04/04/2012, 00.00
CHINA
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Beijing opens to increased foreign investment and promises to end monopoly of Chinese banks

by Wang Zhicheng
Investment increases from 30 to 80 billion dollars; yuan investments from 20 to 50 billion. Still signs of flagging Chinese economy. Initial comments positive, although there are still many limitations. Wen Jiabao opens to private banking sector.

Beijing (AsiaNews) - On the eve of Qing Ming festival, with the banks and markets closed, China has decided to increase the threshold for foreign investment in its financial market, while Premier Wen Jiabao has suggested an end the Chinese banks monopoly because they earn money "too easily".

Yesterday, the China Securities Regulatory Commission website announced an increase in the threshold for foreign investment from 30 to 80 billion U.S. dollars. At the same time, offshore investors can invest for up to 50 billion yuan (previously the limit was 20 billion).

According to analysts, the move is an important step to opening up the economy to the international market and rendering the yuan a global trade currency, breaking away from dependence on the dollar as the currency for reserves.

The experiment is also an attempt to attract more international investment, since the Chinese economy is cooling. In one year, the Shanghai stock market has dropped by 20% and for the first time in nearly 30 years the trade balance registered a deficit for China. Many investors are choosing other markets such as Indonesia and Vietnam.

An increase in foreign investment would lead to long-term commitments in the country and ensure stability. There are still many steps to really liberalize the Chinese financial market. David Sample, Director of the Van Eck Emerging Markets Fund in New York, interviewed by Bloomberg, noted that "there are no restrictions or quotas, in transparency and in repatriating the money. There is still a long way to go [to make China] an ideal destination for foreign investors. "

To reinforce the idea of a more open Chinese market, Premier Wen Jiabao, who visited Fujian, said that he may also allow private investment in the banking sector. Speaking with entrepreneurs from private companies, he said that China needs to break the "monopoly" of a few institutions that lend money and make earnings "too easily ".

The banking sector in China is dominated by four banks, all state controlled, including the Industrial and Commercial Bank of China and the Agricultural Bank of China. In the past months they have been accused of not lending to small and medium businesses, pushing many of them to apply for loans to private underground institutions. Last month, Beijing announced that it would legalize the banking sector which up to now was underground in Wenzhou (Zhejiang), allowing city residents to make investments abroad.

 

 

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