, PBoC will stay the course with prudent monetary policy. Low- confidence in the real economy; targeted stimulus will fail if loans to SMEs
er numbers offset June's stimulus-led credit burst, and tighter lending to remain at 20 percent interest rates.
Examining the credit nose-dive; are interest rate Causal analysis of July's financial data shifts What did July's credit figures mean?
cuts looming? China Electronic Banking Network 14 Aug 2014 Business Today 21 Aug 2014
China Business News Online 14 Aug 2014 Sheng Songcheng 盛松成 Tao Dong 陶冬
Li Deshangyu, Sun Hongjuan 李德尚玉, 孙红娟
... When the PBoC released its Q2 monetary policy report... Aggregate financing and credit growth are overall within July's credit nose-dive cannot be explained entirely by sea-
they presumably had an indication of July monetary and acceptable limits and basically correspond with economic sonal factors... The reasons for this tightening are: first,
financing statistics. Their actions were however contrary, growth and price increases. prominent downside risks, very cautious bank lending, and
paying much attention to rising commodity price risks and M2 growth is, I would like to point out, both time-specific the banks'... disregard for... small and micro loans; second,
only vaguely mentioning downside risks... the PBoC does and seasonal. Short-term fluctuations are normal and [their a significant lapse in local government enthusiasm for infra-
not want full-blown monetary easing, just targeted easing. significance] should not be exaggerated. structure construction...
Wen Bin 温彬 Sheng Songcheng 盛松成 Wang Hongzhang 王洪章
China Minsheng Bank PBoC Statistics and Analysis China Construction Bank
Department
Wen traces the credit slump to bank hyper-caution. NPLs PBoC's head number-cruncher and prime champion of its Former PBoC chief disciplinary officer, chairman Wang has
are spreading westward, from manufacturing to adjacent prudent monetary policy, Sheng routinely assures media since taking over in 2012 pushed for shifting CCB's client
industries. Curb NPLs by allowing diversification in the data fluctuations require only slight stimulus. He dominat- base to agribusiness and SMEs. He argues banks should
scale and ownership structure of banks; liberalising interest ed headlines in May after suggesting Yu'ebao needed the not be responsible for defaults from trust companies; Chi-
rates is a preliminary step to more varied financial services. same RRR as commercial banks, affecting its profit model. nese investors should have a better understanding of risks.
Chinese Academy of Social Sciences Institute of Finance... PBoC Statistics and Analysis Department China Chief Economist Forum
Consultant to NPC on macroeconomic, monetary and fis- Gathers and validates monetary supply, inflation and credit PKU's annual conference draws chief economists from do-
cal policies, with ties to CBRC and CIRC. Home to populist data. Its 2014 annual financial stability analysis report indi- mestic and foreign financial institutions, connecting domes-
housing market critic Yi Xianrong 易宪容. cated commercial banks could absorb a sharp rise in NPLs. tic banks and Chinese nationals employed by foreign banks.
5economy
monetary policy 货币政策 september 2014
pledged supplementary lending: too indirect to guide interest rates
PBoC announced C¥1 tn collateralised loans to China Development Bank liquidity expansion; manipulating interest rates requires affecting liquidity
in July, a new targeted stimulus tool PBoC claims can guide intermediate across the economy. CDB has earmarked funds for shantytown renova-
interest rates. Pledged supplementary lending's PSL fiscal and monetary tion. This benefits the weak building materials industry without stimulating
objectives are irreconcilable: promoting structural adjustment contains commercial construction, thus not exacerbating housing oversupply.
One trillion in lending will boost shantytown Deciphering the PBoC's new pledged The 'triple paradox' of pledged supplementary
renovation and subsidised housing investment supplementary lending tool lending
21st Century Business Herald 22 Jul 2014 Tencent Finance 27 Jul 2014 China Economic Times 8 Aug 2014
Zhang Shuo, Wang Guan 张烁，王冠 Jiang Chao 姜超 Xu Gao 徐高
PSL has two key variables[:]... the discount rate and the Such policy should become more professional and pay ... PSL faces a dilemma when determining operational
PSL benchmark interest rate. PSL can [control] money greater heed to its core inflation, employment, and financial scope. A monetary policy instrument that seeks to man-
supply and [promote] structural adjustment via these two stability goals. [The PBoC] should not concern itself with age interest rates should directly affect most traders in the
variables. It hence conforms to... 'targeted support' policy. unrelated areas like fiscal issues or structural adjustment. market... yet PSL is also a highly targeted tool... if it were
... PSL can furthermore serve as an alternative to relending These may be the correct choice now, but should not be- non-targeted it would differ little from the already existing
in the long-term, thus promoting interest rate liberalisation. come the long-term 'new normal'. rediscount policy.
Hu Xiaolian 胡晓炼 Guo Tianyong 郭田勇 Hu Huaibang 胡怀邦
The People's Bank of China Central University of Finance China Development Bank
and Economics
Former SAFE director, vice president Hu champions using Guo supports targeted stimulus in principle but says PBoC Bank of Communications averaged 20 percent profit dur-
RMB as a global settlement currency, but holds PBoC line and CBRC must tolerate more risk for agribusiness and ing his five years as chairman. Hu's April 2013 appoint-
that interest rate liberalisation must come first. Replacing SME credit. PSL cannot help intended beneficiaries with- ment was seen as a move to expedite CDB's transition to
relending with PSL will relax its control over interest rates out removing 'zombie' developers. Its primary market im- commercial lending. Urges unified evaluation system and
while allowing it to influence market investment decisions. pact is too diffuse to effectively influence interest rates. standardised lending and collection practices.
PBoC School of Finance PBoC Monetary Policy Committee China Development Bank
Successor to the PBoC Graduate School, headed by alum- Stacked with bank heads, regulators, vice ministers, and ac- China's largest policy bank, funding infrastructure and pil-
nus and former PBoC deputy governor Wu Xiaoling 吴晓灵. ademic economists. Advises SC on monetary adjustments lar industry development at lower (state supported) lending
A nexus of academic support for a cautious liberal agenda. and coordination with other macroeconomic policies. rates than commercial banks.
6economy
monetary policy 货币政策 september 2014
mid-term outlook: SMEs failing to thrive
Through prudent monetary policy, PBoC must stem corporate debt while banks are loath to lend to SMEs as long as they are being forced to ab-
engineering economic transition. The first is arguably working, though sorb NPLs. Cheaper credit would lower current risks, but derail economic
non-bank lenders continue to usurp PBoC's control of corporate interest transition. Prudent monetary policy and the 'new normal' keep the bank's
rates. Funnelling liquidity to fledgling sectors is not working. Conventional hands tied. The economy awaits other reforms to provide impetus.
tember october november december january february march april may june july august septem
july october 30 nov 2013 february july
22 jul 2013 8 oct 2013 PBoC releases Shanghai FTZ 28 feb 2014 16 jul 2014
financial support guideline,
Deposit insurance and savings The state should mainly rely on Wenzhou announces it will le- While announcing financial
pushing forward interest rate
rate liberalisation are needed to macroeconomic monetary and galise private lending in March, statistics for first half of 2014,
liberalisation
improve SMEs' credit access, fiscal controls, declares Devel- serving as a pilot for financial Sheng Songcheng 盛松成
says Lu Zhengwei 鲁政委 opment Research Centre's 383 december reform and an attempt to bail maintains that prudent mone-
Industrial Bank plan, its Third Plenum reform out private debt holders tary policy would not change in
prospectus 9 dec 2013 recent future
august march
november Without deleveraging before the
21 jul 2014
14 aug 2013 US Federal Reserve ends quan- 12 mar 2014
13 nov 2013 titative easing, the economy will State Council approves PBoC's
Recent interest rate reforms left Deposit interest rate liberali-
crash, says economist Andy Xie plan of C¥1 trillion PSL to China
deposit rates untouched. PKU's Interest rate marketisation is sation can be achieved in one
Guozhong 谢国忠 Development Bank to support
Cao Fengqi 曹凤岐 calls for in- a 3P highlight, says financial to two years, predicts Zhou
shantytown renovation
dustry coordinating mechanism commentator Ye Tan 叶檀 11 dec 2013 Xiaochuan 周小川
august
19 aug 2013 19 nov 2013 Counter-cyclical regulation and may
monetary easing are recom- 13 aug 2014
Time is ripe for deposit rate PBoC to speed up interest rate 7 may 2014
mended to address slowing
liberalisation and further relaxing marketisation, says Zhou Xiaoc-
growth, states CCTV finance PBoC unveils Q1 monetary July financial statistics report
bank reserve requirements, sug- huan 周小川, departing from the
commentator Niu Wenxin 钮 policy report, vowing to reduce shows considerable drop in
gests Qin Guolou 秦国楼 China administrative approval system
文新 financing costs for rural- and credit growth. PBoC explains
Everbright Group and extending the deposit insur-
MSE-related areas drop by seasonal fluctuation
ance system
we are watching for officials scholars commentators
- liberalising deposit interest rates LOU Jiwei 楼继伟 Justin Lin Yifu 林毅夫 zhang monan 张茉楠
- liberalising capital accounts Liu He 刘鹤 ZHANg Weiying 张维迎 Zhang Jingwei 张敬伟
- effects of ending QE3 ZHOU Xiaochuan 周小川 zhou Qiren 周其仁 Li Deshangyu 李德尚玉
7economy
capital market 资本市场 september 2014
'ten opinions' lend official endorsement to insurance
'New national ten opinions', released 13 August, embrace commercial mercial health insurance and aged care services. Marketisation is under-
insurance development, shedding long-held distrust of insurance. High- scored repeatedly, yet top CIRC officials prescribe broad state interven-
lights include tax-deferred pension schemes, expanding insurance funds' tions. Market- or administratively-driven, implementation requires intensive
investment channels, and calls for liability insurance and a range of com- inter-agency coordination, seldom a smooth process.
Interpreting the insurance industry's 'New national Breaking down the 'New national ten opinions': Innovation is key when implementing the 'New
ten opinions'; Xiang Junbo gives the industry a warning insurance asset management 3.0 is industry hot topic national ten opinions'
Beijing Business Day 22 Aug 2014 China Business News 1 Sep 2014 Sina Finance 1 Sep 2014
Cui Qibin, Xu Chenhui 崔启斌，许晨辉 Yang Rui 杨芮 Wang Zuji 王祖继
The industry must... guard against systemic risk with finan- 'There are two main ways in which the Opinions provide ... For purely commercial businesses, the focus is on creat-
cial risk not being left to the insurance funds to shoulder. new gusto: first, the tax-deferred commercial pension pi- ing fair competition in the market and reducing the state's
Regarding the main risk factors in the insurance market, lots will generate... development opportunities for old-age myriad approval [procedures], and its unreasonable inter-
there are, Xiang emphatically argues, four merit concerns: pension insurance; and second, liberalising investment ference... For services that have a positive impact [on so-
solvency, corporate governance, insurance fund manage- channels... will open up channels for insurance funds to ciety] but a weak foundation... the state should offer guid-
ment, and high cash value risks. directly participate in the real economy', said Zeng Yujin. ance [rather than direction]...
Xiang Junbo 项俊波 Lin Dairen 林岱仁 Zeng Yujin 曾于瑾
China Insurance Regulatory China Life Insurance Company CIRC Fund Management
Commission Regulatory Department
Head of Agricultural Bank of China during its 2010 IPO, Addressing media on the 'ten opinions', president Lin said Director Zeng hails 'ten opinions' emphasis on liberalising
then the world's largest. Chairman Xiang is famed for more implementation details were needed to assess speed investment channels to support physical and service infra-
his 'iron fist', wielded against premium-hungry insurance and scale of impact. China Life had geared up for tax-de- structure building. An array of research, policy documents
companies. Taking charge in 2012, he has prioritised ferred pension and endowment insurance, and hoped to and regulations, is however needed to guide this invest-
consumer protection and risk reduction. capitalise on government procurement programs. ment; fund management needs more innovation.
China Insurance Regulatory Commission China Life Insurance Company MOHRSS Department of Endowment Insurance
The insurance supervisor has cleaned up but not marketised China's largest insurer is 70 percent state-owned. Analysts Coordinates endowment insurance plans; will oversee tax-
the insurance industry in recent years. Sceptics of ‘New say its size is a liability; transitioning from short-term products deferred endowment insurance pilots in 'ten opinions'; reg-
national ten opinions’ warn of NDRC meddling. and away from sales volume-driven profits will be obstacles. ulates insurance fund forecasting and reserve requirements.
8economy
capital market 资本市场 september 2014
mid-term outlook: insurance fund investment goals contradict
The 'ten opinions' lay out a wide ranging but incoherent plan for insurance espoused by CSRC: the long-term nature of insurance funds could be a
fund investment. Clause 13 calls for channelling funds toward social wel- stabilising force in the speculation-ridden equities market. CIRC officials
fare projects. Other clauses emphasise integrating insurance with financial recognise this takes a change in mentality (code for 'retraining') among
markets, including investing funds in capital markets, reiterating a view fund managers, and regulatory strengthening across-the-board.
gust september october november december january february march april may june july augu
august 24 sep 2013 16 oct 2013 30 nov 2013 july
9 aug 2013 Fund urbanisation through Xiao Gang 肖钢 CSRC chair- Positive noises as CBRC 19 jul 2014
municipal bond markets, man advocates protecting announces streamlined, more
Insurance company controls to SFC announced details of the
suggests Finance vice minister SME investors' rights accountable IPO market for
be relaxed; market exit mecha- Shanghai-Hong Kong Stock
Zhu Guangyao 朱光耀 January 2014
nisms upgraded, reveals Xiang november Connect expected to be
Junbo 项俊波 october february launched on 13 October 2014
6 nov 2013
23 aug 2013 9 oct 2013 17 feb 2014 august
Zhongan Insurance co-found-
Insurance industry bottle- CSRC expected to support ed by Ping An Insurance and Wenzhou's private financing 13 aug 2014
neck is poor consumer rights MSME listings and amend Se- partners Alibaba and Tencent regulation guidelines to come
into force 1 March, legalising State Council announced the
protection, say economists curities Law and Futures Law
18 nov 2013 private lending by setting up a 'New national ten opinions',
Yang Wensheng 杨文生 and
10 oct 2013 mandatory registration system touching on tax-deferred social
Mu Shanshan 穆珊珊 Shan- SOE regulator Ji Xiaonan 季 security and natural disaster
dong University of Finance and Local financial agencies to 晓南 says SOE reform must may insurance for governments
Economics manage small and micro finan- utilise capital markets
cial institutions under PBoC 9 may 2014 22 aug 2014
september
plan; PBoC, CSRC, CBRC
State Council unveils guide- Xiang Junbo 项俊波 CIRC
3 sep 2013 and CIRC to control only large
lines aimed to build multi-tier warns of risks in solvency,
and medium financial institu-
CSRC approves issuance of capital market by encouraging business operations, invest-
tions
5-year bond futures contracts market-based M&A and im- ment of insurance fund, and
proving delisting system high cash value products
we are watching for officials scholars commentators
-amendment of the Securities Law XIAO Gang 肖钢 BA Shusong 巴曙松 Ouyang Xiaohong 欧阳晓红
-delistings in equities market XIANG Junbo 项俊波 JIN Yanshi 金岩石 NIU Wenxin 钮文新
-relaxing Social Security Fund investment regulations YAN Qingming 阎庆民 CAO Fengqi 曹凤岐 PI Haizhou 皮海洲
9economy
banking 银行业 september 2014
non-performing loans prompt asset price worries
Quickly spreading in overcapacity industries, SMEs and the Yangtze and ronment to accelerate write-offs; 3) unleash (with SC approval, granted
Pearl River Deltas, non-performing loans are expected to further increase mid-August) asset management companies to repackage and dispose of
as growth slows. CBRC's game-plan is straightforward: 1) urge commer- toxic assets. Posted bank profits are enough to absorb defaults for now,
cial banks to write-off NPLs; 2) petition for a friendly legal and tax envi- but risk of downward spiral looms if asset values decline too far.
The spark that will set the economy aflame Three hidden dangers behind non-performing loan The CBRC raises the battle cry for the third time
Hexun Online 2 Sep 2014 amounts and rate increases for listed banks against non-performing loans
Yu Yongding 余永定 Xinhua Net 2 Sep 2014 China Business News 3 Sep 2014
Li Chun 李春 Yang Liuhan 杨柳晗
... Commercial banks are, with the cooperation of non-bank Non-performing loan amounts and rates for commercial The next step will be to... further speed up researching and
financial institutions and trust companies in particular, using banks will, expects Lian Ping, rise slightly in the second formulate a risk classification and loan loss provision cal-
wealth management products [as a disguise] for attracting half of the year. The determining factor here, he notes, is culation system for non-standard debts, to ensure each
deposits via free-market interest rates. The central bank is, overall economic conditions. Slowing economic growth will debt issued has the required assets set aside for loan loss
as a result, losing control of corporate loan interest rates, put consistent pressure on banks' risk management. provision, thereby effectively safeguarding financial security
and will no longer be able to constrain leverage. and upholding public confidence.
Yu Yongding 余永定 Lian Ping 连平 Wang Zhaoxing 王兆星
CASS Institute of World Bank of Communications China Banking Regulatory
Economics and Politics Commission
(former)
CASS academician, central in removing RMB's USD peg, Recognised as a statistical analyst. Lian predicts contin- Former PBoC regulator, vice chairman Wang charges
vocal against dollar FX reserves. Yu warns declining prop- ued decline in bank asset quality for H2, citing a contagion commercial banks with ignoring loan risk classification
erty values plus high borrowing costs and corporate lever- from small resource firms, steel to other commodities, and guidelines for off-balance sheet items (i.e. shadow bank-
age could be a perfect storm. Sustainable debt levels hard absence of mechanisms to contain spreading debt. State ing). Banks should focus on risk management and efficien-
to gauge; the centre should act while economy is stable. banks, he assures, can absorb it. cy, he suggests, rather than solely on increasing size.
Zheshang Asset Management Company PBoC Financial Stability Bureau China Banking Regulatory Commission
One of five local asset management companies approved to Evaluates systemic financial risk; drafts regulation for finan- The institutional system supervisor urges banks not to tarry
dispose of NPLs at local banks; mirrors the four central ones cial holding companies and cross-financial businesses; as- in writing off NPLs. It suggests more rigorous risk flagging:
cleaning up national banks' balance sheets in early 2000s. sesses the economic impact of large M&As. stricter monitoring and punishment; versatile classification.
10economy
banking 银行业 september 2014
mid-term outlook: tight credit preventing structural shift
The 'new normal' growth model is consumption-driven, avoiding reliance is mending loopholes that allowed shadow banking to flourish without ad-
on broad stimulus. Commercial banks are hamstrung to increase finance equate loan loss provisions. Tighter supervision will not clean the current
to local SMEs, while facing depreciating asset prices and declining profits asset base. It may not even stem risk: new non-bank financing platforms
from absorbing bad debt—both effects of tight liquidity. CBRC's next step undermine PBoC's determination to contain corporate leverage.
tember october november december january february march april may june july august septem
october december 7 jan 2014 march 11 may 2014
11 oct 2013 10 dec 2013 Document No.107 clarifies that 4 mar 2014 To fix shadow banking, clarify
CBRC, CIRC, CSRC, PBoC product features, legal status,
CBRC sets individual share- Banks must be allowed to fail, PBoC governor Zhou Xiaoc-
responsible for shadow banks liability and risks, and determine
holding limit at 15 percent to asserts Tan Haojun 谭浩军 huan 周小川 clearly states that
supervision based on level of
diversify the capital mix and SASAC 8 jan 2014 'Yu'ebao will not be shut down'
exposure, says former PBoC
level the field of small players in during the CPPCC meeting
13 dec 2013 Shadow banking regulation is deputy Wu Xiaoling 吴晓灵
rural banks
a mere palliative and does not april july
Banks should be endowed with
november address the underlying problem,
limited liability to ensure the 29 apr 2014
says commentator Ye Tan 叶檀 25 jul 2014
26 nov 2013 state is not left holding the bag
PBoC annual stability report
on collapse, says Wu Xiaol- february CBRC announces approval of
Private banks need 'living wills' indicates China's banking
ing 吴晓灵 National People's three private banks, focusing
detailing steps to deal with 21 feb 2014 system can withstand a sharp
Congress on individuals and SMEs; SMEs
bankruptcy, argues Yan Qing- rise in bad loans, urges allowing
Niu Wenxin 钮文新 CCTV and agribusiness; and corporate
ming 阎庆民 China Banking january risky financial products to fail
sparks hot debate on Yu'ebao banking, respectively
Regulatory Commission 7 jan 2014 by comparing it to a 'financial may september
29 nov 2013 parasite': it creates no value but
CBRC announces five pri- 5 may 2014
earns excessive profits 2 sep 2014
Private banks should first be vate bank pilots. Alibaba is a
RRRs apply to money market
required to have deposit insur- contender in the first licencing In 40 days, CBRC urged banks
products including Yu'ebao,
ance before operating, suggests round expected by March 2014 to speed up write-offs on non-
announces PBoC statistics chief
Lian Ping 连平 Bank of Com- performing loans three times.
Sheng Songcheng 盛松成
munications By June, NPL balance had
increased by C¥4.9 billion
we are watching for officials scholars commentators
- introduction of deposit insurance system Zhou Xiaochuan 周小川 WU Xiaoqiu 吴晓求 Lian Ping 连平
- further approval of local asset management companies Wu Xiaoling 吴晓灵 Yu Yongding 余永定 NIU Wenxin 钮文新
- tighter regulation of off-balance sheet banking operations Wang Zhaoxing 王兆星 PENG Wensheng 彭文生 ZHANG Ping 张平
11economy
monopoly 垄断 september 2014
anti-monopoly campaign stirs domestic debate
NDRC's anti-monopoly investigations incited a lively substrata of academ- market share discourages homegrown innovation. Lawyers protested lack
ic and professional resistance. Economists bristled at what they saw as of due process and disregard for letter of the law; inconsistent enforce-
misguided protectionist objectives. Forcing competitive foreign firms to ment undermines its deterring effect. These voices will not soften NDRC
lower prices only hurts domestic industry, while administratively stripping and SAIC's agenda; at best they could inform revision of the law.
'Anti-monopoly' terror The more they rely on anti-monopoly, the more Unbearable weight of anti-monopoly
Ifeng Finance 6 Aug 2014 Chinese firms go downhill Caixin Century Weekly 28 Aug 2014
Hu Shizhi 胡释之 PingWest 8 Aug 2014 Tao Jingzhou 陶景州
Luo Yihang 骆轶航
If trade protectionism is correct, then strong foreign firms Breaking down monopolies is not best done by struggling China should perhaps follow the EU in setting up an inde-
really must be harmful and terrible monsters who in the past companies for whom anti-monopoly probes promise ben- pendent, single, authoritative and dedicated anti-monopo-
we should never have allowed in, and a closed-door policy efits. It is best done by those with genuine breakthrough ly enforcement agency, and amend the Anti-Monopoly Law
would be the most beneficial for the country and citizens. technology, or who have radically changed business prac- to convert the State Council's Anti-Monopoly Committee
In reality however open policies bring the greatest benefits. tices. from a mere coordinating agency to a unitary enforcement
body.
Shang Ming 尚明 Xu Xinyu 徐新宇 Xie Zuoshi 谢作诗
Ministry of Commerce Anti- NDRC Bureau of Price Zhejiang University of Finance
Monopoly Bureau Supervision and Anti- and Economics
Monopoly
Shang helped Chinese companies fight anti-dumping and Nicknamed 'Mr. Confession' for allegedly using intimida- Free market enthusiast representing the view, commonly
anti-subsidy laws at MoFTEC; later he contributed to Mof- tion in anti-monopoly hearings. Nonetheless, his message held among economists, that overzealous anti-monopoly
COM's anti-monopoly and unfair competition regulations. regarding investigations has been clear since they began: prosecution ultimately hampers domestic innovation. While
Against charges of protectionism, MofCOM's antitrust en- minimum resale prices set by foreign auto-makers consti- arguing China should not blindly imitate other systems, he
forcement is, he claims, consistent with other countries'. tutes an abuse. Past NDRC rulings concur. urges administrative and institutional streamlining.
MofCOM Anti-Monopoly Bureau Shanghai Higher People’s Court SAIC Anti-Monopoly and Anti-Unfair Competition...
Clears M&As. Unlike NDRC, final approvals indicate little do- Last year the court ruled minimum resale price agreements, Responsible for vaguely-defined category 'non-merger' and
mestic bias, but lawyers worry a vague clause allows Mof- the biggest source of fines so far, have to be determined by 'non-price-related' conduct. Its raid on Microsoft prompted
COM to arbitrarily take firms off a fast-track process. the court to be anti-competitive. talk it was trying to one-up NDRC; both denied in-fighting.
12economy
monopoly 垄断 september 2014
mid-term outlook: anti-monopoly will not always insulate SOEs
International coverage depicts NDRC's anti-monopoly enforcement as ically immune to investigation for now, but this does not mean enforce-
arbitrary and biased in favour of SOEs. Neither is wholly true. Enforcement ment serves them. The centre's admission they stunt growth is not lip
is idiosyncratic; unbeholden to legal standards, it narrowly targets vertical service; NDRC may even be recruited to dismantle certain administrative
and horizontal price fixing and abuse of market position. SOEs are polit- monopolies. But this reinforces anti-monopoly's use as a policy tool.
tember october november december january february march april may june july august septem
september february 17 mar 2014 29 may 2014 july
5 sep 2013 20 feb 2014 Chinese smartphone makers NDRC announces Nikon and six 24 jul 2014
hope to force Qualcomm to ad- other glass lens manufacturers
'Monopoly is the twin sister of 64 banks fined C¥825 million; tel- Qualcomm suspected of over-
just its business model, but real fined C¥19 million. Experts sug-
corruption', says Liu Shengjun 刘 ecom companies under investi- charging and abusing market
purpose is to buy time, claims gest China should issue heavier
胜军 Caixin, break administrative gation; IDC agrees to cease from position in wireless communica-
Tan Min 覃敏 Caixin fines to keep up with international
monopolies and force SOEs out setting 'sky-high prices', reports tion standards. Sources close
levels of enforcement
Xu Kunlin 许昆林 NDRC may to NDRC did not say whether
october june regulators had determined Qual-
21 feb 2014 4 may 2014 comm abused its monopoly,
15 oct 2013 9 jun 2014 confirms Xu Kunlin 许昆林 NDRC
Private oil companies reluctant to Part of infrastructure networks
Sinopec gas pipeline pilot spells cooperate with Sinopec. Monop- and telecom services split; new Iron ore futures and spot pric-
oly hard to break, says Economic
29 jul 2014
greater pipeline accessibility, not National Tower Company a 'child ing shake up international price
SOE monopoly, explains Xu Bo Observation Network of monopoly', says Dan Jinliang system monopoly, reports Wang State Administration for Industry
徐博 CNPC 单金良 Enterprise Observers Zhuying 王朱营 China Securities and Commerce announces
march Journal anti-monopoly investigation into
november 4 mar 2014 7 may 2014 Microsoft
14 jun 2014
25 nov 2013 Feng Xingyuan 冯兴元 Unirule In- september
Break down administrative mo-
stitute proposes drastic cutbacks Siemens, GE, Philips hold mo-
NDRC lists six industries includ- nopolies like Sinopec, not just a
to SOEs: exit from aerospace nopoly over China's high-tech 9 sep 2014
ing daily chemicals, auto, com- 'generous slice of flesh', argues
and other competitive fields; re- medical equipment market, says
munication medicine and house- Huang Wenfu 黄文夫 China NDRC announces a penalty on
tain only natural monopolies Chen Jian 陈坚 Yueyue Medical
hold appliances as focus for Business Times three domestic cement corpora-
CEO
pricing monopoly investigations tions with total of C¥114 million
we are watching for officials scholars commentators
- moves to break up State Grid Xu Kunlin 许昆林 WU Hanhong 吴汉洪 Liu Jipeng 刘纪鹏
- NDRC investigations against SOEs Shang Ming 尚明 Liu Jipeng 刘纪鹏 LIU Yingtuan 刘英团
- clearer definition of 'competition' Chen Qingtai 陈清泰 Xie Zuoshi 谢作诗 Liu Shengjun 刘胜军
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