Chinese Economy Slowing...Creating Opertunities

According to numerous Chinese financial experts, the Chinese economy will face greater uncertainty in 2016. The prospects of global economy recovery are still unclear. If the US Federal Reserve raises interest rates continuously, it will cause emerging economies to suffer capital outflow and local currency depreciation. China is under pressure of de-capacity and industrial deflation, and whether real estate investment will stabilize remains uncertain. Among these factors, the stabilization of the Chinese economy will depend more on global economic recovery, the Fed rate hike and domestic real estate investment, as excess capacity cannot be reduced in the short term. Economists forecasts that the economy will grow at 6.7 percent this year with further downward pressure in the first six months. But the economy will stabilize after the second quarter, as the government will strengthen the current fiscal and monetary policies and the previous policies will take effect gradually. More than likely, Chinese government will continue to depreciate the RMB to possibly 7.5/1 (compared to USD) to stimulate the manufacturing industry and exports. This will mean a devaluing of Chinese assets. This is the perfect time to invest and prepare for a rebound in 2017.

Tighter Regulations for Payment Platforms in China

Starting July 1, 2016, China will tighten regulations on non-banking online payment platforms to to fight against financial fraud and money laundering. Now you have to open accounts with real names and identifications. China has also imposed a cap on maximum yearly payments through such platforms at 200,000 yuan ($30,910). According to the new policy, for example, each account on WeChat can transfer at most 1,000 yuan through the "Lucky Money" function. If more money needs to be transferred, the users must provide three to five ways to verify identity, including bank accounts, driving license and social security ID.

China Promoting PPP Structure

To support public-private partnership (PPP) projects China will provide a 180 billion yuan rewards pilot program that will start in 2016. The private partners in the PPP projects will be offered three-tier rewards based on the investment scale. For a PPP project with investment of under 300 million yuan ($46.3 million) the central government will provide 3 million yuan in reward; for a project between 300 million yuan and 1 billion yuan, the reward will be 5 million yuan; and for a project above 1 billion, the reward is 8 million yuan. It also encourage uncompleted locally-funded public service projects to transform into PPP model projects. For those successfully transformed projects, the central government will also provide rewards. The reward scale will be 2 percent of the debt reduction the transformation brought to the local government. This move will help ease the local government debt problem in China, while at the same time stimulating the Chinese economy to reach a goal of 7% GDP growth in 2016. This is also a great opportunity for investors looking to invest with the local government (a less risky investment in China).

China to Launch Registration-Based IPO in 2016

On Sunday, the country's top legislature authorized the roll out of the new IPO registration mechanism to complete the amendment of the Securities Law. In a statement by the China Securities Regulatory Commission, officials said the legislative approval of launching the registration-based IPO system marked significant development to the Chinese capital market and implements an important measure to allow the market force to determine the allocation of resources. It is not merely about delegating the IPO approval power to the stock exchanges but a major transformation of the regulator's role, the registration-based IPO system will emphasize the information disclosure rather than corporate prospect and profitability. The regulator said that it will no longer endorse the value of prospective companies under the new system but it will still control the pace and pricing of IPOs to maintain market stability.

Cutting Red Tape

China took steps to further streamline the permitting process by separating business licenses from administrative permits. The pilot reform, which allows some companies to get their businesses running without obtaining administrative permits, will be practiced in the Pudong New Area of Shanghai. In some areas where the market mechanism is effective and self-discipline is well in place, administrative permits will be canceled. For the sector of processing trade, administrative permits will be replaced by registration, and companies can start their business activity as soon as they submitted relevant documents to authorities. In some other areas where administrative permits cannot be canceled for the time being, the process will become easier and companies can have their permits immediately after submitting materials. 

New IPO Scheme May be in the Works for China

The legal procedure for registration-based initial public offerings is expected to be completed as early as the end of this month, a substantial step to wrap up the biggest reform of China's stock market. An executive meeting of the State Council, presided over by Premier Li Keqiang on Wednesday, discussed a draft amendment to the country's Securities Law that proposed changing the current approval-based IPO mechanism to a registration-based one at the Shanghai Stock Exchange and Shenzhen Stock Exchange. The new policy would realize within two years of the draft's approval by the Standing Committee of the National People's Congress.

China Strengthening Enforcement of Anti-Counterfeiting

China is strengthening its enforcement of its anti-counterfeiting laws. In recent actions, China is going after online retailers (such as taobao.com) and requiring them to take a more proactive stance towards preventing the sales of counterfeit products through their platforms. On November 7, 2015, China issued the “Opinions on strengthening the management of infringement and counterfeiting in the field of Internet", which clarifies the online sales of counterfeit goods and internet piracy as regulatory focus, clears responsibilities of the e-commerce enterprises, network service providers and up-downstream related enterprises, including guiding and supervising the e-commerce platform to strengthen the qualification examination of network operators, Urging internet service providers to implement the "Notice-Delete" obligation and implementing the real-name registration system for delivery enterprises of distribution, warehousing, postal, courier and so on. This is a small, but clear step towards a China more focused on IP protection.