IMF chief lauds China’s plan to open financial system

Bloomberg

China’s plan to ease foreign-ownership limits on financial firms drew praise from IMF chief Christine Lagarde, who described the move as a “very positive development.”
The partial removal of barriers “is an indication of two things: openness and also better strength and confidence in their own system,” the International Monetary Fund managing-director said in an interview in Danang, Vietnam. She added that Chinese policy makers are responding to calls for controlling credit-fueled growth.
The IMF has raised the issue of debt with China’s central bank and other authorities, and they are taking action to avoid economic expansion being predominantly driven by credit, she said. Concern about excessive leverage in the financial system has also been flagged by People’s Bank of China Governor Zhou Xiaochuan, who reiterated risks posed by the nation’s debt burden, potentially signaling that authorities will take a tough line.
Lagarde’s comments on China’s moves to open up its financial sector follow an announcement last week that the Asian nation will remove foreign-ownership restrictions on banks while allowing overseas firms to take majority stakes in local securities ventures, fund managers and insurers.
Lagarde spoke at the end of an Asia-Pacific ministers’ meeting in Vietnam that pledged to flight protectionism and embrace the World Trade Organization. The leaders of the world’s two biggest economies offered contrasting global visions in speeches to business leaders: Chinese President Xi Jinping offered a robust defense of globalization, calling on nations to keep their economies open for shared prosperity; President Donald Trump said the US wouldn’t seek multilateral trade deals and wanted to make the system fairer for Americans.
Lagarde rejected the idea that globalization is under threat, saying the main issue that needs to be addressed is who benefits from it. Globalization and the benefits of technology and innovation “must flow to all,” she said. There “cannot be groups of people, regions of the world or regions in countries which do not benefit from globalization.”

GLOBAL GROWTH
Lagarde also talked up the global economy, pointing to its acceleration to 3.6 percent growth this year from 3.2 percent last year, and a forecast 3.7 percent for 2018. Asia would generate at least 5.5 percent, she said. “So, that tells you a lot about the role played by the region in global economic development.” The IMF chief said she couldn’t see central banks in Asia tightening monetary policy in 2018.
“Monetary policy will be tightened in those countries where the economy is picking up sufficiently fast and where inflation is rising, so this is going to be the case in the US,” Lagarde said.
“It’s happening very grad-ually, very smoothly and we hope that it continues at that pace
without any abruptness with-
out massive capital movement
as a result.”

JPMorgan sees China deals heating up

Bloomberg

China is poised for an acceleration of deals as confidence grows in the wake of last month’s Communist Party gathering and as the nation opens up to reforms. Deal-making activity will pick up now that the country’s 19th Party Congress is over, ending a wait-and-see period leading up to the event, said Carl Chien, JPMorgan Chase & Co. Asia Pacific vice chairman. Look for increased activity in the tourism and airline sectors, he said.
“A lot of the question marks and uncertainties are behind us,” said Chien in an interview on the sidelines of the APEC summit in Vietnam. “We’ll be able to see activities happening which weren’t happening in the first half of the year.”
His outlook follows President Xi Jinping’s promise last week that the nation will take “big strides in reform” in coming years and that foreign companies will see a more transparent and orderly business environment. In a major step, China said it will remove foreign ownership limits on banks, giving global financial companies unprecedented access to the world’s second-largest economy. There is still progress to be made to improve the deals environment. US President Donald Trump’s visit to Beijing yielded few concrete concessions on addressing a yawning trade deficit. While the White House unveiled a slew of deals with a $250 billion price tag, many were non-binding memoranda of understanding that may never materialize.
Still, the latest reforms further bolster the credentials of Xi less than a month after he cemented his status as the nation’s most powerful leader in decades. The Party Congress projected an image of strong leadership, Chien said. “The 19th Congress gave us a lot of stability,” he said. “It’s a good thing for the market.” Chinese companies have announced a total of $149bn in deals involving foreign targets so far in 2017, a 39% decline from $246 bn last year. One of the largest is a $12bn buyout of Singapore warehouse operator Global Logistic Properties Ltd. by a consortium that includes Bank of China Group Investment and a unit of China Vanke Co.