China pledges to maintain market stability, support overseas listings

(Bloomberg) — Beijing has issued a firm promise of policies to boost financial markets and spur economic growth as it reacts to a market sell-off amid risks in the real estate market, overseas listings and… internet companies.

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

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

Read more: Chinese stocks rise the most in two months as officials pledge to support them

Shares jumped after the announcement. The Hang Seng index of Chinese companies jumped 13% in Hong Kong, the highest since 2008, after falling 26% this year through Tuesday. The CSI 300 index of continental stocks climbed 4.6%.

Registrations abroad

China supports overseas listing and has made positive progress in talks with Washington on Chinese stocks listed in US markets, the report said, adding that the two sides are working on a cooperation plan. detailed.

In 2020, U.S. lawmakers signed into law a bill threatening to delist Chinese companies that fail to meet audit inspection rules. U.S. regulators said on Tuesday they were “actively engaged” and had met with Chinese government officials to reach an agreement that would give them access to auditing 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 last year took aim at the country’s most valuable companies, warning that platform operators could abuse their power and undermine competition. In particular, regulators have challenged companies like e-commerce leader Alibaba Group Holding Ltd., which ultimately paid a record fine, and food delivery giant Meituan, which was forced to cut fees it bill restaurants for delivery and improve processing. of its drivers.

housing market

Regarding the current slump in China’s property markets which has pushed major real estate developers to the brink of collapse, the statement calls for the introduction of an effective plan to prevent and resolve risks around developers, as well as policies to help the industry transform into a new development. model. Monetary policy will be proactive in the first quarter and new lending will increase appropriately, he added.

“The statement touched on so many issues on different fronts, which is truly rare,” said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc. “Markets were very bearish and selling tended to self-perform partly because of the lack of government response – in terms of valuation there shouldn’t have been such a big correction. “One of the goals of the government’s decision is probably to break that inertia and stabilize market expectations,” he said.

The meeting did not mention Russia’s invasion of Ukraine, which has fueled a spike in oil prices and investor fears that Chinese companies could face sanctions.

Other points of the meeting:

  • Regulation of internet platform companies must be ‘standardised, transparent and predictable’

  • Financial institutions should “see the big picture” and firmly support the development of the real economy

  • Long-term institutional investors urged to increase stakes in Chinese companies

  • Beijing and Hong Kong should strengthen their communication on the stability of Hong Kong’s financial markets

  • Pursuing economic development is the top priority of the Communist Party of China

  • Coronavirus controls must be coordinated with economic development

  • The economy should operate within a reasonable range

  • The functioning of capital markets should remain stable

(Updates throughout.)

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