Financial Services Focus Group Quarterly Update – Q3 2017

Published on 2017-10-20

China's economy expanded at 6.8% in the third quarter of this year.

The trend of the economy stabilising and improving had continued in the first three quarters and there have been more favourable factors supporting middle- and high-rate growth of the world's second-largest economy. 

China launches Bond Connect trade link

On July 3, China finally opened the long-awaited Bond Connect trade link, officially inviting foreign investors to tap into its $9trn bond market. The new link, which was announced in a joint statement by the Chinese central bank and the Hong Kong Monetary Authority, marks the latest in a series of moves to liberalise China’s capital markets.

The new trading link will connect global investors to Chinese bonds by establishing mutual bond market access between Hong Kong and mainland China. However, access to Chinese bonds via the programme will be restricted to overseas institutional investors such as banks, insurers and investment funds.

Under rules issued by the Chinese central bank, offshore investors will be able to trade bonds using foreign currencies. Further, the Chinese central bank will have the right to access offshore investor data. 

China to Process All Online Payments via Centralised Clearing Platform

All online payment transactions in China involving bank accounts will be processed through a centralised online payment clearing platform starting from June 30 next year, the payment and settlement department of the People’s Bank of China (PBOC) said in a recent document, entitled the “Notice Concerning the Migration of Internet-based Payment Transactions of Non-Banking Payment Institutions from the Direct Connection Model Toward the Online Clearing Platform.” The move will enable financial regulators to strengthen regulation and risk control over third-party payment businesses, and protect consumers more effectively.

BRICS finds commerce consensus

Trade ministers of BRICS countries have reached consensus on a number of major issues, including establishing stronger digital networks at ports to ease trade and approving a service trade cooperation road map to boost economic ties.

BRICS countries will work together to enhance intra-BRICS investment, and improve the capacity of services related to investment amid uncertainties in the global economic recovery. Other results include launching an e-commerce cooperation initiative, approving guidelines for intellectual property rights, endorsing the outlines for investment facilitation and producing a framework on strengthening the economic and technical ties among BRICS countries. 

China’s central bank to relax RMB exchange rate rules

The renminbi exchange rate will be more flexible, basically determined by the market's supply and demand situation. The PBOC scrapped a rule this week that requires banks to reserve a 20 percent deposit on forward sales of foreign exchange, a sign that the central bank has relaxed capital controls. The rule was enacted in October 2015 as a measure to restrain capital outflows and stabilise the yuan. The relaxing of capital controls is expected to put the yuan's internationalisation process back on track, as analysts said. It means that the yuan's promotion in international payments may rebound after a decline since 2016. As the opening of China's capital market will continue, the space for arbitrage due to the exchange rate gap between onshore and offshore markets will be gradually removed.