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Preparation and major events of Lujiazui Forum 2017

Jul 25, 2017

The Shanghai Municipal Government’s Information Office held a press conference on June 16 to brief the media on the preparation for and major events at the Lujiazui Forum 2017. The following are the highlights:

Zheng Yang, director, Shanghai Financial Service Office
Wu Meng, deputy director, Shanghai Securities Regulatory Bureau
Zhou Wenjie, deputy director, Shanghai Banking Regulatory Bureau
Wang Xiaodong, deputy director, Shanghai Insurance Regulatory Bureau
Sun Hui, deputy director, Shanghai headquarters of the People’s Bank of China

People’s Daily: Director Zheng has just briefed us on the itinerary of the Lujiazui Forum and there is an unprecedented theme – a theme on the “Belt and Road” initiative. How will Shanghai’s financial industry play the role of “bridgehead” when it serves the “Belt and Road” initiative?

Zheng Yang: The “Belt and Road” initiative promotes “coordinated policies, connected facilities, smooth trade, free-flowing financing activities and getting peoples’ hearts close to each other”. “Free-flowing financing activities” is a key content of the “Belt and Road” initiative and requires the full support of the financial industry. Providing all-round financial services to the “Belt and Road” initiative is an essential field for Shanghai to implement key national strategies. Shanghai’s efforts to become an international financial center have laid a solid foundation for financial services in the “Belt and Road” initiative. The opening pilot programs in the financial sector operated by the China (Shanghai) Pilot Free Trade Zone have also helped build a platform to serve the “Belt and Road” initiative. The Shanghai Financial Service Office has reached agreements with Shanghai bureaus and headquarters of the Chinese national financial regulators on how to serve the “Belt and Road” initiative and provide convenience to trade and investment:

First, build a hub system for the “Belt and Road” initiative. Expand financial links with financial institutions in the “Belt and Road” countries and regions. The expansion of these links will provide even more professional financing and risk management services to construction projects in the “Belt and Road” countries and regions. Shanghai’s financial sector will also expand links with the Yangtze River Economy Belt, promote further opening up, both domestically and externally, and build a financial network and support system that reaches every part of the world.

Second, Shanghai’s financial sector will build a global service center for the yuan. The sector will expand the scope of cross-border use of yuan, improve yuan’s percentage in trade and financing, clearing and settlement, project investment as well as cross-border loans in “Belt and Road” countries and regions. The sector will also expand cooperation with overseas offshore yuan markets as well as steadily carry out yuan-bonds and asset-backed securities issued by overseas institutions and companies. The city will also use the previously-mentioned channels to attract investors in “Belt and Road” countries and regions to invest in domestic yuan assets. The city will strengthen financial support to market entities to invest overseas while striving to develop overseas insurance, setting up special loans and infrastructure investment funds as well as promoting inter-link between exchanges and business innovation at these exchanges.

Third, improve innovation abilities of financial products and services. The city will seize the opportunities of innovation and opening advantages of the financial system of the China (Shanghai) Pilot Free Trade Zone to encourage financial institutions to innovate in financial products and service models. In this way, these institutions will provide cross-border business cooperation with innovative financial services, including cross-border settlement, overseas loans, cross-border e-commerce, foreign exchange and yuan cash pools. The city will also speed up construction of free trade port areas, develop off-shore financial businesses, expand cross-border financial services to build high-level opening platform when risks are well under control.

Fourth, deepen financial cooperation and expand markets in the “Belt and Road” countries and regions. The city will let the governments, financial institutions and companies join hands in building cooperation platforms for financial institutions and companies as well as improving mechanisms for such cooperation in these countries and regions. The city will also encourage domestic financial institutions to cooperate with overseas financial institutions to boost the “Belt and Road” initiative with complementary advantages, resource sharing and risk sharing. What measures has the capital market adopted to support Shanghai’s efforts to become a science and technology innovation center? What has the capital market achieved so far?

Wu Meng: The China Securities Regulatory Commission actively promotes the capital market to support Shanghai’s efforts to become a global science and technology innovation center. It has made the following achievements: first, building multi-level capital market to finance innovation companies and startups. By May 2017, Shanghai had 76 companies listed on middle and small capital stocks and the China Growth Enterprise Market as well as 974 companies listed on the National Equities Exchange and Quotations. Between 2016 and May 2017, Shanghai had 12 new companies listed on middle and small capital stocks and the China Growth Enterprise Market as well as 534 new companies listed on the National Equities Exchange and Quotations. Thirty-one listed companies on middle and small capital stocks and the China Growth Enterprise Market have received 25.7 billion yuan in financing via equities and creditor’s rights. Companies listed on the National Equities Exchange and Quotations received financing worth 18.6 billion yuan through stock issuance. The Shanghai Bureau of the CSRC also cooperated with relevant districts to promote new policies at incubators and startup parks to encourage eligible companies to develop better with the support of the multi-level capital market.

Second, the capital market has become a key platform for innovation-driven development to provide sound environment for eligible acquisition and reorganization. Ten companies listed on middle and small capital stocks and the China Growth Enterprise Market have completed acquisition and reorganization since 2016 involving a capital of 10.4 billion yuan. Some of the listed tech startups have also implemented or launched equity-incentives to boost innovation activities.

Thirdly, industry bodies use multiple ways to serve innovation and business-starting activities. Securities companies continue to expand investment banking services. Private equity funds and venture capital funds use value discovery and increment mechanism in the capital market to support innovation and development of business-starting companies.

We will follow the guidelines for promoting innovation on financial services to support Shanghai’s efforts to become a science and technology innovation center to carry out the following tasks:
We will support the capital market and industry body to play their roles in optimizing financial services, supporting innovation, business-starting activities, and serving the city’s efforts to become a science and technology innovation center.

STV: It seems that the pilot zone has become a little low-key recently compared with the high-profile activities in the first few years of its founding. What recent progress has the pilot zone made with regards to financial reforms? What are the future plans for the zone?

The press release mentions that the United States has increased the interest rate on the dollar, so how will this affect the devaluation of emerging economies’ currencies? What will China do to cope with this?

Sun Hui: The Shanghai Municipal Government and the PBOC will serve as the chair of this year’s Lujiazui Forum. On behalf of the PBOC, thank you for your support. There is a press release but I will provide the latest information.

BRICS finance ministers and presidents of central banks hosted a conference in Shanghai before this forum this year and we have invited some BRICS countries’ central bank heads to the forum. These central bank presidents will give keynote speeches at the forum.

The whole world is concerned about the dollar interest rate increase but I am sorry to say that I am not authorized to answer this question.

I will answer the other question. The Shanghai headquarters has put financial support to the pilot zone as top priority and has been making efforts in this regard. My feeling is different from yours. The pilot zone is the key among essential tasks of the PBOC. Financial support to the zone’s reform and innovation has been persistent and has generated sustainable new fruits and achievements. From our viewpoint, we are carrying out tasks instead of promoting our tasks. Our work has meant essential progress in the field as follows:

One is on the general plan for the pilot zone’s financial reform. It is formulated by the PBOC and the Shanghai government and is better known as the “40 guidelines of Shanghai’s financial reforms”. It has been continuously implemented since its formulation. We have also issued the yuan global service systems on the basis of this plan along with new forms. The systems will improve financial services in “Belt and Road” countries and regions and support the development of the pilot zone.

Second is the pilot zone’s free trade account, which has ever expanding functions. Once the FT accounts were only used for tech companies to attract overseas talents. Now the FT accounts have been promoted to the whole city’s science and technology innovation sectors as cross-border double-bond cash pool businesses and cross-border equity investment businesses as well as other cross-border financial services. By the end of April 2017, a total of 52 financial institutions were directly linked to FT accounts’ monitoring management information system. By April, the system had 67,000 FT accounts, settling cash equivalent to 13.1 trillion yuan, of 28,000 domestic and overseas companies in 133 countries and regions. These companies received up to 909.4 billion yuan of financing through FT accounts.

Third, deepen foreign exchange management system reforms and promotes convenience in investment. By the end of April 2017, foreign-funded companies carried out up to US$69.5 billion foreign exchange registration businesses under FDI options at the China (Shanghai) Pilot Free Trade Zone and such companies carried out US$178.7 billion foreign exchange registration businesses under FDI options overseas. A total of 50 MNCs have adopted the centralized operation of foreign exchange.

Fourth, enhance coordination with Shanghai’s efforts to become a science and technology innovation center. Bank of Shanghai, SHRB and SPD Silicon Valley Bank received green light to operate coordinated investment and loan businesses for tech startups. By the end of 2016, financial institutions in the city had provided 2.5 billion yuan of financing support to 240 tech startups with coordinated investment and loan businesses.

Fifth, promote financial service to support the “Belt and Road” Initiative. Domestic banks actively carry out financing services and become major contributors in the businesses. By April, these banks had 548 clients in “Belt and Road” countries and regions and had a total loan balance of 139.8 billion yuan. Fifteen commercial banks in 12 countries of the 64 “Belt and Road” countries have opened eight legal person banks or other legal person entities, four branch banks and three representative offices.

The PBOC will support the pilot zone in the following fields:

First, implement the “40 guidelines for financial reforms” steadily and fully expand the functions of FT accounts. Second, continue to support the construction of Shanghai’s efforts to become a science and technology innovation center. Third, fully play the pilot zone’s role as the bridgehead of the “Belt and Road” initiative and deepen reforms with “Belt and Road” countries. The PBOC will also support big Shanghai companies to invest overseas, invite “Belt and Road” countries’ financial companies to issue yuan bonds and assets-backed securities in Shanghai as well as attract “Belt and Road” countries’ sovereign wealth funds, central banks and other investors to invest in yuan assets in Shanghai. We will also welcome them to open representative offices in Shanghai.

We will further expand reform and innovation along with preventing risks. We will also explore financial supervision mechanisms compatible to the city’s effort to become an international financial center.

Reuters: I have a question for director Zhou. How’s the progress with the “334” checks (three violations, three interest arbitrages and four improper actions)? What are the main problem areas? Could you please introduce the key works for the next stage?
Zhou Wenjie: The series of on-site checks by the regulatory commission aims to guide banks to get back to their original function i.e. to service the real economy and prevent financial risks. It also benefits banking and financial institutions to further deepen construction to improve the fundamental and mechanical guarantee system. On the request of the banking regulatory commission, the Shanghai Banking Regulatory Bureau has deployed the plan of self-check by banks and financial institutions, and made plans to tackle “three violations, three interest arbitrages and four improper actions”. So far the regulatory bureau has completed on-site checks on some of the financial institutions. In the next step the bureau will urge them to take the main responsibility in managing risks, rectifying them solidly and making serious improvement on the problems that have been identified.

Shanghai Radio: I have a question for deputy director Wang Xiaodong on the construction of international insurance center in Shanghai, as has been made clear in Shanghai Implementation Guideline. How is the progress? What new policies have been adopted? What concrete effects have been made so far?

Wang Xiaodong: It mainly concerns the following aspects. First, a batch of reform and innovation measures has been implemented and tested in Shanghai. The China Insurance Regulatory Commission has been testing reform and innovation measures in Shanghai to support the construction of the Shanghai Free Trade Pilot Zone, some of them have been expanded to the whole of Shanghai and even other provinces. Meanwhile, “financial reform 40 guidelines” have been introduced by Shanghai and other ministries and commissions to push forward the opening up, market construction and supervision of insurance. And supportive policies have also been adopted to push forward shipping insurance, reinsurance and fund application in Shanghai. Shanghai has successfully tested reforms of registration for shipping insurance products, issued the first shipping insurance index in the world, namely the Shanghai Shipping Insurance Index, and introduced the first insurance-hypothecated loan in the world. All these measures have been providing top-level design and expanding development pattern for the Shanghai International Insurance Center.

Second, the market system of the Shanghai International Insurance Center has been formed. The China Insurance Regulatory Commission supports Shanghai in the city’s bid to set up a key insurance factor trade platform and professional insurance clubs and organizations. Last year the Shanghai Insurance Exchange opened and an insurance industry fund-use platform has also settled in Shanghai. The Shanghai Shipping Insurance Association, China’s first professional shipping insurance association, was also set up. At the same time, we are encouraging the setting up of new insurance institutions and functional insurance institutions in Shanghai. There are 55 insurance legal person institutions, 99 provincial level insurance branches and more than 220 professional insurance intermediary organizations in Shanghai. A diversified market system has been formed in Shanghai, laying a solid foundation for the construction of the international insurance center in Shanghai.

Third, the capability of the insurance industry in Shanghai to serve the nation innovatively has been improving steadily. The China Insurance Regulatory Commission supports Shanghai as it innovates mechanism and system to improve the capability and level of serving the real economy. For example, the Shanghai insurance industry provided 4.3 billion yuan on risks of manufacturing and maiden flying of C919, and provided more than 30 billion yuan for the construction and operation of Shanghai Disney Resort, and provided insurance on the first batch of more than 100,000 shared bikes and the income insurance test on grain crops, the first of its kind in China. In protecting and improving people’s livelihood, we have introduced insurance system on potential defects in construction projects, traffic accident insurance card for seniors over 70 years old, created an APP on the dealing and settlement of insurance claims of traffic accidents, and introduced a policy to use the personal balance of social security to buy commercial insurance.

In the use of insurance fund, last year the accumulated registered amount of insurance fund used in Shanghai reached 84 billion yuan. In general, these have become a new force in the construction of Shanghai into an international insurance center.

The Paper: We see that one of the themes of the Lujiazui Forum this year is financial regulation and innovation. On financial innovation, Shanghai had said that it would encourage qualified private enterprises to set up private banks. What is the progress apart from Shanghai Huarui Bank? Have you received applications from other private banks? How is the progress on Internet banking?

Zheng Yang: During the Lujiazui Forum, financial regulatory departments and related experts might also answer this question, so I would rather keep it a secret for the time being.

The test run on private banks is going on well in Shanghai. First, the private Shanghai Huarui Bank is performing well for more than one year since it was founded; its financial performance has been top among the first batch of five private banks. Second, there are many private enterprises applying for private banks. We joined hands with the Shanghai Banking Regulatory Bureau to recommend Zhangjiang Bank recently. And next year we plan to recommend another one, now we are doing the preparations.

As to the second question on regulating internet finance, in general internet finance has been developing well in Shanghai with manageable risks. We hope that Shanghai can be an area with high standard and regulatory order. We must insist on the consistent development of the industry with balanced development and regulation, innovation and risk management. As to the renovation of internet finance, the first stage is finding out the real situation, the second stage is cleaning-up and rectification, which is ongoing, and the third stage is summarizing and acceptance check, which still needs time of more than half a year.

Xinmin Evening News: It’s been a year since the dispute settlement center for consumers of the Shanghai banking industry was set up. How is the operation? Are there any related statistics you wish to share with us? What new measures do you have to protect consumer rights?

Zhou Wenjie: In recent years, the Shanghai Banking Regulatory Bureau has adopted eight measures to protect consumer rights, continuously raise the quality of efficiency of the banking industry and help the supply-side structural reform of the financial industry by focusing on two key points of “people” and “products”.

First is to set up a complete structure of organizations in protecting consumer rights. By the end of 2016, nine institutions under the Shanghai Banking Regulatory Bureau had set up special departments on consumer rights with a total of 260 employees, which ensured smooth implementation of measures protecting consumer rights.

Second is to take into account the protection of consumer rights in performance assessment. By end of last year, more than 30 institutions had included the work in the assessment of their performance, which is an incentive for them.

Third is to explore the mechanism of self-assessment on consumer rights at the stage of designing products. In 2016 the self-assessment was carried out on 110 products and problematic products were stopped from entering the market.

Fourth is to regulate product sales. The Shanghai Banking Regulatory Bureau has pushed forward a system of regulating sales of financial products and commission-based products at 3,700 branches, covering audio and video record of sales, publishing of product information, publicizing the certificates of salespersons and those who left the institutions. The measures laid a solid foundation and provided technical support to set up a just and orderly market environment and play an active role in solving disputes and complaints.

Fifth is to enhance the management on grassroots branches and employees. The Shanghai Banking Regulatory Bureau has urged institutions inside the area to carry out self-check. In 2015 they carried out joint checks on bank employees and punished 45 employees, in 2016 they checked and punished 23 employees, which is a very good demonstration and warning to prevent further damage.

Sixth is to set up a diversified system to settle disputes. In May 2016 the Shanghai Banking Industry Dispute Settlement Center was set up under the guidance of the Shanghai Banking Regulatory Bureau. So far the center has accepted 490 disputes, carried out mediation on 354 cases and solved 297 cases, or 84%. Among the disputes, around 30 percent were rather complicated, but consumers’ appeals have been reasonably met and the active role of the center has been widely recognized.

Seventh is to complete the administrative remedy and guarantee system. The Shanghai Banking Regulatory Bureau has actively carried out check and punishment responsibilities on violations of institutions. In 2016, the bureau took regulatory measures on institutions in 46 cases by ordering rectification, issued summons,, suspended business and imposed administrative penalty.

Eighth is to spread financial knowledge actively. The Shanghai Banking Regulatory Bureau held education activities on finance in communities and schools as well as bank branches. This morning an activity involving youths in the Shanghai banking industry passing on financial knowledge to students was held with the participation of 35 domestic banks and 62 colleges. The activity aims to raise awareness among young college students to spend money rationally, care about their credit and manage their wealth safely. At the same time, we are trying to set up a safe, rational, harmonious and integrated environment for students by introducing qualified financial enterprises in colleges. At the ceremony today two financial institutions joined hands with a comprehensive online platform of the national education system to carry out loan service in colleges. During the Lujiazui Forum, we will also issue a white paper on protecting financial service consumers in Shanghai.