China Vows to Keep Markets Stable, Support Foreign Listings

Beijing issued a strong promise for policies to boost financial markets and stimulate economic growth as it responded to a market sell-off over risks from the property market, overseas listings and internet companies.

Government departments should “actively introduce policies that benefit markets,” according to a meeting of China’s top financial policy committee led by Vice Premier Liu He, who’s in charge of overall economic policy. The meeting concluded there is a need to “boost the economy,” in the first quarter, according to a state-media report.

The Financial Stability and Development Committee meeting promised investors relief on a number of concerns which drove a sell-off in Chinese equities earlier this week. “Any policy that has a significant impact on capital markets should be co-ordinated with financial management departments in advance to maintain the stability and consistency of policy expectations,” the meeting said.

Stocks surged after the announcement. The Hang Seng China Enterprises Index jumped as much as 13% in Hong Kong, the most since 2008, after plunging 26% this year through Tuesday. The CSI 300 Index of mainland shares climbed 4.6%.

Overseas Listings

China supports overseas listing and has achieved positive progress in discussions with Washington over Chinese stocks listed in U.S. markets, the report said, adding that both sides are working to formulate a detailed cooperation plan.

In 2020 U.S. lawmakers enacted a bill threatening to delist Chinese firms that failed to meet audit inspection rules. U.S. regulators said Tuesday that they were “actively engaged” and had been meeting with Chinese government authorities to reach a deal that would give them access to audit firms in Hong Kong and China.

Platform Companies

Efforts to “rectify” internet platform companies should be completed “as soon as possible,” the statement said.

Beijing took aim at the country’s most valuable companies last year, warning that platform operators may abuse their power and undermine competition. In particular, regulators took issue with companies like e-commerce leader Alibaba Group Holding Ltd., which eventually paid a record fine, and food-delivery giant Meituan, which was forced to lower the fees that it charges restaurants for delivery and improve the treatment of its drivers.

Housing Market

On the ongoing slump in China’s property markets which has pushed large property developers close to collapse, the statement called for the introduction of an effective plan to prevent and resolve risks around the developers, as well as policies to help the industry transform to a new development model. Monetary policy will be proactive in the first quarter and new loans will grow appropriately, it added.

“The statement addressed so many issues on various fronts, which is really rare,” said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc. “The markets were very pessimistic and the selloffs tended to be self-fulfilling partly because of the lack of response from the government — valuation wise, there should have not been such a big correction. An aim of the government move is probably to break that inertia and stabilize market expectations,” he said.

The meeting didn’t mention Russia’s invasion of Ukraine, which has fueled an oil price spike and fears among investors that Chinese companies might be subject to sanctions.

Other points from the meeting:

  • Regulation of internet platform companies should be “standardized, transparent and predictable”
  • Financial institutions should “consider the big picture” and firmly support the development of the real economy
  • Long-term institutional investors are welcome to increase shareholdings in Chinese companies
  • Beijing and Hong Kong should strengthen communication over the stability of Hong Kong’s financial markets
  • Continuing economic development is the first priority of the Chinese Communist party
  • Coronavirus controls should be co-ordinated with economic development
  • The economy should operate in a reasonable range
  • The operation of capital markets should remain stable

Author: Bloomberg, Yahoo

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