In today’s talking points, China’s sovereign wealth fund appoints vice mayor of Shanghai as new General Manager; the State Council announces pilot program for Chinese bank subsidiaries to invest in startups; regulators to clarify new rules for foreign hedge fund managers in China; and Chinese millennials drive consumer demand and direction.
Shanghai vice mayor to head China’s sovereign wealth fund
China’s sovereign wealth fund, China Investment Corporation (CIC) has appointed vice mayor of Shanghai, Tu Guangshao as General Manager following the retirement of General Manager Li Keping. Tu has served in several government bodies including the central bank, the China Securities Regulatory Commission and most recently as the vice mayor of Shanghai. Tu was appointed as the vice mayor of Shanghai in December 2007. During his time as vice mayor, he has been credited for a pilot program to make the yuan fully convertible inside the Shanghai Free Trade Zone and for helping transform Shanghai into an international financial centre. The outgoing Chairman, Li, who headed the sovereign fund from January 2014 has pushed for aggressive overseas expansion of the CIC. In July 2015, the state-owned company launched a new subsidiary CIC Capital Corp to invest in infrastructure, forestry, agriculture and fisheries projects abroad.
Read more at Caixin
Pilot program for Chinese banks to invest in startups
The Bank of Shanghai, Shanghai Huarui Bank, and SPD Silicon Valley Bank along with 7 other chosen banks, will launch subsidiaries to make investments in private companies, similar to traditional venture capitalism. The subsidiary arrangement allows banks to sidestep traditional legal restriction on commercial banks directly holding shares in non-financial institutions.
The State Council’s announcement of the pilot program in March 2015 said that it hoped the system would encourage banks to provide funds for high-tech startups and other small enterprises with big growth potential. These companies have traditionally had difficulty obtaining financing because they lack the property or other major assets required by most state-run banks as collateral. Under the pilot program, the chosen banks will receive options in exchange for their capital, which can later be converted into shares of their borrowers. Zhu Huichong, an executive at the Bank of Shanghai (BOS) said that the BOS subsidiary in principle will not invest in a firm that did not previously borrow from the parent bank.
Read more at Caixin
New rules for foreign hedge funds in China
The China Securities Regulatory Commission has declared that the Asset Management Association of China is to detail new rules allowing the launch of products by foreign hedge fund managers in China. The new rules aim at diversifying the pool of investors, attracting new asset management talent and deepening deregulation of capital markets. Under these rules, foreign asset managers in China must set up operations and raise capital locally. They are required to invest in domestic capital markets without conducting cross-border transactions.
Read more at Asia Times
Chinese millennials reshape consumer demand
By 2020, China’s young millennials aged 18 to 30 years old will make up more than a third of the urban population. The consumption of this demographic is growing at 14% annually, twice the pace of consumers over 35. Not only are millennials driving demand volume, they are also reshaping demand – Connie M.Chan, partner at U.S. venture capital firm Andreessen Horowitz, notes they are ‘embracing new brands instead of the established ones. For example, they would prefer Tesla to BMW.’ According to Yao Jinbo, CEO at 58.com, leading Chinese online classifieds market, the sharing economy is further gaining steam as trust grows with the improvement of verification and user review systems, credit infrastructure, and harsher punishments for dishonest behaviour.
Read more at Xinhua