China needs to give clearer picture on private capital in banking industry

Sunday, May 27, 2012

BEIJING – China will give private capital the same entry standards to the banking industry as other capital, state media said on Sunday, as the government makes its hardest push in a decade to court private investors by welcoming them into a handful of sectors.
Private companies would be allowed to buy into banks through private stock placements, new share subscriptions, equity transfers, and mergers and acquisitions, the official China Daily said, citing the China Banking Regulatory Commission.
Private investment would also be permitted in trust, financial leasing and auto-financing companies, the report said.
“The banking regulatory branches at different levels cannot set up separate restrictions or additional conditions for private capital to enter the banking sector. They are obliged to improve transparency of the banking market access constantly,”the newspaper cited the regulator as saying.In order to encourage lending to the private sector, China should let private capital play a bigger role in financial institutions, and encourage private lending companies to become commercial banks, Wu Xiaoling, a former deputy central bank governor, told the China Daily.
“The government has encouraged small lending companies to turn into rural banks,” she said. “But with a minimum shareholding requirement of the main initiator, private investors lack enthusiasm for such things.”
Separately, the China Securities Regulatory Commission said that it would support private companies to list on the stock market, both domestically and overseas, and to issue bonds.
On Friday, the powerful watchdog of China’s state-owned firms said China would allow private investment in state companies when they restructure or sell shares, but gave few details on how that would happen.
However, analysts are sceptical China will follow through on its pledges to cut the role of the state, given that its stranglehold over swathes of the world’s second-largest economy has been unchallenged for years.
Analysts have said deep vested interests often backed by influential politicians are the biggest obstacle dogging privatisation efforts.
That said, government ministries may follow the state-owned Asset Supervision and Administration Commission’s lead and voice public support for privatisation in coming weeks in response to Premier Wen Jiabao’s instructions to detail plans on how to cut the state’s role in the economy.
China needs to state clearly it’s framework, including it’s rules and regulations, with a good time frame on all it’s reforms, so that foreigners will inspect clearly and make decisions, just an announcement will not spark interests, unless you lay all the ground rules, including foreign capital participation, if foreigners are able to buy up to 49% of your bank shares, for all your FDIs.
– Contributed by Oogle.

Author: Gilbert Tan TS

IT expert with more than 20 years experience in Apple, Andriod and Windows PC. Interests include hardware and software, Internet and multimedia. An experienced Real Estate agent, Insurance agent, and a Futures trader.

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