Financial Regulation in China: Hui Zheng, Coordinator, China Group, Allen & Overy LLP

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Hui Zheng is qualified in both the Chinese Bar and in England & Wales as a solicitor. Hui has contributed chapters to Chinese Business Law and Neate and Godfrey: Bank Confidentiality, Fifth Edition. …

Hui Zheng is qualified in both the Chinese Bar and in England & Wales as a solicitor. Hui has contributed chapters to Chinese Business Law and Neate and Godfrey: Bank Confidentiality, Fifth Edition. He has also had articles published by the Beijing Arbitration Journal in 2010 and by Securities Law Review in May 2012.

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  • 1. FinancialRegulation inChinaHui Zheng19 September 2012© Allen & Overy 2012 1
  • 2. List of Chinese Financial Regulators People’s Bank of China (PBOC) - State Administration of Foreign Exchange (SAFE) - Monetary Policy Department II of PBOC China Banking Regulatory Commission (CBRC) China Securities Regulatory Commission (CSRC) China Insurance Regulatory Commission (CIRC)© Allen & Overy 2012
  • 3. Financial Regulation Update – Three Examples1. RMB Exchange Rate- PBOC announced on 14 April 2012: the trading band for daily price of the USD against RMB is increased from 0.5% to 1% (first change since 2007)2. Interest Rate Reform- PBOC announced on 7 June 2012: the upper limit of the floating band of deposit interest rates set by financial institutions is 110% of the base interest rate.© Allen & Overy 2012
  • 4. Financial Regulation Update (continued)3. New QFII Rules- CSRC issued on 27 July 2012: the Rules on Issues Relevant to Implementing the Regulations on the Administration of Domestic Securities Investment by Qualified Foreign Institutional Investors (QFII)- What does this mean? (a) lowered entry barrier (b) expanded scope of investment to cover bonds traded on the interbank market (c) increased maximum holding of QFIIs in a single company - the maximum aggregate holding percentage of all foreign investors in a single listed company increases from 20% to 30%© Allen & Overy 2012
  • 5. Financial Regulation Update (continued)The table below comparing the previous criteria with those under the new QFII rules 1 Type of applicant Track record Capital Securities assets under management Experience in asset management business: Current: USD5 billion Asset manager No requirement Current: 5 years Draft: USD500 million Draft: 2 years Years since establishment: Current: USD5 billion Insurance company Current: 5 years No requirement Draft: USD 500 million Draft: 2 years Operating securities Current: paid up capital no Current: USD 10 billion business: less than USD 1 billion Securities company Draft: USD5 billion Current: 30 years Draft: net assets no less Draft: 5 years than USD500 million Current: total assets rank Operating banking business: Current: USD10 billion top 100 worldwide Commercial bank Current: no requirement Draft: USD 5 billion Draft: Tier one capital no Draft: 10 years less than USD 300 million Other types (pension funds, charity funds, endowment Years since establishment: Current: USD 5 billion funds, trust companies, Current: 5 years Draft: USD 500 million government investment Draft: 2 years management companies, etc) FN 1. In the case of an insurance company or other types of QFII applicants, securities assets held by such applicant.© Allen & Overy 2012
  • 6. Overview of Chinese Banking Sector– By the end of July 2012, the total Chinese banking assets reached RMB 122.91 trillion– The 5 biggest Chinese commercial banks’ assets amount to RMB 55.36 trillion– Industrial and Commercial Bank of China (ICBC) and China Construction Bank (CCB), in terms of market valuation, are now the top two banks in the world– Bank of China (BOC) set up its London branch in 1929. By the end of June 2012, both BOC and ICBC had set up overseas branches & subsidiaries in more than 30 countries© Allen & Overy 2012
  • 7. Foreign Banks in China at the end of September 2011– Foreign banks from 47 countries– 207 rep offices– 39 locally incorporated institutions with 247 branches & subsidiaries– 93 foreign bank branches– Asset 2.06 trillion RMB– Operation in 48 cities© Allen & Overy 2012
  • 8. Questions? These are presentation slides only. The information within these slides does not constitute definitive advice and should not be used as the basis for giving definitive advice without checking the primary sources. Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. The term partner is used to refer to a member of Allen & Overy LLP or an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Allen & Overy LLPs affiliated undertakings.© Allen & Overy 2012
  • 9. Hui Zheng Mr Hui Zheng received his LLB from Nanjing University and completed his Magister Juris at University of Oxford. He was dually qualified in the Chinese Bar and in England & Wales as a solicitor. With a wide range of experience in law in both Asia and the UK, he has worked at Allen & Overy LLP in London for the past six years. Hui contributed three chapters (Outbound Investment of Chinese Enterprises, Offshore Investment Vehicles, and Bankruptcy) to Chinese Business Law (Hart Publishing & Druckerei C.H Beck 2010) and the China chapter for the book, Neate and Godfrey: Bank Confidentiality, Fifth Edition (Bloomsbury Professional 2011). His article in Chinese onCoordinator of China Group international public company takeover rules was published on Securities Law Review by(London) China Law Press and the Shanghai Stock Exchange in May 2012.LondonTel: +44 (0)20 3088 3126 He is currently combining his career with a PhD in International Financial and Law at Durham University.© Allen & Overy 2012