New Rules Released on Policy Banks to Enhance Risk Control

Chinas banking regulator issued regulations for the first time specifically designed for the nations three stateowned policy banks， clarifying their business positions and enhancing oversight of risk control. The special rules for supervision and management measures apply to the countrys three giant policy lenders – the China Development Bank （CDB）， the Export-Import Bank of China （EximBank） and the Agricultural Development Bank of China（ADB） – according to Zhou Minyuan， head of the China Banking Regulatory Commissions policy banks supervision department. Under the new rules， the CBRC requires the policy banks to establish a capital restraint mechanism with a capital adequacy ratio as a core regulatory indicator， though the commission didnt set a specific ratio. The regulator will set requirements on capital adequacy ratios for the three policy banks based on the requirements for commercial banks， said Xu Qinghong， deputy head of the CBRCs policy banks supervision department. The rules also include specific requirement on corporate governance and internal controls. The CDB will have an external board of supervisors， something that is already in place at the two other banks. China established the three policy lenders in 1994 under the direct jurisdiction of the State Council as part of a banking sector overhaul that relieved the major state-owned commercial banks from their role in carrying out governmentdirected spending. Supervision and management of the policy lenders has mainly followed rules outlined in a 1993 State Council document on financial sector reform， without any specific law or regulation. But as the policy banksbusinesses have expanded over the years， the institutions have become the subject of complaints that they are increasingly competing with commercial banks while enjoying greater policy sup- port. The industry has called for new rules to fill the regulatory vacuum. The new regulatory documents clarify business roles for each of the policy lenders. The CDB should focus on mid- and long-term investment financing， especially in strategic and underdeveloped sectors.

Alibaba Reassigns Entertainment Unit Head to Run Strategic Investments

Alibaba Group Holding reassigned the head of its digital media and entertainment unit to lead the e-commerce giants strategic overseas investments， Alibaba CEO Daniel Zhang said. Yu Yongfu， 41， will step down Dec. 1 as chairman and chief executive officer of Alibabas Digital Media and Entertainment Group and assume the new position leading Alibabas foreign investment activities. Before he became chief of the entertainment business in October 2016， Yu held several senior positions with Alibaba following a career in investing. The move comes as Alibaba seeks a larger share of the entertainment market. A committee of six senior Alibaba executives will manage the unit with a rotating president， Zhang said. Yang Weidong， the CEO of the video streaming platform Youku Tudou Inc.， will be the first rotating president. The statement confirmed media reports in recent days of Yus departure. An industry source close to the matter said Alibaba decided to reassign Yu about two months ago. In his new position， Yu will lead a newly-established investment team under Alibabas Electronic World Trade Platform （eWTP） initiative， a strategy proposed by chairman Jack Ma last year to build trading platforms overseas to serve international traders. Zhang said the eWTP initiative is a key part of Alibabas new business strategy focusing on developing new retail， manufacturing， finance， technology and energy services. Yu worked at the venture capital company Legend Capital in early 2000s， rising to vice president. He focused on investments in internet， new media and telecom businesses. He joined UCWeb in 2006 as chairman and CEO and helped the company to grow quickly. Alibaba acquired UCWeb in 2014 and in 2015 merged it with Autonavi mapping service in a revamp of Alibabas mobile unit， where Yu was named president. Alibaba set up the digital media and entertainment division last year by consolidating its newly acquired assets in filmmaking， gaming， video， literature and other businesses， including Youku Tudou， Alibaba Pic- tures Group and Alisports. It is part of Alibabas effort to build a business ecosystem connecting the entertainment and content production businesses with its traditional e-commerce operations to create new competitive edge.endprint

China to Appropriate State Company Assets to Make Up Pension-Funds Gap

China will set aside part of stateowned enterprises assets to make up the shortage of money in the nations pension funds due to an increasingly aging population， according to a statement released by the state government. Some state-owned companies will transfer 10% of their stakes to the pension fund in the first stage， the document released by the State Council， or Chinas cabinet， said. About three to five enterprises and two financial institutions administered by the central government will be included in a pilot program this year. The document did not specify which companies. Some provinces will also start trying this program， the statement said. Based on the pilot program results， more state-owned companies and financial institutions will be added in 2018. The statement noted that the nations pension funds have seen widening gaps between income and expenditures because of an aging population and improving pension standards. The nationwide basic pension allowance for each retiree had been as low as 55 yuan per month. But the central government raised that to 70 yuan as of 2015. Some provinces and municipalities have higher standards than other places – Shanghai raised the amount from 750 yuan to 850 yuan per month this year， the highest in China. As fewer younger people are joining the labor force， the pension program has found it increasingly diffi-cult to meet expenditures. The countrys pension funds gained 3.8 trillion yuan（$574 billion） in 2016， up 1.6 trillion yuan from 2012， growing 14.9% annually. However， the pension fund program spent 3.4 trillion yuan in 2016， up 1.7 trillion than in 2012， growing 19.4% annually， according to figures from the Ministry of Human Resources and Social Security. In some provinces， such as Heilongjiang， Inner Mongolia and Hubei， the spending was already more than income for the pension funds last year.

China to Roll Out Red Carpet for Foreign Financial Firms

China plans to grant overseas investors greater access to its financial market， in a bid to invigorate the countrys financial services sector. Foreign companies will be allowed to own a majority stake — up to 51% — of any joint venture in the securities， funds， and futures industries， up from a current cap of 49%， Vice Finance Minister Zhu Guangyao said at a recent press briefing. The minister did not say when the new cap would become effective. But he added that， after three years at 51%， the cap would be lifted entirely. The move， announced by Zhu following U.S. President Donald Trumps visit to Beijing， is seen as a renewed effort to open up Chinas domestic financial market. Sixteen years after China agreed to liberalize foreign access to its financial sector as part of its World Trade Organization accession commitments， overseas investors still complain about barriers restraining their access to the worlds second-largest economy —barriers such as shareholding caps and license controls. The new policies are set to address such concerns. The new policy will allow foreign investors to control asset management joint ventures and thus have the final say in investment decisions. But questions remain on how far the new policy can go in removing barriers for foreign investors. As part of the policy package， China will lift foreign ownership restrictions on local banks and asset management companies， which currently stand at 20% for a single investor and 25% for combined foreign shareholding. After three years， foreign investors will also be allowed to own up to 51% of shares in life insurance joint ventures. This cap will then be removed after five years.endprint

China Cracks Down on Public-Private Partnership Abuse

China is stepping up efforts to close loopholes in its public-private partnership initiative that are being exploited by local governments to borrow more money through banned channels. In a notice posted on its website， the Ministry of Finance announced an overhaul of the approval system and told local governments nationwide that they have until the end of March to comply with orders to review， identify and remove unqualified projects from the official PPP registration system. Delisting means the deals will not be eligible to be funded through the PPP model， under which private companies invest in government infrastructure projects. Authorities unable to meet the deadline will be given a 30-day grace period， but after that， the registration of new projects will be suspended in their provinces， the statement said. The order is intended to“prevent the PPP program from being abused and turned into a new type of（government） financing vehicle， and to firmly contain the risks of an increase in hidden debt，” the ministry said. The announcement comes amid mounting evidence that the initiative has been used as a way to circumvent central government efforts to control the growth in off-balance sheet local government debt and improve the transparency of local finances. Under pressure to support the program amid a tepid response from the private sector， some local officials are offering secret deals or incentives to entice outside investors and approving projects that dont fit the PPP criteria laid out by the central government.endprint