China promises to ease foreign access to gas, call centers

Economists say Beijing’s market-opening measures reflect growing confidence Chinese companies can compete. (Reuters)
Updated 01 July 2019
0

China promises to ease foreign access to gas, call centers

  • Initiative is part of a series of Beijing’s market-opening measures
  • Business groups welcome the changes but say many have little effect so far on foreign companies

BEIJING: China promised on Sunday to allow more foreign ownership of gas pipelines, call centers and some other businesses in the latest of a series of market-opening measures.

The Communist Party has announced a series of tariff cuts and market-opening steps over the past 18 months aimed at making its state-dominated economy more productive. 

The moves come amid trade tension with Washington, though none directly addresses American complaints about Beijing’s technology ambitions and controls on foreign companies.

Sunday’s Cabinet announcement also promised more foreign access to some businesses in agriculture and mining.

Business groups welcome the changes but say many have little effect so far on foreign companies. Business groups say they need to see regulations for industries that are to be opened before they can know whether those will be profitable for foreign newcomers, who will face entrenched Chinese competition.

Sunday’s announcement is part of a shift by Beijing to use of a “negative list” system of investment regulation. That would put some areas off-limits to foreign investors and leave the rest of China’s market open. Until now, foreign companies have been limited to operating in a “positive list” of areas picked by regulators.

Economists say Beijing’s market-opening measures reflect growing confidence Chinese companies can compete and a recognition of the need for more competition.

HIGHLIGHTS

• President Xi Jinping’s government has launched a flurry of such reform initiatives since he was confirmed for a second five-year term as ruling party leader in 2017.

• Xi spent his first term directing a marathon anti-corruption campaign.

• Beijing previously promised to reduce or end limits on foreign ownership in China’s auto, insurance and other industries.

President Xi Jinping’s government has launched a flurry of such reform initiatives since he was confirmed for a second five-year term as ruling party leader in 2017.

Xi had been expected to launch economic changes after he took power in 2012. Instead, he spent his first term directing a marathon anti-corruption campaign and cementing his status as China’s most powerful leader in decades while pressure to shore up declining economic growth mounted.

Beijing’s tariff row with Washington over Chinese technology ambitions has battered exporters, adding to pressure on the ruling party to make other industries more productive.

Sunday’s announcement promised to abolish a requirement that ventures to operate gas and thermal pipeline networks in cities of more than 500,000 must be controlled by the Chinese side.

It promises similar changes for ownership of cinemas, call centers and some other value-added telecom businesses. It promised to abolish rules that say foreign investors in oil and gas exploration must operate through joint ventures with Chinese partners.

Rules that prohibit foreign investment in exploration and mining of molybdenum, tin, antimony and fluorite will be abolished, the statement said.

Beijing previously promised to reduce or end limits on foreign ownership in China’s auto, insurance and other industries.


Debut of China’s Nasdaq-style board adds $44bn in market cap

Updated 22 July 2019
0

Debut of China’s Nasdaq-style board adds $44bn in market cap

  • Activity draws attention away from main board

BEIJING: Trading on China’s new Nasdaq-style board for homegrown tech firms hit fever pitch on Monday, with shares up as much as 520 percent in a wild debut that more than doubled the exchange’s combined market capitalization and beat veteran investors’ expectations.

Sixteen of the first batch of 25 companies — ranging from chip-makers to health care firms — increased their already frothy initial public offering (IPO) prices by 136 percent on the STAR Market, operated by the Shanghai Stock Exchange.

The raucous first day of trade tripped the exchange’s circuit breakers that are designed to calm frenzied activity. The weakest performer leapt 84.22 percent. In total, the day saw the creation of around 305 billion yuan ($44.3 billion) in new market capitalization on top of an initial market cap of around 225 billion yuan, according to Reuters’ calculations.

“The price gains are crazier than we expected,” said Stephen Huang, vice president of Shanghai See Truth Investment Management. “These are good companies, but valuations are too high. Buying them now makes no sense.”

Modelled after Nasdaq, and complete with a US-style IPO system, STAR may be China’s boldest attempt at capital market reforms yet. It is also seen driven by Beijing’s ambition to become technologically self-reliant as a prolonged trade war with Washington catches Chinese tech firms in the crossfire.

Trading in Anji Microelectronics Technology (Shanghai) Co. Ltd., a semiconductor firm, was briefly halted twice as the company’s shares hit two circuit breakers — first after rising 30 percent, then after climbing 60 percent from the market open.

HIGHLIGHTS

• 16 of 25 STAR Market firms more than double from IPO price.

• Weakest performer gains 84 percent, average gain of 140 percent.

• STAR may be China’s boldest attempt at capital market reforms yet.

The mechanisms did little to keep Anji shares in check as they soared as much as 520 percent from their IPO price in the morning session. Anji shares ended the day up 400.2 percent from their IPO price, the day’s biggest gain, giving the company a valuation of nearly 242 times 2018 earnings.

Suzhou Harmontronics Automation Technology Co. Ltd., in contrast, triggered its circuit breaker in the opposite direction, falling 30 percent from the market open in early trade before rebounding. But by the market close, the company’s shares were still 94.61 percent higher than their IPO price.

Wild share price swings, partly the result of loose trading rules, had been widely expected. IPOs had been oversubscribed by an average of about 1,700 times among retail investors.

The STAR Market sets no limits on share prices during the first five days of a company’s trading. That compares with a cap of 44 percent on debut on other boards in China.

In subsequent trading sessions, stocks on the new tech board will be allowed to rise or fall a maximum 20 percent in a day, double the 10 percent daily limit on other boards.

Regulators last week cautioned individual investors against “blindly” buying STAR Market stocks, but said big fluctuations were normal.

Looser trading rules were aimed at “giving market players adequate freedom in the game, accelerating the formation of equilibrium prices, and boosting price-setting efficiency,” the Shanghai Stock Exchange (SSE) said in a statement on Friday.

The SSE added that it was normal to see big swings in newly listed tech shares, as such companies typically have uncertain prospects, and are difficult to evaluate.