Think China Glossary

The People's Bank of China (PBOC)

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The People's Bank of China (PBC) was established on December 1, 1948 based on the consolidation of the Huabei Bank, the Beihai Bank and the Xibei Farmer Bank.

In September 1983, the State Council decided to have the PBC function as a central bank. The Law of the People's Republic of China on the People's Bank of China adopted on March 18, 1995 by the 3rd Plenum of the 8th National People's Congress has since legally confirmed the PBC's central bank status.

With the improvement of the socialist market economic system, the PBC, as a central bank, will play an even more important role in China's macroeconomic management. The amended Law of the People's Republic of China on the People's Bank of China, adopted by the 6th meeting of the Standing Committee of the 10th National People's Congress on December 27, 2003, provides that the PBC performs the following major functions:

(1) Drafting and enforcing relevant laws, rules and regulations that are related to fulfilling its functions;

(2) Formulating and implementing monetary policy in accordance with law;

(3) Issuing the Renminbi and administering its circulation;

(4) Regulating financial markets, including the inter-bank lending market, the inter-bank bond market, foreign exchange market and gold market;

(5) Preventing and mitigating systemic financial risks to safeguard financial stability;

(6) Maintaining the Renminbi exchange rate at adaptive and equilibrium level; Holding and managing the state foreign exchange and gold reserves;

(7) Managing the State treasury as fiscal agent;

(8) Making payment and settlement rules in collaboration with relevant departments and ensuring normal operation of the payment and settlement systems;

(9) Providing guidance to anti-money laundering work in the financial sector and monitoring money-laundering related suspicious fund movement;

(10) Developing statistics system for the financial industry and responsible for the consolidation of financial statistics as well as the conduct of economic analysis and forecast

(11) Administering credit reporting industry in China and promoting the building up of credit information system;

(12) Participating in international financial activities at the capacity of the central bank;

(13) Engaging in financial business operations in line with relevant rules;

(14) Performing other functions prescribed by the State Council.

The State Administration of Foreign Exchange (SAFE)

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The State Administration of Foreign Exchange (SAFE) is designated with the following functions:

Designing and implementing the balance of payments (BOP) statistical system in conformity with international standards, developing and enforcing the BOP statistical reporting system, and collecting relevant data to compile the BOP statement;
Analyzing the BOP and foreign exchange positions , providing policy proposals with aim to achieving an equilibrium BOP position, and conducting feasibility study on the convertibility of the renminbi under capital account;
Drafting rules and regulations governing foreign exchange market activities , overseeing the market conduct and operations, and promoting the development of foreign exchange market ; analyzing and forecasting the foreign exchange supply/demand positions and providing the People's Bank of China (PBC) with propositions and references for the formulation of exchange rate policy;
Promulgating regulatory measures governing foreign exchange transactions under current account and supervising the transactions accordingly; monitoring and regulating the foreign exchange account operations both in China and abroad;
Supervising and monitoring foreign exchange transactions under capital account, including inward and outward remittance and payments;
Managing foreign exchange reserves of the country in accordance with relevant rules and regulations;
Drafting foreign exchange administration rules, examining the domestic entities' compliance with foreign exchange administration rules and regulations , and penalizing institutions engaging in illegal practices;
Participating in relevant international financial activities;
Performing other duties and responsibilities assigned by the State Council and the PBC.

THE ELEVENTH FIVE-YEAR PLAN (11-5 Plan)

2007-06-13T03:11:00.000-07:00

The 5-year plans are the blueprint of China's social and economic future.

The 11th 5-year plan outline comprises 48 chapters in 14 articles.

Main targets of economic and social development

The draft outline has set forth main targets of economic and social development in the next five years.

- Smooth and steady operation of the macro-economy. Gross Domestic Product is to grow 7.5 percent annually to double the per capita GDP in 2000. Both urban employment and migrant agricultural laborers will increase 45 million. Registered urban unemployment will remain under 5 percent.

- Optimizing and upgrading industrial structure. Proportion of added value in service industry to GDP and that of new employment to total employment will grow by 3 and 4 percentage points respectively. R&D expenditure will increase to 2 percent of GDP.

- Considerably improving efficiency of resource use. Energy consumption per unit of GDP is to decrease by 20 percent. Water consumption per unit of industrial added value is to decline by 30 percent. Irrigation water use efficiency is to increase by 0.5. Industrial solid waste recycling and conserving rate is to grow 60 percent.

- Urban and rural development is to grow balanced with urbanization rate growing to 47 percent.

- Basic public service is to be greatly reinforced. People's average education is to increase to 9 years. Urban basic endowment insurance is to cover 223 million people. New rural cooperative medical care's coverage will reach over 80 percent.

- Sustainable development capacity will be boosted. The total population will be controlled under 1.36 billion. Arable land will be maintained at 120 million hectares. Main pollutant discharges will be reduced by 10 percent and forest coverage will reach 20 percent.

- Relatively complete market economic system

- People's living standard continues to improve. Urban resident per capita disposable income and rural resident per capita net income will grow by an annual rate of 5 percent respectively.

- Democratic and legal system construction and spiritual civilization construction will make new progress.

Building a new socialist countryside

The draft outline proposes to continue the basic strategy of overall planning of urban and rural economic and social development. While actively promoting urbanization, solid and steady progress will be made in building a new socialist countryside according to the requirement of advanced production, improved livelihood, a civilized social atmosphere, clean and tidy villages and democratic administration.

It proposes to stick to developing agricultural productivity as the primary task of building a new socialist countryside, maintaining grain production growth and increasing its production capability to around 500 million tons.

It also proposes to extend agricultural industrial chain to let farmers benefit more from the expansion of agricultural functions and develop farm produce processing, freshness preservation, storage, transportation and other services.

It suggests to accelerate implementation of rural water safety project, basically realize connection of all towns by asphalt (cement) roads, perfect rural power grid, basically connect all the villages with telephones and provide internet access in every town, complete rural healthcare and medical aid system, emphasize popularization and consolidation of nine-year compulsory education in rural areas and eliminate tuition and incidental fees for rural students during the compulsory education period.

The draft outline proposes to stick to the guideline of "giving more, taking less and being flexible" and speed up the construction of a long-term mechanism in promoting agriculture by industry and towns by cities.

Boosting optimization and upgrade of industrial structure

The draft outline proposes to adjust and optimize industrial structure, corporate structuring and industrial arrangement with increasing independent innovation as the core link so as to increase overall technological level and improve competitiveness of industry.

It requires the extension of high-tech industries from processing and assembling to independent research and development and advancement of independent innovation commercialization; a series of leading industries with core competence should be formed; a group of industrial bases with concentration effect and a batch of transnational high-tech companies should be established and a raft of brand names of proprietary rights should be raised.

The outline proposes to make breakthrough in core technologies, increase the level of development and design of key technologies and equipment, localization of core components, the manufacture and system integration. A stable, economical, clean and safe energy supply system must be built.

Speeding up service industry development

The draft outline insists on marketization, industrialization and socialization; scope expansion, scale increase, structure optimization, function reinforcement, market standardization and raising the proportion and level of service industry.

It proposes to add 17,000 kilometers of railway, of which passenger lines account for 7,000 kilometers; to increase total length of highway to 2.3 million kilometers, of which expressways account for 65,000 kilometers; to build Yangtze waterway and high-level navigation course networks in the Yangtze River Delta and Pearl River Delta etc.; to build international shipping centers in Shanghai, Tianjin and Dalian etc.

Promoting balanced regional development

The outline proposes to boost balanced regional development to gradually form development arrangement that has clear function positioning, virtuous interaction among the eastern, central and western regions, and narrows gap in public service and people's living standards.

The overall strategy for regional development the outline puts forward is advancing the western development, rejuvenating old industrial bases in northeast China, promoting the rise of the central region; and encouraging development of the east first.

It proposes to give overall planning to population distribution, economic deployment, land utilization and urbanization pattern in light of the carrying capacity of resources and environment, existing development density and potential, so as to classify the land space into four categories: optimized development, key development, restricted and banned development zones.

National Development and Reform Commission (NDRC)

2007-06-13T02:58:00.000-07:00

The National Development and Reform Commission (NDRC) is a macroeconomic management agency under the State Council, which studies and formulate s policies for economic and social development, maintains a balance of economic aggregates and guides the overall economic system restructuring.

The NDRC's predecessor was the State Planning Commission (SPC), which was founded fifty-one years ago in 1952. The State Planning Commission was renamed as the State Development Planning Commission (SDPC) in 1998. After merging with the State Council Office for Restructuring the Economic System (SCORES) and part of the State Economic and Trade Commission (SETC) in 2003, the SDPC was restructured into the NDRC.

In the transition from the planned economy to a socialist market economy, our commission persists in deepening reform, subscribing to new ideas, transforming functions and giving full play to the fundamental role of the market in allocating resources. Meanwhile we have been making unremitting efforts to strengthen and improve macroeconomic management and forcefully promoting the sustained, rapid and sound development of the national economy.

The principal functions of the NDRC include:

1.To formulate and implement strategies for national economic and social development, long-term plans, annual plans, industrial policies and price policies;

2.To monitor and adjust the performance of the national economy, maintain the balance of economic aggregates and optimize major economic structures;

3.To examine and approve major construction projects;

4.To guide and promote economic system restructuring;

5.To carry out strategic readjustment and upgrading of industrial structure, coordinate the development of agriculture and rural economy and guide the
development of industry;

6.To formulate plans for the development of the energy sector and manage national oil reserve;

7.To promote the sustainable development strategy, social development and coordinated development of regional economy and implement the Western Region Development Program;

8. To submit the plan for national economic and social development to the National People's Congress on behalf of the State Council in accordance with the Constitution.

China Banking Regulatory Commission (CBRC)

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Formulate supervisory rules and regulations governing the banking institutions;
Authorize the establishment, changes, termination and business scope of the banking institutions;

Conduct on-site examination and off-site surveillance of the banking institutions, and take enforcement actions against rule-breaking behaviors

Conduct fit-and-proper tests on the senior managerial personnel of the banking institutions

Compile and publish statistics and reports of the overall banking industry in accordance with relevant regulations

Provide proposals on the resolution of problem deposit-taking institutions in consultation with relevant regulatory authorities

Responsible for the administration of the supervisory boards of the major State-owned banking institutions; and Other functions delegated by the State Council

State Administration of Foreign Exchange (SAFE)

2007-06-11T08:23:00.002-07:00

SAFE regulates the movement of foreign exchange in and out of the country and sets quotas for foreign investors who have gained a QFII licence from the CSRC.

China Securities Regulatory Commission (CSRC)

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The commission supervises the Shanghai and Shenzhen stock exchanges and issues rules and regulations governing listed companies, brokerages and other institutions involved in the capital markets. It also regulates the Qualified Foreign Institutional Investor (QFII) programme.

Qualified Domestic Institutional Investor (QDII)

2007-06-11T08:21:00.000-07:00

QDII (Qualified Domestic Institutional Investors) is an investment scheme that works opposite the QFII (Qualified Foreign Institutional Investor). It is a scheme under which domestic institutional investors authorized by the government could invest in the overseas capital markets under the foreign exchange control system in China.

QDII was initially proposed by the Hong Kong government to introduce mainland capital to the Hong Kong securities market and to attract more international capital, which was significant to the low-priced Hong Kong securities market after the Asian financial crisis. When QDII was first proposed, the China Securities Regulatory Commission was enthusiastic in promoting the scheme. On the other hand, the State Administration of Foreign Exchange's response was lukewarm, due to foreign exchange control concerns. However, now the table has been turned. Due to growing pressure on the appreciation of renminbi, SAFE is now more active in promoting the scheme, to maintain the stability of the RMB exchange rate, but the Securities Regulatory Commission is becoming more conservative, because the formal adoption of such a scheme might affect the A and B share markets.

On May 11 2007, the China Banking Regulatory Commission (CBRC) announced that it's extending the spectrum of QDII products to overseas stocks. A bank will be allowed to invest no more than 50 percent of a single wealth management product in foreign stocks. However, banks can neither pour more than 5 percent of a wealth management product into a single stock, nor use their own money in such investment.

The CBRC would not allow QDII funds to invest in other overseas stock markets in the near term apart from Hong Kong, as it was the only market with a memorandum of understanding for related regulatory cooperation

Qualified Foreign Institutional Investor (QFII)

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On November 5, 2002 the China Securities Regulatory Commission (CSRC) and the People's Bank of China (PBOC) introduced the QFII (Qualified Foreign Institutional Investor) program as a provision for foreign capital to access

China

's financial markets.

Chinese QFII regulations relax some capital controls and allow foreign institutions to invest in RMB-denominated equity and bond markets. Indeed, QFII is a Chinese brokerage business, which allows qualified foreign institutions to trade Chinese A-shares via special accounts opened at designated custodian banks, for their clients.

The QFII mechanism not only further opens China's securities markets ¡§C but also gives foreign investors an opportunity to take position on those markets and buy stakes in Chinese companies, thus sharing in China's phenomenal growth. QFIIs can provide their clients with added opportunities to share in the growth of the Chinese Market.

List of QFII is here

Restricted Free Float Share

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Shares of stocks in China’s A-Share market held by the government or its subsidiaries/agencies, including state-owned shares or legal person shares.

Shares held by strategic investors, which include legal persons, companies or groups of strategic investors in the A-Share market.

Shares held by members of the directorate and senior management and their family members or relatives, as well as shares held by the company’s founders or founder families.

Stocks held by enterprise employee include such channels as employee pension plan, annuities for employees or management staff.

In China, most State Owned Enterprise (SOE) would have a significant percentage of shares as Restricted Free Float Share. For example, China Life has 70.49% of shares in this category.

China Life	No. Of Share (x10,000)	%
Restricted Free Float Share	1,992,353	70.49%
Free Float Share	834,118	29.51%
A Share	90,000	3.18%
H Share	744,118	26.33%
Total	2,826,471	100.00%

Free Float Share

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Individual. Shares held by individuals, excluding those held by members of the

directorate and senior management personnel, and their family members or relatives, and

excluding those shares held by individuals whose holdings are explicitly considered as

strategic investments.

Investment funds and unit trusts. Shares held by investment funds, open-ended funds

and unit trusts, including passive index funds and shares held by ETFs.

Securities Company. Shares held by brokerages and other non-strategic investors for

the purposes of underwriting, trading and clearing of trades.

Annuity Fund. Shares of annuity funds, except shares of companies held by their own

annuity.

Insurance Company. In principle, shares held by insurance companies are included in

the float-adjusted circulation, unless the holdings are deemed strategic in nature.

Social Security Fund. Shares held by all types of social security funds, but excluding

shares held by those social security funds that exert significant management influence on

the company.

Red Chip

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Securities of Hong Kong incorporated companies that trade on the Hong Kong Stock Exchange, quoted in HKD. The constituents are substantially owned directly or indirectly by the Chinese Government. Those from the PRC are not allowed to trade however there are no restrictions on international investors.

H Share

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Securities of companies incorporated in the PRC and nominated by the Chinese Government for listing and trading on the Hong Kong Stock Exchange, quoted and traded in HKD. Those from the PRC are not allowed to trade H shares however there are no restrictions on international investors.

A Share

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Securities of Chinese incorporated companies that trade on the Shanghai or Shenzhen stock exchanges, quoted in Chinese Renminbi (RMB). Traded by residents of the People’s Republic of China (PRC) or international investors under the China Qualified Foreign Institutional Investors (QFII) regulations.