1. The Anbang unwind marches on
Caixin has a juicy scoop that a Chengdu government-backed investment entity is set to take a stake in the Chengdu Rural Commercial Bank.
Is your mind blown?
Okay, okay. We’ll back up.
This equity purchase matters less because of the buyer than the seller, which is none other than the defunct Anbang Insurance:
- “Anbang Insurance Group Co. Ltd. will probably transfer some of its shares in a bank based in the southwestern city of Chengdu to an investment firm owned by that city’s government, Caixin has learned.”
- “Chengdu Xingcheng Investment Group Co. Ltd….is expected to lead the purchase of a 35% stake in Chengdu Rural Commercial Bank Co. Ltd..”
- “The deal will likely be announced before the end of the year.”
The share sell is also important because it underscores two key regulatory trends:
- Regulators are increasingly focused on identifying and safeguarding systemically important institutions – that push has largely come in reaction to Anbang’s woes.
- They are also concerned about China’s small banks, which have essentially been used as piggy banks by their majority shareholders – Anbang’s ownership of Chengdu Rural Commercial bank seems to be a case in point.
The big picture: It’s all part of the ongoing financial de-risking program.
Caixin:Exclusive: Local Government Said to Take Stake in Anbang-Controlled Bank
2.NPC Standing Committee to meet next week
Mark your calendars!
Yesterday, the National People’s Congress Standing Committee (NPCSC) – China’s legislature – got into the Christmas spirit by deciding to hold its next bi-monthly session from December 23-28.
Ten draft laws or revisions are up for review:
- Revision to the Securities Law
- Basic Healthcare and Health Promotion Law
- Revision to the Forest Law
- Community Corrections Law
- Revision to the Law on the Prevention and Control of Environmental Pollution by Solid Waste
- Yangtze River Protection Law
- Amendment to the Law on the Protection of Investment by Taiwan Compatriots
- Export Control Law
- Urban Maintenance and Construction Tax Law
- Deed Tax Law
According to the always excellent NPC Observer, the legislature will also review a complete draft Civil Code – which will replace nine existing laws covering six areas, including:
- property rights
- personality rights
- marriage and family
- tort liability
What to watch: The revised version of the Securities Law is expected to be officially passed at the upcoming NPCSC session (see next entry).
3. New Securities Law should improve IPO process
A revised version of the Securities Law is expected to be passed when the legislature meets next week (see previous entry).
This update has been a long time in coming (Caixin):
- “It has taken China nearly five years to update the Securities Law, which has become outdated since it was first promulgated in 1999 when the country’s financial markets were in their infancy.”
- “The law has been tweaked several times but has undergone only one comprehensive revision, which went into effect in 2006.”
The big sticking point has been whether and how to regulate a registration-based IPO system.
Lawmakers are now under pressure to sort the mess out:
- “The State Council…is set to complete the IPO system reform by Feb. 29, 2020.”
- “But the absence of a revised Securities Law to govern the new market practice would leave a piece missing in the reform.”
Get smart: Regulators have made good progress in recent years on improving the IPO process – and cleaning up China’s capital markets more broadly. Firmly ensconcing a registration-based IPO system in law will be another important step in this process.
Caixin:Securities Law Revisions Set for NPC Review Next Week
4.The sword of Lamocles
On Monday, Hong Kong Chief Executive Carrie Lam met with Xi Jinping in Beijing to deliver her annual work report.
Quick take: Performance reviews can be nerve-wracking at the best of times. For Lam, this is distinctly not the best of times.
Luckily, Xi had warm words (Xinhua):
- “In the face of various difficulties and pressures, you have stuck to the bottom line of the ‘one country, two systems’ principle…and done a great deal of hard work.”
Xi also reiterated the government’s support for Lam.
But there was a ghost at this feast.
- Guo Shengkun, Politburo member and head of the Central Political and Legal Affairs Commission, was also in attendance.
Why it matters: Guo is China’s “security czar” and the boss of Minister of Public Security Zhao Kezhi who previously sat in on Xi and Lam’s meetings (see the November 5 Tip Sheet).
Get smart: Guo’s presence is another indication that Beijing is looking to tighten its grip over Hong Kong law enforcement.
Get smarter: Despite the outward display of solidarity, Beijing is deeply unhappy with Lam and her handling of the Hong Kong crisis.
5.Wang Yi touts China-EU cooperation
On Monday, Foreign Minister Wang Yi delivered a rousing speech at the European Policy Center in Brussels.
His message: China is Europe’s friend!
Here’s what Wang had to say (Gov.cn):
- “Anyone who is objective and rational will see that cooperation between China and the EU is far greater than competition and the consensus far greater than differences.”
- “We are partners, but not rivals.”
Some context: Relations between the US and the EU have deteriorated during the Trump administration. Beijing is trying to capitalize on the rift by cozying up to Brussels.
More context: These efforts have been partially undermined in recent weeks by a series of bellicose comments from Chinese ambassadors to European countries.
Wang also pre-empted (and post-empted) EU criticism about China’s human rights record by saying it was all a matter of perspective (CGTN):
- “The true value of the universality of human rights can only be realized when it is applied in the context of specific needs of different countries.”
Get smart: European leaders may detest Trump, but they also don’t trust China. Beijing will need more than flowery rhetoric to convince its European critics.
Get smarter: So far, China’s efforts to win friends in Europe have been mostly a bust.