Ren Gulong and Zhang Jiaqi

NPL MARKET IN CHINA

As China’s economic growth slows down, non-performing loans (“NPLs”) continues to rise. According to the regulatory indicators released by the China Banking and Insurance Regulatory Commission (“CBRC”), the balance of commercial banks’ NPLs reached RMB 2.03 trillion by the end of the third quarter of 2018. CBRC urges Chinese banks to make greater efforts to manage and dispose of their NPLs. As a matter of fact, supportive policies have been consecutively enacted by Chinese government in recent years so that more investors are given opportunities to participate in China’s NPLs market.

The major players in China’s NPLs market are the big four state-owned assets management companies (“AMCs”), which were established by the Chinese government in 1999 to purchase NPLs from the big four Chinese commercial banks. Since CBRC allows setting up of local AMCs to participate in NPLs disposal in 2012, over 70 local AMCs haven been established. In June 2018, CBRC further issued Pilot Management Rules For Financial Assets Investment Companies (《金融资产投资公司管理办法(试行)), encouraging commercial banks to set up a subsidiary to engage in swap of NPLs into equities.

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Authored by Ren Gulong <Ren Gulong@anjielaw.com>, Zhang Jiaqi <zhangjiaqi@anjielaw.com> at AnJie Law Firm

Ren Gulong and Yang Anshu

In early December 2018, UBS AG increased its shareholding in its PRC subsidiary, UBS Security Co., Limited (“UBS China”), to 51%, making UBS China the first securities firm in China controlled by a foreign entity. This is an important event in the financial market and UBS AG certainly takes the advantage of China’s new measures to open up its financial market.

Measures of financial opening-up were provided in the government work report of 2018 issued in March. This opening-up process speed up due to the trade war tensions with the United States. At the Boao Forum in April 2018, President Xi Jinping announced further open up of Chinese financial market. Immediately after the announcement, Mr. Yi Gang, the governor of the People’s Bank of China (“PBOC”), disclosed details of the opening-up measures and a timetable. As responses to Mr. Yi’s timetable, the past year 2018 witnessed several new rules issued and old rules amended.

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Authored by Ren Gulong <rengulong@anjielaw.com>, Yang Anshu <Yang Anshu@anjielaw.com> at AnJie Law Firm

Authored by Ren Gulong (rengulong@anjielaw.com) ,Zhang Yuan(zhangyuan@anjielaw.com),Yang Anshu(yanganshu@anjielaw.com),  Wen Xianglai(wenxianglai@anjielaw.com) & Hu Jianan(hujianan@anjielaw.com) at AnJie Law Firm

On 19th March 2018, the People’s Bank of China (PBOC) published the Notice of People’s Bank of China No.7 [2018] (the “Notice”), which removes restriction on payment services provided by foreign-invested payment institutions and sets up the rules and regulatory requirements. This Notice has followed the instructions of the 19th CPC National Congress on speeding up the reform process and promoting the full opening of the payment service market. It will lead to a new era of payment industry in China.

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Authored by Ren Gulong (rengulong@anjielaw.com) & Zhang Yuan(zhangyuan@anjielaw.com) at AnJie Law Firm

On 18 March 2018, China’s lawmaker, the National People’s Congress approved a reform plan for the institutional organizations of the State Council, China’s top administrative authority (the "Reform"). Among various substantial restructuring of governmental departments, one of the key part is the restructuring of the financial regulators. This is a substantial reform since 2002 and ends up the framework of separate institutional regulation by one central bank plus three commissions.

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 Authored by Ren Gulong (rengulong@anjielaw.com) at AnJie Law Firm

In January, 2018, China Banking Regulatory Commission (CBRC) released the Interim Measures for the Administration of Equity in Commercial Banks (“the Measures”) to prevent and punish illegal acts of shareholders that harm the interests of banks and to ensure the sound operation and healthy development of commercial banks.

Private capital has been enthusiastic in setting up or acquiring banking institutions in the past several years. In the meantime, a series of problems arose, acquisitions of bank shares with non-proprietary funds or using entrustment structure, the illegal transfer of interests between a bank and its shareholder.

In January, 2018, China Banking Regulatory Commission (CBRC) released the Interim Measures for the Administration of Equity in Commercial Banks (“the Measures”) to prevent and punish illegal acts of shareholders that harm the interests of banks and to ensure the sound operation and healthy development of commercial banks. The Measures regulates major shareholders of commercial banks, strengthens the examination of shareholders’ qualifications and intensify the investigation and punishment of illegal acts.

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 Authored by Ren Gulong (rengulong@anjielaw.com) and Yang Aushu(yanganshu@anjielaw.com) and Xiao Yao (xiaoyao@anjielaw.com) at AnJie Law Firm

Entrusted loan is a special term in Chinese financial market, which refers to aloan provided by a corporate lender to a corporate borrower through a commercial bank who acts as a trustee of the lender. Entrusted loans, together with trust products, P2P lending and other off-balance sheet business are considered as shadow banking in China. Since the global financial crisis, China’s shadow banking grew dramatically to provide loans to borrowers who cannot get credit from banks. According to People’s Bank of China (PBOC), the entrusted loans reached 13.97 trillion yuan by end of 2017, accounting for 8% of the aggregate financing in China. Though shadow banking has played a positive role for economic growth, there is growing concern on its risks, which is multi-faceted, hidden, complex, and contagious.

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 Authored by Ren Gulong (rengulong@anjielaw.com) and Yang Aushu(yanganshu@anjielaw.com)at AnJie Law Firm

On 10 November 2017, Vice Minister of Finance Zhu Guangyao announced at a press briefing that China will ease and remove the limits on foreign investments in the financial service sector including securities, banking and insurance. The announcement shows a high-level policy (the “New Policy”) and detailed rules may soon be promulgated, which will certainly bring more opportunities for foreign investors in Chinese financial market.

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Authored by Ren Gulong (rengulong@anjielaw.com) at AnJie Law Firm

After several months’ consultation, State Administration of Foreign Exchange (SAFE) released a Foreign Exchange Rules On Administration Of Cross-border Security (the “Cross-border Security Rules”) on 19 May, which will become effective on 1 June 2014.  The Cross-border Security Rules will dramatically relax regulations on Cross-border Security by removing all up-front approvals to the effect that FX/RMB will be fully convertible in respect of Cross-border Security.

Continue Reading Reforms of Foreign Exchange Rules on Cross-border Security

Authored by Ren Gulong (rengulong@anjielaw.com) at AnJie Law Firm

On October 11, 2014, The International Swaps and Derivatives Association (ISDA) announced that 18 major global banks have agreed to sign a new ISDA Resolution Stay Protocol (the “Protocol”). The Protocol has been developed in coordination with the Financial Stability Board to support cross-border resolution and reduce systemic risk.

 

Continue Reading New ISDA Protocol – Action to Facilitate Cross-Border Resolution Efforts