6 Nov 2013
Flash: China’s 3rd plenary session - what financial reforms can we expect? - JPMorgan
FXstreet.com (Barcelona) - The most relevant economic meeting of the year, or perhaps of the decade, the 3rd Plenary Session of the 18th CPC Central Committee, will be held Nov 9-12, and according to JP Morgan Strategists, "the market has high expectations on this event as it is expected to be a roadmap of China’s economic reform in the next 5-10 years."
On the potential financial reform, JPM notes: "The aim of financial reform is to remove price distortion in the financial market (interest rate and exchange rate) and to improve the efficiency of capital allocation within the country and across the border."
What has happened?
JPM said: "In July, PBOC removed lending rate restrictions; In July, the quota for qualified foreign institutional investors (QFII) was increased from $80 billion to $150 billion; In August, Shanghai Free Trade Zone was approved by the State Council."
What could happen next?
"The liberalization of deposit rates will follow the rule “long term first, short term next” and “large deposits first, and small deposits next”. We expect it to be completed in 2-3 years. Introduction of an explicit deposit insurance scheme. We expect it will happen in the next 6-9 months; Exchange rate regime: we expect the daily trading band may be enlarged in 4Q13. We expect currency convertibility and capital account liberalization to proceed gradually, and to be completed by around 2020."
"A priority task in the coming years is to develop a multichannel financial market, including the bond market (establishment of market-based interest rates and yield curve), international board (i.e. allowing foreign companies to be listed in the A-share market), and the approval of private-owned banks."
On the potential financial reform, JPM notes: "The aim of financial reform is to remove price distortion in the financial market (interest rate and exchange rate) and to improve the efficiency of capital allocation within the country and across the border."
What has happened?
JPM said: "In July, PBOC removed lending rate restrictions; In July, the quota for qualified foreign institutional investors (QFII) was increased from $80 billion to $150 billion; In August, Shanghai Free Trade Zone was approved by the State Council."
What could happen next?
"The liberalization of deposit rates will follow the rule “long term first, short term next” and “large deposits first, and small deposits next”. We expect it to be completed in 2-3 years. Introduction of an explicit deposit insurance scheme. We expect it will happen in the next 6-9 months; Exchange rate regime: we expect the daily trading band may be enlarged in 4Q13. We expect currency convertibility and capital account liberalization to proceed gradually, and to be completed by around 2020."
"A priority task in the coming years is to develop a multichannel financial market, including the bond market (establishment of market-based interest rates and yield curve), international board (i.e. allowing foreign companies to be listed in the A-share market), and the approval of private-owned banks."