Financial Services Focus Group Quarterly Update – Q4 2017

Published on 2018-02-28

2017 China GDP grew at 6.9%

2017 China's GDP grew 6.9% beating the forecast of 6.5%, while 4Q17 GDP growth was 6.8%.  It is the first time since 2010 that GDP growth exceeded prior year GDP growth (2016 was 6.7%).  The PBOC (People's Bank of China) has stated that they will continue with a prudent monetary policy to manage risk during 2018.

US President Donald Trump visited China in November 2017

US President Donald Trump visited China from 8-10 November, 2017.  On 9 November, President Xi Jinping and President Donald Trump attended a dialogue with business leaders from both countries and were present for the signing of trade deals worth US$253.5 billion, a new trade record figure in the trade history of the two countries.  Senior US trade officials announced later that closed deals actually exceeded US$253.5 billion by a significant margin.

China expands foreign ownership in financial sector

China’s Vice Minister of Finance, Mr. Zhu Guangyao, announced in Beijing that the Government will relax ownership limits across the financial services sector, particularly in regard to the commercial banking, securities, futures, asset management and insurance sectors.

Liberalisation of the sector over the next three years will enable foreign companies to own 100% of Chinese securities firms, fund managers and futures companies.  China will also raise foreign ownership in insurers from the current 50% shareholding limit to 51% within three years and to 100% in five years.  China also intends to eliminate the current limit of 25% ownership in banks but no timeline has yet been announced.

The Communist Party of China (CPC) 19th National Congress

Xi Jinping was re-elected onto the 19th Central Committee of the Communist Party of China (CPC) at the closing session of the 19th CPC National Congress.  General Secretary Xi Jinping pointed out that the principal contradiction of the country now is one between unbalanced and inadequate development and the people’s ever-growing needs for a better life.  In the CPC report, a two-stage development plan for the period from 2020 to the middle of the 21st Century has been drawn up in order to transform China into a modern socialist country. 

The IMF and World Bank note efforts to reform China’s finances

IMF and the World Bank jointly published a series of reports in December on the subject of China’s financial system.  Of particular note is the China Financial System Stability Assessment, which summarises outcomes over the prior five-year period with an update on China’s Financial Sector Assessment Program.

According to the IMF, China’s financial assets reached nearly were valued at 470% of GDP, which has developed rapidly in size and complexity.  The Assessment also identified potential concerns about the Chinese financial system, including sustained rapid credit growth, especially in regard to local government and household loans, the increasing complexity of wealth management products and implicit guarantees that may cover potential risks and improperly allocated investment funds.

Chinese Direct Investment into UK doubles in 2017

Chinese FDI (combined greenfield investments and acquisitions) into the United Kingdom more than doubled in the prior 12 months from US$9.2 billion in 2016 to US$20.8 billion in 2017, despite uncertainty over Brexit.  The figures, which were put together by law firm Baker McKenzie and research consultancy Rhodium Group, show that China's FDI into the UK grew six-fold during the past four years up from US$3.2 billion in 2013.

One deal significantly impacted the total FDI figure in 2017, ie. the US$14 billion purchase of London-based warehouse company Logicor by Chinese sovereign wealth fund China Investment Corporation (CIC).  Logicor owns around 50 warehouses in the UK and in other European countries and was sold to CIC by Blackstone's real estate arm.