Shanghai announced new measures to encourage private investment in small and micro companies, the latest move to boost venture capital in the city.
The local government said in an online statement yesterday that it is striving to build Shanghai into an international venture capital center.
By 2017, the city is expected to accumulate an additional 100 billion yuan (US$16 billion) in capital for investing in innovative companies. The city also forecasts attracting an extra 1,000 venture capital professionals and 100 influential venture capital firms in a bid to help start-up companies receive the guidance they need.
The city's Venture Capital Investment Guidance Fund increased 1 billion yuan annually in the past three years. The fund invests in targeted sectors and also serves as a guide for privately owned funds. District and county-level governments are encouraged to establish similar funds.
Shanghai plans to simplify foreign investment procedures in domestic venture capital firms by piloting a foreign exchange settlement trial.
State-owned enterprises are also being encouraged to form VC firms.
The new measures are part of the government's efforts to support small and micro companies in Shanghai. Apart from direct financing solutions, Shanghai has also encouraged banks to lend money to cash-strapped small companies.
Executive Deputy Mayor Tu Guangshao's said earlier this week that Shanghai will improve fundraising services for small and micro companies.
There were about 370,000 small and micro enterprises in the city as of the end of 2013. They accounted for 97.1 percent of incorporated companies and provided 54 percent of the city's jobs.
Elsewhere, the People's Bank of China's Shanghai Headquarters agreed to loan 1 billion yuan (US$161.1 million) to Shanghai Rural Commercial Bank.
A booth showcasing Guangdong-based businesses at an expo in Guangzhou, the province's capital. Guangdong is currently seeking central government approval of a Guangdong-Hong Kong-Macao free trade zone. Provided to China Daily
Southern province aims to capitalize on links with neighboring regions
The Guangdong provincial government has vowed to realize liberalization of trade in services in the South China province and its neighboring Hong Kong and Macao special administrative regions by this year through CEPA (the Closer Economic Partnership Arrangement).
"It is a task assigned to Guangdong by the State Council," Vice-Governor Xu Shaohua told a Monday news conference. "We are striving for the central government's approval of specific preferential projects and policies.
"At the same time, we will open up more fields for investors from Hong Kong and Macao, including those in the service sector, using a 'negative list'."
Xu also said Guangdong is currently seeking central government approval of a Guangdong-Hong Kong-Macao free trade zone.
"We are talking with ministries about the construction plan and preferential policies," Xu said.
At a joint meeting between Guangdong and Hong Kong in September, Guangdong Governor Zhu Xiaodan said that the new free trade zone will focus on liberalizing trade and building a platform for the cooperation in the high-end service industry, capitalizing on Hong Kong's reputation as a premier international finance center.
A focus on liberalizing trade in services will set this free trade zone apart from the China (Shanghai) Pilot Free Trade Zone, which focuses on financial openness, according to Lin Jiang, dean of the public finance and taxation department of Lingnan College at the Guangzhou-based Sun Yat-sen University.
"The volume of trade in services has surpassed that of trade in goods in international trade," said Lin, who also is vice-director of the university's research center of Pearl River Delta, Hong Kong and Macao.
"The Guangdong-Hong Kong-Macao free trade zone is the pilot zone in China to make breakthroughs in fields such as offering tax refunds for service exports, which are intangible goods," Lin said.
"Liberalizing trade in services also answers the province's need for upgrading and transforming its processing trade. That's why the province doesn't stress liberalizing trade in goods," said Lin, who gave as examples of modern service industries high-end design and management consultancies.
Zhu also noted at the September meeting that the new free trade zone will help adapt the mainland's financial management mechanism to international practices in Hong Kong.
Lin said it will benefit the province to make business laws and regulations according to international practices in Hong Kong, since that will be one of the free trade zone's major incentives for international investors, compared with the Shanghai free trade zone.
Xu listed several items on the Guangdong government's action plan for liberalizing trade in services in the zone. They include: relaxing or canceling restrictions on Hong Kong and Macao investors' qualifications, shareholding ratios and/or scope of business; promoting mutual attestation of professional qualifications; and exploring possible business modes for individual professional services.
"The Hengqin New Area in Zhuhai, the Nansha New Area in Guangzhou and the Qianhai experimental zone in Shenzhen are the three areas opened up for Hong Kong service industry," Xu said. "In addition, Zhongshan, Foshan and Dongguan cities are proposing platforms to attract investors from Hong Kong and Macao."
The latest announced preliminary plan of the Guangdong-Hong Kong-Macao free trade zone includes the three new areas and experimental zones plus Guangzhou Baiyun International Airport, taking up an area of more than 1,300 square kilometers, which is 47 times of that of the Shanghai free trade zone.
Lin warned that it would be a challenge for the Guangdong government to figure out a way to coordinate so many areas.
Part of the reason for Monday's news conference was to interpret the provincial Party committee's suggestions for Guangdong's implementation of the central government's comprehensive reforms.
The suggestions were approved by the Third Plenum of the 11th General Assembly of the Guangdong Provincial Party Committee, held last weekend in Guangzhou.
"To further open up the province, Guangdong will also strengthen its cooperation with the US and European developed countries by establishing overseas offices of economic trade in these countries," Xu said, adding that an office in Germany already has been set up.
"This is to get in touch directly with big multinational corporations to attract investments and technologies that will assist in upgrading and transforming Guangdong's economy," he said.
Guangdong, the largest Chinese trader for ASEAN countries, also will further promote its foreign trade with these countries and spearhead the central government's strategy of building the Maritime Silk Road of the 21st century.
Yu'ebao (Leftover Treasure). an Alibaba personal finance product, had 43.03 million users with aggregate deposits of 185.3 billion yuan (30.4 billion U.S. dollars) at the end of 2013.
Yu'ebao is an online fund established by Alipay, China's largest third-party payment platform and subsidiary of Alibaba, part of China's biggest online shopping mall, togetheer with the private Tianhong Fund.
"Investments" in the fund have brought 1.79 billion yuan in profits to users since its launch in June 13 this year, according Alipay on Wednesday.
Yu'erbao allows Alipay customers to invest any balance in thier accounts with the Tianhong Fund and has already become the largest fund of its kind in China.
Its users come from all over China: more than 2,000 counties and cities in 31 provincial-level administrative regions with an average deposit of 4,307 yuan per user.
The Shanghai Stock Exchange has started simulated trading in equity options, part of a drive by regulators to expand investors' risk-hedging options.
Simulated trading began on Thursday morning, the SSE confirmed to China Daily, and more than 60 securities firms took part.
The shares of Ping An Insurance Group Co of China Ltd, SAIC Motor Corp Ltd, the China 50 ETF and the Shanghai SSE180 ETF were used in the exercise.
The exchange-traded funds track the top 50 and top 180 yuan-denominated stocks on the SSE.
In early December, SSE Chairman Gui Minjie told a forum that preparations "are almost complete" for launching options on individual stocks.
Single-stock options are essentially equity derivatives, giving buyers the right - but not the obligation - to buy or sell a stock at a fixed price within a certain period or on a set date, said Tony Sun, a strategist with Shanghai Tebon Fund.
The options "will allow investors to hedge their positions more effectively. We have limited financial instruments now, but as reform continues and China's financial markets become more global, innovation is a necessity," said Sun.
China introduced equity index futures in 2008, and those instruments remain the only equity derivatives in use. The regulators expanded a pilot program in August 2012 to boost margin trading.
In February, a new pilot was launched to enable securities lending and short-selling of blue chip stocks.
"Individual stock options can be seen as a form of insurance that reduces trading risks. However, options trading prices can be very volatile. Investors still have to be aware of the risks caused by leveraging and volatility," said Xiong Jinqiu, an independent financial commentator.
The China Securities Journal reported earlier this month that the SSE may officially introduce formal equity options trading in April. Some analysts believe the move is meant to stimulate investment in China's blue chips, which have been trading at depressed valuations.
The average price-earnings ratio for the SSE, where most of China's blue chip companies are listed, stands at only 11 times 2012 earnings. On the Shenzhen exchange, which is dominated by small-cap companies, the average ratio is 28.
Change for WMPs
Another development involving the liberalization of the financial markets took place on Wednesday, this one involving wealth management products.
WMPs will be allowed to invest directly in fixed-income products on domestic securities markets, the China Securities Depository and Clearing Corp announced.
The notice said that WMPs will be allowed to open accounts at the Shanghai or Shenzhen stock exchanges. Investment will be confined to fixed-income products, including exchange bonds, credit-backed securities and preferred shares. The latter are often classified as fixed-income products because of their fixed dividend.
Analysts said that the move on WMPs is intended to provide a bridge "linking" interbank market liquidity with the nation's stock exchanges, even though WMPs can't make direct stock investments at this stage.
The outstanding balance of WMPs stood at 9.92 trillion yuan ($1.63 trillion) as of Sept 30, the China Banking Association said earlier this month.
The figure has more than doubled since the end of 2011, and it's up from 7.1 trillion yuan at the end of 2012.
The Shanghai Gold Exchange plans to launch an international board in the pilot free trade zone to attract offshore yuan capital to invest in the Chinese mainland's gold market, a senior official said yesterday.
"We want to tap the opportunity from Shanghai's pilot free trade zone and launch an international board to attract offshore yuan to invest in the mainland," Xu Luode, chairman of the bourse, said at a precious metals forum in Shanghai yesterday.
The board will ensure that the onshore gold market correlates with the global market, said Xu, without disclosing a timetable for the launch.
Financial reforms in the free trade zone will allow free fund transfers between the zone and offshore markets for the first time, according to a directive issued by the People's Bank of China on Monday.
The Shanghai exchange will establish a system that publishes daily rates at which selected market participants are willing to lend gold in the mainland interbank market, which is similar to the Gold Forward Offered Rates by the London Bullion Market Association, according to Xu.
The world's biggest exchange for physical gold in Shanghai will also offer custody for the metal to retail investors.
The Chinese mainland will continue to levy anti-dumping duties on methyl ethyl ketone (MEK), an industrial solvent, from Japan and Taiwan for another five years, the Ministry of Commerce (MOC) announced on Wednesday.
The decision was made after a one-year review and will come into effect on Thursday.
The Chinese mainland started to levy tariffs ranging from 9.6 percent to 66.4 percent on MEK from Japan, Taiwan and Singapore on Nov. 22, 2007.
When the five-year anti-dumping measures expired last year, Singapore was delisted, while the other two regions came under review.
After the review, the MOC said domestic producers may again suffer losses to MEK from Japan and Taiwan if the anti-dumping duties were lifted.
MEK is a solvent widely used in making paints, dyes and lubricants.
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