China this week

Added 18th June 2015

What the mainland press is talking about: One belt, one road is riddled with risk; QFII and RQFII approvals for May; Bank of China plans to launch small-mid cap A-shares fund.

China this week

The $1trn "one belt, one road" is full of risk

OBOR is an infrastructure and industrial initiative that aims to strengthen economic and trade connections from China's west into Central Asia and beyond, and also into Southeast Asia toward Africa.

State banks and financial institutions are preparing to provide funding for projects and Chinese companies will benefit from related infrastructure and industrial projects.

Bank of China plans to support the initiatives by lending $100bn over the next three years. China Construction Bank will get involved by opening eight new branches overseas this year.

Some say "one belt, one road" could eventually spur more than $1trn worth of business.

Leung is confident that the funds will be available in the third quarter.

But the initiative is riddled with risks. Investors will face "complex issues stemming from diverse political, social and economic conditions in countries targeted by the initiatives" and starkly different legal, environmental and technological standards, according to a source at ICBC.

Other experts have pointed to the potential for waste. "They say a short-lived burst of enthusiasm may spur overspending that leads to heavy debt burdens for borrowers and lenders".

In addition, overspending could lead to heavy debt burdens for borrowers and lenders.

"That's exactly what happened after the government responded to the 2008 global financial crisis by overdoing it with 4 trillion yuan in stimulus spending. Some of that spending was unnecessary, officials say, and fueled debt buildup that lingers today."

Caixin, June 17

 

RQFII and QFII approvals for May

 

RQFII

Company

Country

Approval date

Amount (RMB)

CSAM Asset Management

Singapore

29/05/2015

700m

Allianz Global

Singapore

29/05/2015

1bn

GAM International Management

UK

29/05/2015

1.8bn

Harvest Global Investments (UK)

UK

29/05/2015

3bn

Lyxor Asset Management

France

29/05/2015

6bn

Samsung Securities

Korea

29/05/2015

3bn

Daewoo Securities

Korea

29/05/2015

2bn

Kyobo AXA Investment Managers

Korea

29/05/2015

1.5bn

 

QFII

Company

Country based

Agent Bank

Approval date

Amount (RMB)

E.Sun Commercial Bank

Taiwan

Bank of China

29/05/2015

50m

The Regents of the University of California

US

Deutsche Bank

29/05/2015

400m

Fullgoal Asset Management

HK

HSBC

29/05/2015

200m

Taikang Asset Management

HK

ICBC

29/05/2015

280m

Nan Shan Life Insurance

Taiwan

Citibank

29/05/2015

50m

City of London Investment Management

UK

HSBC

29/05/2015

600m

Capital Securities Investment Trust

Taiwan

HSBC

29/05/2015

250m

KB Asset Management

South Korea

Citibank

29/05/2015

300m

BNP Paribas Investment Partners

HK

Bank of China

29/05/2015

570m

HSBC Global Asset Management

HK

Bank of Communications

29/05/2015

376m

 State Administration of Foreign Exchange (SAFE), June 17


Bank of China to launch small-mid cap A-shares fund

The Bank of China (Hong Kong) plans to cooperate with its holding company, the Bank of China, to introduce a small-to-mid cap A-shares fund and a "hybrid" A-share fund, according to Leung Wai Kei, BOC's global VP of marketing.

Leung is confident that the funds will be available in the third quarter.

These new funds will invest in a range of A-shares and are expected to benefit investors when the markets are bullish.

Mutual fund recognition, which will start on July 1, will widen A-share investment channels and the BOC wants to be well-positioned to take advantage of new capital inflows. 

Leung believes the new A-share fund will be sufficiently differentiated from funds sold through the QFII and RQFII schemes and from ETFs. 

China Securities Journal, June 16

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