Oct. 10 - China’s securities regulator said publicly-traded companies will now be required to pay dividends in cash instead of stock, three years before filing their refinancing applications.

The regulation should improve long-term investment and aid market volatility. The China Securities Regulatory Commission (CSRC) said: “The listed firms, if applying for refinancing, must pay dividends in cash totaling no less than 30 percent of its distributed profits over the past three years.”

To improve transparency, it will be mandatory for listed firms to reveal the details of their cash dividend policies and previous cash dividend data to investors in their annual reports.

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BEIJING, Oct. 10 – In an attempt to boost already battered stocks, China’s financial regulatory body, the China Securities Regulatory Commission, has ceased reviewing applications for Chinese initial public offerings.

Beijing has been attempting to boost the market in a number of ways, and over the past few months has cut stamp duties, limited the sell down of previously non-tradable, usually government-owned, stocks, and has been encouraging listed State-owned enterprises to increase their own shareholdings. Much of these efforts however have been undone in the wake of the global financial crisis.

The CSRC has taken this action before. During 2005 and 2006 the CSRC refused all IPO applications for a full twelve months, recommencing only in May 2006. Since then, offerings have been approved at a rate of about ten a week. The new move will affect about 35 mainland companies that have gone through the approvals processes but have yet to begin their share sales as CSRC regulations state they must provide share offerings within six months of regulatory approval. Chinese brokerages are expected to feel the pinch as they have already been hit by a shrinking market and losses on proprietary trading. (more…)

United States may have to pay price for Beijing intervention

BEIJING, Oct. 9 - Banking sources in China have indicated to China Briefing News today that Beijing is likely to purchase still more U.S. debt to support the dollar and to help avert a U.S. and possible global downturn.

China already holds approximately some US$1.27 trillion in U.S. foreign exchange reserves. However, as the value of the greenback has fallen, pressure has mounted to sell and use that money to bail out China’s own domestic economy. But with the mainland looking increasingly isolated from the global credit crisis, it is in Chinese interests to support the dollar and see the value of these reserves rise.

Academics advising the Chinese government on its foreign exchange management have described the U.S. dollars China holds as “having been taken hostage” by financial mismanagement not of China’s own making, and there is considerable anger in China’s financial industry that the United States let this situation get to such a stage. However, if China does step into the breach and declare support for the dollar, it will impact globally on the current situation and also place Beijing in a position of improved stature amongst the international business community over its perhaps better perception of prudent fiscal management. (more…)

Oct. 7 - According to the Chinese Ministry of Commerce, the October National Holiday boosted consumer spending and travel in the country to record levels.

The weeklong holiday runs from September 29 to October 5 in commemoration of the anniversary of the founding of the People’s Republic of China in 1949.

The government had lifted travel restrictions prior to the Olympics to push domestic tourism. Last week, air travel passenger numbers increased by 14.8 percent compared to last year’s figures.

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Oct. 6 – The China Securities Regulatory Commission (CSRC) said it will soon allow firms to do low margin trading and short selling on a trial basis.

In a statement made on its website on Sunday, the CSRC did not specify the date of commencement for the trading. It said, “With the agreement of the cabinet, the CSRC will in the near future launch margin trading and short selling on a trial basis.”

The move will allow traders to borrow part of the money needed to buy a security or borrow security to sell. It will also serve as a risk aversion tool for investors and should instill confidence in the country’s stock markets amid the banking crisis rocking the United States.

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Sept. 26 - China recently implemented several incentive programs to attract talent to the Chinese financial services sector. Local authorities in Beijing, Shanghai and Shenzhen have introduced new measures to attract financial institutions to set up in their jurisdictions.

In Shanghai, financial institutions based in Pudong will benefit from a new incentive program. Security houses, banks and insurance companies as well as qualified individuals such as senior executives, individuals with managerial roles, and professionals with extended experience (three years or more) working for a financial institution also stand to benefit from the incentives.

These incentives include: (more…)

Sept. 19 – Starting today, the stamp duty on stock purchases will be abolished in an effort to rescue the falling domestic stock market.

The move to dissolve the 0.1 percent was done, “to encourage market confidence,” reported Xinhua. The new rule does not include sellers of shares which are still required to pay the 0.1 percent stamp duty.

Last April, authorities decreased stock transaction tax by two-thirds to 0.1 percent. This led to investors going on a buying spree and propelling the benchmark index by almost 10 percent for the largest single-day gain in more than six years.

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Sept. 18 - As the U.S. financial crisis unravels, China’s three top commercial banks have reported their levels of exposure through bonds issued by investment bank Lehman Brothers.

The fourth largest investment bank in the United States, Lehman Brothers, had filed for bankruptcy on Monday when efforts to find a buyer failed last Sunday.

In a statement, China Merchants Bank said it holds US$70 million worth of Lehman Brothers bonds: US$60 million of which is senior debt and US$10 million in subordinated debt. (more…)

HONG KONG, Sept. 5 - In a sign the global downturn is affecting Chinese exporters, payment default rates (non-collectable debts) due from mainland businesses rose in the first six months of 2008 to 1.6 percent of total payments due, according to Coface, the international trade risk financing group.

Surveying over 3,000 Hong Kong businesses from January to June, Coface found that Chinese businesses were experiencing the growing impact of the worldwide credit crunch, and warn that the payment performance of China buyers may worsen in the coming months.

Receivables also rose to nearly 10 percent of all payments surveyed due from China buyers, up from 8.3 percent in the second half of 2007. In response to this trend, 33 percent of those surveyed said they had tightened credit control and payment terms offered to their customers in the past six months, with a further eight percent indicating they were about to do so. (more…)

Sept. 3 - Proposals to restructure the national application of China’s most important collectable tax, the value-added tax, have been put forward to the State Council and are expected to be implemented shortly.

Two measures immediately stand out:

1. VAT, which has not yet been levied on services, is to be attached to service contracts and invoices, meaning all service businesses in China can now both levy and offset VAT
2. VAT has not yet been fully able to have been offset against certain purchases, such as equipment purchases; the proposals call for VAT to be offset against all transactions (more…)