The Ministry of Finance released new regulations for Sino-foreign accountancy joint ventures. The only such joint ventures on the mainland are those of Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers (PwC). The new rules were welcomed by several of the firms and the Hong Kong Institute of Certified Public Accountants (HKICPA). They will dilute the control that Hong Kong and foreign accountants exert over the firms’ mainland operations. One of the new rules is that within three years the top management in the mainland joint ventures must be Chinese nationals with Chinese accountancy qualifications and they must have at least eight years of accounting experience on the mainland. If the top management fails to meet the criteria, they must be replaced with Chinese nationals. Under the new rules, the proportion of partners from Hong Kong, Macao, Taiwan, and other countries in the Big Four accounting firms’ mainland joint ventures without Chinese qualifications will be limited to 40% this year, declining to 35% at the end of 2014, 25% at the end of 2016, and 20% at the end of 2017. From the viewpoint of Hong Kong accountants working for the Big Four firms on the mainland, the new rules were better than expected, said Winnie Cheung, Chief Executive of the HKICPA. “Initially there was concern whether all partners in the Big Four joint ventures in China would have to be fully local and locally qualified. Cheung said she hoped the new quota for foreign partners would be extended to all accounting firms on the mainland, the South China Morning Post reports. “The normal situation in the world is that accounting firms must be owned by locally qualified accountants. That is the case in most countries in the world. China is actually being more open to non-qualified foreigners participating in their practices,” said Paul Gillis, Professor of Accounting at Peking University. Nevertheless, the restructuring will pose a challenge for foreign firms. Given how young the auditing industry is in China, they have few local employees who are ready to be senior partners.

• The yuan weakened against the U.S. dollar on May 7 as its central parity rate fell the most in three weeks due to the weaker outlook for China’s exports. The People’s Bank of China (PBOC) set the reference rate 0.22% weaker at 6.2858 against the dollar from the previous trading day — the biggest drop since March 12. Yi Gang, Director of the State Administration of Foreign Exchange (SAFE), said that China should avoid any excessive adjustment of the yuan’s reference rate in order to protect the economy.

• British bank Barclays is seeking a Chinese partner to set up an investment banking venture. The bank was considering more than a dozen Chinese securities firms with a view to a possible partnership, including Chongqing-based Southwest Securities. Beijing is opening up the financial services industry to foreign investors, allowing them to take up to a 49% stake in securities ventures. In comparison with its major competitors, Barclays is considered a latecomer to the investment banking business in China. A total of 13 foreign financial institutions have set up securities ventures in China in the past decade.

• China’s central bank plans to give USD10 billion from its foreign exchange reserves to a new entity to help state firms invest abroad. The People’s Bank of China (PBOC) is in talks with China Reform Holdings, controlled by the State-owned Asset Supervision and Administration Commission (SASAC), to set up a joint venture, probably abroad.

• The Chinese government plans to treat local money raised and managed by global private equity firms as foreign funds, restricting their access to sectors such as media and mining. Foreign private equity firms such as Blackstone Group and TPG Capital Management have been setting up yuan-denominated funds, hoping they could be treated as local funds and thus avoid curbs on the sectors in which overseas funds can invest. The Ministry of Commerce (MOFCOM) was formulating rules to be implemented by the end of the year that would classify all foreign-run yuan funds as non-Chinese. China-focused private equity funds raised USD32 billion in 2011, with yuan funds making up 68%, according to consultancy Bain & Co.

• China Construction Bank (CCB) says its credit quality improved in the first quarter, but the bank is still taking precautionary measures to guard against risks. CCB President Zhang Jianguo said these measures had helped the bank to minimize the damage from business owners fleeing to avoid loan repayments since last year. Of the 47 business owners reported to have fled in the past year, 17 were CCB clients. The bank’s non-performing-loan ratio and total bad debt fell in the first quarter compared with the previous quarter.

• The China Insurance Regulatory Commission (CIRC) approved a plan by Insurance Australia Group to buy a 20% strategic stake in the Tianjin-based general insurer Bohai Property Insurance Co for CNY687.5 million, making the Australian insurer the largest single shareholder in the company.

• The People’s Bank of China (PBOC) cut the amount of cash that banks must set aside as reserves for the third time in six months to support lending as economic growth is slowing. Reserve ratios will fall 50 basis points, effective May 18. The measure will release up to CNY400 billion for additional lending. It is the third time in six months Beijing has announced a cut in the reserve requirement ratio (RRR), and another is expected in the coming months.

Taipei-based Landseed International Medical Group will formally open its Shanghai Landseed International Hospital on June 26. It will be China’s first wholly externally funded hospital, according to its President, Dr Victor Chang. The hospital plans to provide comprehensive services. “We feel the demand from high-end customers for one-stop health service in first-tier cities, such as Beijing, Shanghai and Guangzhou, is prominent,” Chang said. In late 2010, investors from Hong Kong and Macao were allowed to set up wholly owned hospitals in Shanghai, Fujian, Guangdong, Hainan and Chongqing, while Taiwanese investors were welcomed in Shanghai, Jiangsu, Fujian, Guangdong and Hainan. The Landseed group has operated on the mainland since 2000, running a joint-venture hospital in Shanghai for 10 years and cooperating with about 200 hospitals across the country by providing hospital- management advice and medical staff training.

• General Electric would buy a 15% stake in China XD Electric and would partner with XD to provide technology to build and upgrade electrical systems, it said. The companies would deliver electricity transmission and distribution and grid automation solutions globally. GE will appoint a representative to the XD board.

• Hong Kong companies signed USD4.2 billion worth of investment deals with the government of Wuxi, Jiangsu province, for projects ranging from property to financial industries. Wharf Holdings, Hang Lung Properties and Evergrande Real Estate were among the 26 companies that signed the contracts. Hong Kong firms have invested in more than 3,300 projects in Wuxi valued at USD34.9 billion, equivalent to half the overseas investment in the city.

• For the first time China has become German companies’ top foreign investment destination, totaling USD1.36 billion by the end of last year, according to a survey by the Association of German Chambers of Industry and Commerce. The amount was more than the combined German investment in France, Spain and Italy.

• Creek Project Investments, a British company which had been funding a large foie gras factory farm in China, has suspended the project after pressure from animal welfare campaigners. Production of foie gras, which is made by force-feeding geese or ducks until their livers become enlarged, is banned in the UK and most other European countries, although it remains a prized product in France.

The three experimental development zones in Guangdong – Nansha in Guangzhou, Qianhai in Shenzhen and Hengqin in Zhuhai – have agreed to set up joint conferences to solve problems ranging from competition among them to overlapping of industrial strategies. The zones, which are testing grounds for new free-trade-zone plans, signed the agreement in Nansha on May 7. They plan on strengthening communication on industrial strategies, planning, economic policies and social management. Officials from the three zones will also meet three times a year in joint conferences to discuss important issues. But Professor Zuo Liancun, who teaches at the Guangdong University of Foreign Studies and specializes in Guangdong’s economic cooperation with Hong Kong and Macao, said the agreement won’t solve core problems including vague and all-too-similar industrial blueprints, and he urged authorities to think realistically about potential economic achievements. “It’s meaningless for the three experimental zones to talk about cooperation without [the involvement of] decision- makers from either Beijing or the provincial government,” he said, “because all three regard Hong Kong and Macao as strategic partners, and they all want to boost their financial industries.”

Instead, Zuo said, Shenzhen’s authorities should increase communication with Hong Kong to determine realistic development goals for their small, 15-square-kilometer development zone, after many of Qianhai’s proposed economic reforms either stalled or were rejected by Beijing last month. “It’s only 15 square kilometers of land, and you can’t expect it to become the world’s financial center,” Zuo said. “Hengqin and Nansha should also slow down their pace and forget about their lofty ambitions. It’s impossible for Hengqin to compete with Shenzhen and Dongguan in terms of GDP after lagging behind in manufacturing for three decades.” Zhou Linsheng, Researcher with the Comprehensive Reform and Development Institute in Guangdong, said the three experimental zones could find themselves in vicious competition for resources and projects in the absence of necessary coordination, the South China Morning Post reports. Zhou said the three zones should have different development strategies. “Nansha is 800 square kilometers of land close to the manufacturing hubs of Dongguan and Zhongshan, and has huge potential to develop its manufacturing, which surely won’t be included in the blueprints of Qianhai and Hengqin. Its deepwater port is also an advantage for manufacturing and shipping.”

“China is displacing the European Union as the second-largest trade partner of countries (in the region of the Caribbean and Latin America) and it’s more important for South America’s growth than the United States,” said Osvaldo Rosales, Director of the International Trade and Integration Division of the United Nations’ Economic Commission for Latin America and the Caribbean. In 2011, China’s trade with Latin American and Caribbean countries exceeded USD245 billion. China has become the region’s second-largest trade partner and third-largest investor, said Li Baorong, Deputy Director General of the Latin America and Caribbean Department at the Foreign Ministry. China will soon become South America’s biggest trade partner, said Alicia Herrero, Chief Economist for Emerging Markets at Banco Bilbao Vizcaya Argentaria. But trade between China and the region is concentrated on few countries and few products. Brazil, Chile and Argentina account for 77% of the region’s exports to China, with copper exports taking up 30% and soy contributing 12%, Rosales said. In each country, a handful of products account for 80% to 90% of exports to China, except for Brazil and Mexico. Financial cooperation is a promising new area, as both sides work through issues such as project lending and currency swaps. Since 2005, the China Development Bank (CDB) has agreed to lend nearly USD60 billion to institutions in 13 Latin American countries.

• The Quarantine Bureau has rejected a consignment of U.S. pork after tests found traces of ractopamine in meat shipments totaling 103.5 tons, but there was no immediate threat of broader retaliatory measures. If more cases are found, China could impose more restrictive barriers to U.S. imports, but the amounts involved so far are tiny compared with overall import volumes. China’s pork imports from the U.S. climbed more than three-fold in 2011, but some U.S. meat industry executives say China could reduce imports this year as domestic production rises.

• “If the eurozone falls into a deep recession, and that in turn slows U.S. growth, China’s export growth will be impacted,” said a report by ANZ Greater China. Compared with the slowdown of exports, “we are more concerned about the deceleration of import growth, which impacts the nation’s domestic consumption,” said Li Wei, Senior Economist at Standard Chartered Shanghai.

• China has impounded Philippine fruit exports alleged to carry pests, amid a tense stand-off between the two countries over the disputed territory of Scarborough Shoal or Huangyandao in Chinese. China imported 300,000 tons of Philippine bananas worth USD60 million last year. Chinese quarantine officials informed the Philippines that all its banana exports would have to face inspection before they cleared Chinese ports after scale insects were allegedly found in one March shipment. The stricter quarantine measures were later extended to Philippine pineapples and papayas. China is the Philippines’ second-largest banana market after Japan.

Guangdong Party Secretary Wang Yang has encouraged the media to secretly visit places where the production and sale of counterfeit goods occurs to get detailed and accurate information. Lai Tiansheng, Director of the province’s anti-counterfeiting action group, promised awards to reporters who send in clues and offer evidence to police about locations where fakes are produced and sold. Police across Guangdong busted 4,298 places for producing or selling counterfeits, and they seized more than CNY3.27 billion worth of products in a special campaign launched early this year. A total of 3,260 suspects have been detained in the campaign. An exhibition on the anti-counterfeit campaign is running in the Guangzhou Museum of Arts until May 26.