The pilot stock trading scheme linking Shanghai and Hong Kong has achieved its intended goal, the China Securities Regulatory Commission (CSRC) said. By the close of trade on November 21, the total trading value reached CNY29.1 billion. Investors in Hong Kong traded CNY25.2 billion of Shanghai-listed shares while mainland investors bought and sold CNY3.9 billion of Hong-Kong listed shares. The launch of the stock trading scheme on November 17 has been viewed as a milestone in the process of the liberalization of the capital market as it enables investors in Shanghai and Hong Kong to trade shares in each other’s market for the first time. But trading activity in the first week has been disappointing as two-way capital flows have slowed substantially since the first trading day. As of the end of this week, northbound investors exhausted about 36% of the total weekly trading quota of CNY65 billion, while only less than 6% of the southbound quota was used by mainland investors.

On the first day of operation, the daily quota of CNY13 billion that could be invested in Hong Kong on mainland stocks was used by 2 pm, accounting for about 6.5% of Shanghai’s turnover of CNY199 billion. Brokers worry that if the quota for mainland stocks is filled every day, it will take only 23 days to reach the total quota of CNY300 billion. Just CNY1.8 billion of the daily quota of CNY10.5 billion for mainlanders buying into the Hong Kong market was used. The volume of trade by mainlanders represented 3% of Hong Kong’s total main board turnover of HKD83 billion on November 17. Brokers said the hot sectors on the first day of the through-train stock scheme were banking, technology and consumer stocks, while mainland investors picked up blue chips such as property developer Cheung Kong and technology giant Tencent in Hong Kong. Northbound investors can trade in 568 companies listed in Shanghai, while the southbound have access to 268 Hong Kong-listed shares. The second day of trading interest waned, with mainland investors buying 7.6% of their daily allowance of Hong Kong shares, while Hong Kong dealers picked up less than a third of their Shanghai quota.

The Chinese government aims to give aviation a lift by streamlining the time it takes to approve low-altitude flights for private and commercial jets. The air traffic control commission of the State Council and the Central Military Commission (CMC) agreed to simplify flight approvals for general aviation next year. The changes, which apply to all civilian flights except those by scheduled passenger airlines, will be covered in national aviation legislation due to be drafted next year. China has 226 general aviation companies and 1,786 general aircraft, according to the Civil Aviation Administration of China (CAAC). The number of aircraft is expected to surpass 5,000 in six years, with an annual growth of 19%, the CAAC’s Deputy Director Wang Zhiqing told Xinhua. General aircraft, which range from helicopters to private jets, are designed to operate mainly in low-altitude airspace – 1,000 meters or below – but up to now it was not easy to get approvals for flights because the airspace is tightly controlled. In the future the military would no longer be involved in the approval process, the South China Morning Post reports. Military and aviation experts said the reform process would take at least another decade because China needed a more sophisticated air surveillance and control system.

After a meeting between President Xi Jinping and New Zealand Prime Minister John Key, the two nations signed 10 agreements in areas including climate change, television co-production, Antarctica, education, financing, tourism and food safety. The TV deal allows programs jointly developed by both countries to be aired in China. “Possibly, New Zealand will have to worry about the fact that there is more Chinese demand than you can possibly supply”, Xi said at a joint news conference with Key. Xi also called for closer cooperation in the IT sector, environmental protection and biological medicine, areas that China gives priority to and in which New Zealand has a proven track record. China is New Zealand’s largest trading partner, and two-way trade grew by 25% to USD18.2 billion in 2013. Dairy products remain New Zealand’s biggest export to China. Trade volume this year is expected to exceed USD20 billion, moving closer to the target of USD30 billion by 2020, which was set by Xi and Key earlier this year. The China-New Zealand Mayor Forum was launched in Auckland to enhance local government and provincial-level cooperation between the two countries. Inauguration ceremonies were also held for the Bank of China (New Zealand) and China Construction Bank (New Zealand), as well as a plant for China’s leading dairy provider Inner Mongolia Yili Industrial Group and a joint laboratory to study kiwi fruit.

President Xi also made the first visit by a Chinese President to Fiji on the final leg of his 11th foreign trip since he became President in March 2013. He thanked Fiji for helping to track corrupt Chinese officials and their illegal assets. Several agreements were also signed. He also met leaders from other Pacific states including Papua New Guinea, Vanuatu, Micronesia, Samoa, Tonga, the Cook Islands and Niue.

Automotive

• Volkswagen’s growth in China is expected to slow to around 10% this year from 16% in 2013 due to a conservative strategy that has limited its production capacity, Volkswagen China President Jochem Heizmann said in Guangzhou. He expected Volkswagen Group, whose brands include Audi, Skoda and Porsche, to deliver a total of 3.6 million vehicles in China this year. Volkswagen said in late 2013 that it planned to invest €18.2 billion from 2014 to 2018 to increase annual production capacity to around 4 million vehicles, based on an average annual sales growth estimate of around 5%. The company aims to launch more than 20 electric or plug-in hybrid models in China by 2018.
• Fiat Chrysler Automobiles and Guangzhou Automobile Industry Group Co plan to deepen their alliance through a joint sales, marketing and product organization to push the Jeep, Fiat and Chrysler brands in China. GAC Fiat will make three new Jeep models by the end of 2016. The new joint commercial operation in China will be responsible for all product planning, after-sales, marketing and sales of Jeep, Fiat and Chrysler brands. The agreement would allow Fiat Chrysler to increase its sales volume in China to 760,000 units by 2018. Fiat Chrysler sold 130,000 cars in China last year.

Finance

• Qualified residents of Shanghai will be permitted next year to open individual free trade accounts in the China (Shanghai) Pilot Free Trade Zone for direct outbound investment. It will allow them to put their money in overseas stocks, bonds and real estate. Currently the major outbound investment channel for domestic investors is the Qualified Domestic Institutional Investor (QDII) program. The program, which started in 2006, enables domestic investors to buy overseas stocks and bonds through mutual funds. Overseas institutions will also be able to invest in Shanghai’s stock and futures market through free trade accounts within the FTZ.
• Alibaba launched its ground-breaking USD8 billion debut dollar bond, pricing it at levels in line with and even tighter than some of the world’s best-known companies. The company amassed more than USD55 billion of orders for the highly anticipated six-tranche deal, one of the largest investment-grade bonds of the year. The narrow pricing marked a milestone for a Chinese company, as accounting standards in China have a bad reputation in the markets.
• The China Banking Regulatory Commission (CBRC) halted the issuance of credit-card-asset-backed securities (ABS), demonstrating a high degree of caution for the development of a securitized debt market. Banks were granted permission to issue securitized debt products starting only last year. China Merchants Bank earlier this year became the first Chinese bank to issue credit card ABS.
• The Ministry of Finance’s latest dim sum bond is seen as likely to appeal to retail investors in Hong Kong despite its yield being less than that of time deposits offered by banks. The Ministry started selling CNY3 billion of two-year dim sum bonds to retail investors, with the subscription period open until December 5. The yield is 2.93%, higher than previous tranches with the same length of maturity.
• The Chinese government plans to liberalize the yuan’s capital account in some of the 200 state-level economic development zones. They would be allowed to conduct full convertibility of the yuan and be encouraged to promote cross-border use of the currency.
• The Agricultural Bank of China (ABC) has been named one of the world’s 30 systemically important banks this month by the Financial Stability Board (FSB), an arm of the Bank for International Settlements (BIS). With 23,547 branches at the end of last year, Agricultural Bank of China has one of the biggest networks of any bank in the world. But its reach does not far go beyond China. The country’s third-largest bank by assets, has just seven branches abroad, making it at once a domestic giant and an international dwarf. Agricultural Bank joins Bank of China (BOC) and Industrial and Commercial Bank of China (ICBC), the only other Chinese banks on the list.

Foreign investment

• Investment in Taiwan from the Chinese mainland reached USD1.181 billion since the island opened its door to mainland investors in 2009. A total of 595 investment projects from mainland businesses were also given the green light. In the first 10 months of 2014, Taiwan approved 112 projects invested by mainland businesses, a 1.82% increase year-on-year, with investment reaching US$316.5 million, down 5.4% from the same period of last year. Meanwhile, 335 Taiwan investment projects on the mainland were approved in the first 10 months of the year, down 5.1% year-on-year. The investment totaled USD7.828 billion, a 11.71% increase from the same period of 2013.
• The Chinese government and banks will finance companies to build USD45.6 billion worth of energy and infrastructure projects in Pakistan over the next six years, as the two countries develop the China-Pak Economic Corridor (CPEC).
• The sixth version of China’s foreign investment catalog is expected to come into effect by the end of the year, following a public comment period. A ‘negative list’ management approach will be expanded. It will specify areas where foreign capital is banned or limited. Areas not listed are assumed to have no restrictions. The approach was already adopted in the China (Shanghai) Pilot Free Trade Zone (FTZ).

Foreign trade

• The bilateral free trade agreement (FTA) between China and South Korea will be effective in the second half of 2015. About 17 areas were involved in the negotiations between the two sides and have been detailed in 22 chapters, including trade remedies, customs clearance, investment transparency, communications and intellectual property rights. China and South Korea launched the FTA negotiations on May 2, 2012. The 14th round of talks was held earlier this month in Beijing. Trade between the two countries reached USD274 billion in 2013, a 7% year-on-year increase and equaling South Korea’s trade volume with the United States and Japan combined.
• China, South Korea and Japan will hold the sixth round of talks for a trilateral free trade agreement (FTA) this week in Tokyo. Negotiations for the trilateral FTA were launched in November 2012. In the past two years, the three sides discussed various areas, including goods, services, investment, competition, intellectual property rights, e-commerce and the environment. On November 10, agreement was reached on a bilateral China-South Korea FTA.

Health

• Los Angeles Mayor Eric Garcetti has signed a Memorandum of Understanding (MoU) in Guangzhou to attract more Chinese medical tourists. Nine Chinese and U.S. signatories – including China Southern Airlines and Cedars-Sinai Medical Centre – have agreed to promote medical tourism from China. Garcetti also signed a MoU with Guangzhou Mayor Chen Jianhua and Auckland Mayor Len Brown to promote trade and economic relations between the cities.

IPR protection

• Police in Jingzhou, Hubei province, have detained 11 people on suspicion of selling counterfeit elevators worth an estimated CNY20 million. The units were made in underground workshops and sold under famous brand names – including Siemens, Samsung and Fuji – to hotels, apartments and office buildings. About 100 complete elevators and thousands of parts have been confiscated.
• The first national-level copyright trading center in the Yangtze River delta region opened in the Shanghai Free Trade Zone on November 13. The center is expected to promote international copyright exchanges and explore innovative policies in copyright pledges, evaluation, registration systems, customs, taxation and financial services. The center held its first activity, the 2014 China Culture Licensing Fair, on the same day it opened.
• China’s first comprehensive IP insurance policy was issued to a company in the Suzhou Industry Park. According to the policy, Sinoma Science & Technology Co paid USD50,000 to Cathay Insurance, which will undertake the risks of all IP lawsuits for a year, with a compensation ceiling of USD1 million. The insured company has half of its sales overseas.

Macro-economy

• The Chinese government has taken over responsibility for a management shake-up of state-owned enterprises (SOEs) from the supervisory board of the State Assets Supervision and Administration Commission (SASAC). Vice Premier Ma Kai is in charge of the reform. It was reported that SASAC was not powerful enough to coordinate the reform with other ministries. As the central government is now directly in charge, the reform is expected to be speeded up. Pay cuts for executives would be announced next month.
• The internet has become a significant player in the national economy, Vice Premier Ma Kai told the inaugural three-day World Internet Conference in Wuzhen, Zhejiang province. Internet commerce grew 18% in the first three quarters of the year to CNY1.9 trillion. The market value of listed internet companies in China had exceeded CNY3.95 trillion, while four companies – Alibaba, Tencent, Baidu and JD – were among the world’s top 10.
• The Chinese government has issued a detailed action plan for the nation’s energy development, with a commitment to cap annual coal consumption at 4.2 billion tons in seven years. It was 3.61 billion tons last year. The government also pledged to boost exploration for oil and natural gas, build more nuclear power plants and expand renewable energy sources. The plan would require annual growth in energy consumption to be no more than 3.5% for the next six years. The share of non-fossil fuels in the energy mix would increase to 15% by 2020 from 9.8% last year.
• Chinese consumer confidence rose to a 21-month high this month, helped by a rebound in the housing and stock markets. The Roy Morgan Consumer Confidence Index, an indicator based on figures gathered by the Australia and New Zealand Banking Group, increased to 157.1 in November, from 155.1 in October and 152.3 in September. The index reflects consumer price expectations of 1,000 Chinese aged over 14.
• The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) dropped to 50 in November, down from October’s final reading of 50.4. It reversed an upturn that lasted for only one month. The October reading, which was a three-month high, accelerated from September’s 50.2. The output index component slumped to 49.5, the lowest in seven months.
• The Chinese government announced that it would introduce a new “megacity” category to its urban planning system and that more measures were needed to manage population flows. The megacity label would apply to centers with more than 10 million people, Xinhua reported. According to the 2010 national census, six cities would fall into this category – Shanghai, Beijing, Chongqing, Guangzhou, Tianjin and Shenzhen. The second-biggest category will be for “very large” cities with populations of between five million and 10 million people. Ten cities are in this category.

Real estate

• A land parcel in Shanghai’s Huangpu district was sold for a record high of CNY24.85 billion. It was also the second-most expensive plot by total price ever sold on the Chinese mainland. A three-member consortium led by China Minsheng Investment Corp acquired the 126,740-square-meter plot, which is designated for mixed-use purposes including residential, office and commercial. The parcel’s average gross floor area price was CNY35,392 per square meter.

Stock markets

• The China Securities Regulatory Commission (CSRC) is set to unveil a framework for initial public offering reform at the end of next month that would allow market forces, rather than its review committee, to decide the worth of new shares. The Chinese government is strengthening efforts to lower companies’ funding costs while widening their access to capital. Under the new system, companies will be required to publish information about earnings and business operations after they file a listing application, with the regulators only responsible for questioning the applicants regarding the truthfulness of the documents. Loss-making firms would also be allowed to raise funds on the stock market.
• CGN Power, China’s biggest nuclear energy company by installed capacity, has drawn 15 large funds and corporations as cornerstone investors to buy about 40% of its USD3 billion initial public offering (IPO). The firm, which runs the Daya Bay nuclear plant near Shenzhen, secured orders from Singapore’s sovereign wealth fund GIC, U.S. hedge fund manager Och-Ziff Capital, China Life Insurance and China Development Bank as well as distressed asset manager China Cinda. The company will price the deal on December 3, followed by a listing on December 10.

Travel

• The Chinese government has approved construction of five railway projects worth CNY152.7 billion, taking the number of railway projects approved since July to 21. They include three new railways running in Guangdong and Guangxi in the south, and Gansu, Shaanxi and Ningxia in the northwest. China Railway had obtained approval for 64 rail projects planned for this year. The company posted a CNY3.44 billion loss after taxes for the first nine months of this year. Its long-term debt rose 11% to CNY2.9 trillion from the end of last year.
• Between 7,000 and 8,000 10-year visas have been issued to Chinese citizens by the U.S. Consulate General in Shanghai since a new visa policy came into effect earlier this month.
• A new high-speed railway line is set to connect Guangzhou and Shanghai in just eight hours by the end of this year, according to the Guangzhou Railway Group. The travel time would be reduced from 16 hours. New rail routes connecting the Pearl River Delta to 15 other provinces will be launched on December 10. The journey from Guangzhou to Hangzhou, Zhejiang, would take about seven hours.
• China Railway Construction Corp (CRCC) and Nigeria signed a contract to build a 22-stop,1,402 kilomete,r railway along the coast, linking Lagos in the west with Calabar in the east. The USD11.97 billion contract is China’s single largest overseas engineering project. It is expected to lead to exports of equipment from China worth USD4 billion, including construction machinery, trains and steel products.

• China has joined the International Anti-Corruption Academy, an Austria-based global institute that provides education and training to members on how to effectively combat bribery. Both Hong Kong and Macao were included as part of China’s agreement.
• A third round of anti-corruption inspections will be focused on 13 ministries and state-owned enterprises, including China Radio International, Sinopec, Huadian Corp, China Unicom, and China Southern Airlines. The Central Commission for Discipline Inspection (CCDI) will also make surprise return visits to provinces covered earlier.
• Executives of the influential 21st Century Business Herald were arrested in Shanghai, including a President, Vice President and Chief Financial Officer. The prosecutors accused the 21st Century Business Herald and eight companies under the group of blackmail and forcing transactions. The media outlet used negative news coverage to force enterprises to pay “cooperation fees” and demanded hefty “protection fees” reaching millions of yuan by promising not to publish negative reports about them.
• General Electric signed agreements with ENN Energy Holdings in natural gas and with the China Coal Resources Group to cooperate on a large-scale, efficient clean coal utilization project. GE will also provide its third-generation Radiant Syngas Cooler gasification technology and related services to China Coal.
• The number of foreign students enrolled at U.S. institutions has increased for the eighth year in a row, with China being the main driver of growth. There are now 72% more foreign students studying at U.S. universities and colleges compared to 2000. The number of Chinese students increased by 16.5% this academic year to 274,439. Chinese students now make up 31% of all foreign students in the U.S.