Foreign banks in the Chinese mainland continue to be optimistic about their future performance going forward, according to a report released by Ernst & Young Greater China here on Tuesday.
"The regulatory landscape continues to challenge foreign players, while alongside are also the opportunities generated from the evolving RMB internationalization and interest rate liberalization," Managing Partner of Financial Services at Ernst & Young Greater China Jack Chan said.
In terms of total assets, based on the China Banking Regulatory Commission's 2013 annual report, foreign banks' market share in China was just 1.73 percent as of Dec. 31, 2013, below the market share of 1.84 percent back as of Dec. 31, 2004.
According to the report, foreign banks in China expect a modest improvement in performance over the next three years. Half of the participants predict a slight improvement, while 45 percent of them hope to see a significant improvement.
Despite the optimism, the report said many of the CEOs that they have surveyed find the market challenging and complicated by issues surrounding financial reform and economic uncertainty.
The most difficult regulatory challenge in 2014 was access to the bond market, followed by the myriad of rules and regulations and capital and liquidity constraints, Chan said.
As China's economy evolves, the foreign banks believe it is critical that the capital markets open up and the foreign banks participate more fully in the bond market, he said.
The report is based on interviews with 41 foreign bank CEOs and senior bank executives based in Shanghai, Beijing and Hong Kong and conducted during August and September 2014.
It examines the challenges facing players as they push to improve their footprint in China. It also looks at the trends and regulatory reform that is shaping the market and offer insights into ways of driving growth now and in the future.
This year's "Invest in Beijing" Fair, which aimed at attracting more investment to the city's high-end industries, opened in Beijing on Dec 9.
As an annual investment promotion event taking place in the city since 2009, this year's Invest in Beijing attached more emphasis on social and private capital's involvement in its cutting-edge sectors, such as the new generation of information technology, biological medicines, as well as energy conservation, and environmental protection.
The organizing committee also set up a service station to offer face-to-face counseling for potential investors and companies in various fields, such as laws and regulations, investment environment and planning of industries.
Representatives from the city's governmental departments, including the commission of science and technology, commission of education and commission of development and reform, came to explain the investment policies at the station, as did the investment promotion organizations from all the districts and counties of Beijing, as well as the city's major industrial clusters 鈥擹hongguancun Science Park, Beijing Economic-Technological Development Area and Beijing Tianzhu Free Trade Zone.
At the Fair, the Beijing Municipal Commission of Development and Reform released a batch of pilot projects which call for social investment in public services and utilities, and the new list of industries that are prohibited or limited by the municipal government.
The China National Gold Group Corporation, the country's biggest gold producer, Nanshan Group, a chemical firm based in east China's Shandong province, and China Energy Conservation and Environmental Protection Group signed contracts worth 31.1 billion yuan ($5 billion), higher than the 27.9 billion yuan at the contract signing ceremony during last year's "Invest in Beijing" Fair.
This year's Fair highlighted the promotion of projects in high-end sectors and strategic emerging industries to help advance the city's economic restructuring and strengthen its role as the country's center of politics, culture, global exchanges and scientific and technological innovation.
More than 500 representatives from state-owned enterprises, large private companies, multinational corporations, leading players from different industries, as well as chambers of commerce from China and abroad attended the fair.
Ma Peihua, vice-chairman of the Central Committee of the China National Democratic Construction Association, Niu Youcheng, a member of the Beijing Municipal Party Committee and the city's vice mayor Cheng Hong were present at the Fair.
Chinese shares continued rising on Monday, with the benchmark Shanghai index jumping over 2 percent to regain the 3,000-point psychological mark, the first time since April 25, 2011.
China's State Council, the Cabinet, has unveiled a series of measures to promote independent innovation and encourage entrepreneurship.
According to a statement released Wednesday after a State Council executive meeting presided over by Premier Li Keqiang, the country must expand pilot programs for independent innovation and seek "multiplication" in social enthusiasm for innovation and entrepreneurship with the "subtraction" of government grip.
Since 2010, China has experimented with policies promoting scientific and technological innovation in the Zhongguancun National Innovation Demonstration Zone in Beijing.
The government will roll out six Zhongguancun policies to the rest of country, including new rules on research funds and equity financing for small enterprises.
There will also be some tax preferences for innovation demonstration zones. For instance, the income tax for equity incentives given to technical and managerial employees can be paid by installment within five years, according to the statement.
The statement added that China will do research in Zhongguancun concerning overseas talent, diversify corporate financing channels and support the construction of bonded warehouses.
China has six national innovation demonstration zones and plans for more.
A total of 547 angel investment deals have been signed in the first 11 months in China totaling $341.4 million, a 69.6 percent increase compared with the whole last year, according to a report of Zero2IPO Group on Wednesday.
Ni Zhengdong, chairman of Zero2IPO Group, said that lots of angel investment institutions and funds were set up in 2014, stimulated by the rising number of start-up deals.
Ni said 55 new angel investment funds have been set up this year and their scale has reached $700 million.
Venture capital companies also have focused on deals at early development stage and about 60 percent of their funds are invested in these deals, said the report.
Vice-Premier Wang Yang (center) holds a golden key to signal the opening of the 18th China International Fair for Investment and Trade on Monday.
Service sector will be steadily opened-up
China will further open its investment and cooperation system and optimize the environment for foreign investment, Vice-Premier Wang Yang said on Monday.
"China's policy of investment and cooperation will be kept in the long run, although the inbound and outbound investment situation is witnessing big changes," said Wang.
Wang made the remarks at an international investment forum during the 18th China International Fair for Investment and Trade, which opened on Monday in Xiamen, Fujian province.
The annual international investment event provided more than 30,000 potential investment projects and attracted companies and government organizations from 54 countries and regions, according to the organizers.
The competitiveness of the domestic companies in the world's second-largest economy has grown remarkably and there are fundamental changes that foreign investment will have to adapt to, said Wang.
Traditional manufacturing businesses are returning to developed countries and developing economies are boosting efforts to introduce foreign investment, which has affected the international capital flows, he explained.
But he said, "We will not ignore the role that foreign investment plays in the Chinese economy and will not reject foreign-invested companies."
However, according to Wang, China will not simply introduce foreign capital in the future, instead it will look to introduce advanced technology, managerial experience and intelligence resources and build various market-oriented systems in accordance with international practices.
"We will relax the restrictions on foreign investments, and steadily open-up the finance, education, culture and healthcare markets," Wang said.
According to Wang, the Chinese government will strengthen efforts to protect foreign investors' interests by tackling the problems of monopolies, commercial bribery and copyright infringements to improve the domestic investment environment.
This year marks the 30th anniversary of China's first group of national-level economic and technology development zones, and Wang said such zones need to be further transformed and upgraded.
"China's economic and technology development zones should be driven by innovation and they should make better use of foreign investment for their future success," Wang said.
Such zones are also being encouraged to enhance communication with their foreign counterparts to promote new growth models, according to Wang, who pointed out that China's 215 national-level economic and technological development zones realized one-fifth of the country's foreign investment and one-eighth of its GDP in 2013.
Commerce Minister Gao Hucheng said the Chinese government will adhere to its policy of mutual benefits and strive to build an open economic system, actively working with international organizations and governments to promote a healthy recovery of the global economy.
"The annual international investment fair has proved to be an efficient platform to create investment and cooperation opportunities. I hope all participants will take full advantage of this event to boost investment and cooperation," Gao said.
Gao urged domestic economic and technological development zones to play an active role in boosting international investment.
"Such development zones have not only promoted the country's development they have also become an important platform for international investment," Gao said.
By attracting foreign direct investment, catalyzing the development of industrial clusters and adopting new technologies and management practices, the economic and technology development zones have played a key role in China's economic success, said Cai Jinyong, chief executive officer of the International Finance Corporation.
"Successful programs, which can contribute to the long-term future of the zones, are the ones that focus on market demand and are integrated into the domestic economy. The development of any zone should be based on an identified market opportunity," he said.
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