China sets new investment guidelines

Business | Agencies 8 Nov 2019

China's cabinet issued guidelines yesterday aimed at attracting more foreign investors, including plans to encourage investment in its hi-tech industries, opening financial and insurance sectors.

The news came as China Pacific Insurance (2601) is in talks to invest at least US$2 billion (HK$15.65 billion) for a stake in Swiss Re as it seeks to build partnerships overseas, according to sources familiar with the matter.

Meanwhile, Chinese authorities are considering a sweeping package of measures to shore up smaller lenders in an effort to contain one of the biggest risks facing the world's largest banking system.

Problematic banks with less than 100 billion yuan of assets will be urged to merge or restructure under a plan being discussed by financial regulators, industry insiders said.

Local governments would be responsible for dealing with troubled lenders, with the central bank providing liquidity support if necessary, the insiders, who asked not to be identified discussing private information, said.

China has more than 3,000 small banks, many of which are struggling to cope with mounting bad loans and a government crackdown on risky funding practices.

Foreign holdings of Chinese stocks rose to a record high by the end of the third quarter, despite the ups and downs in a protracted trade dispute with the United States, as Beijing further opens its financial markets to help fund businesses.

By the end of September, Chinese equities held by foreigners reached a record 1.77 trillion yuan (HK$1.99 trillion) after having risen for four straight months, up nearly 40 percent in a year, according to the latest data from the People's Bank of China.

China's index-tracking mutual funds have the potential to jump tenfold to 6 trillion yuan in assets over the next decade as investors are more likely to place their money with them than rival stock-pickers who struggle to beat the market, veteran portfolio manager David Xu said.

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