In the news: SH-HK Stock Connect debuts, Visa and Mastercard let down and Evergrande Group buys New Media Group

Shanghai-Hong Kong Stock Connect begins, exempts taxes for now

China will temporarily exempt taxes on profits made from the Shanghai-Hong Kong Stock Connect, which debuted on Monday (November 17). Investors welcomed the tax break as it removed a potential stumbling block. Exempting capital gains tax on the Stock Connect's transactions is also expected to encourage risk- and tax-averse traders who would otherwise prefer to use only Hong Kong markets to invest in China. The Chinese regulators made the announcement last Friday – one business day before the opening. The temporary tax exemption may just mean that they are giving themselves more time to apply the tax later on. As for the Stock Connect's progress, So far, more funds have been flowing to Shanghai than to Hong Kong because international investors were eager to access the Chinese stock market for the first time.

More from CLP:
Slow progress (Annual Review 2014: Capital Markets special)
Interview: Challenges in opening up (CITIC Capital)
Interview: Keys to success (Bank of China HK)
Liberalising fund management


Visa and Mastercard given false hopes as UnionPay bolstered

After Premier Li made a statement last month that China is opening up to foreign credit cards, Visa and MasterCard have shown interest in expanding in the country. But it turned out China has no plans to let Visa or any international company challenge the state-controlled UnionPay, which has exclusive permission from the PBOC to clear all domestic interbank payments. Foreign card firms cannot do business in China without working through the UnionPay network and paying its network access fees. The PBOC announced on November 3 that new financial integrated cards issued by all banks must conform to UnionPay standards, which are incompatible with the EMV standards used by Visa and MasterCard. So Li's October 29 statement about opening up was far from an invitation… MasterCard has said it finds it unfair China is giving UnionPay a clear advantage at home. But the complaint does not carry much weight. UnionPay usage is growing around the world and turning China's standard into the international standard seems to be the country's motive.

More from CLP:
FDI changes draw praise, spark confusion
Barriers lifted for foreign projects


Evergrande Group buys controlling stake in New Media Group

Property developer Evergrande Real Estate Group has signed an MOU to invest US$122.5 million for a 74.99% stake in Hong Kong-based publisher New Media Group. It is Evergrande's latest attempt to reduce the risks from a declining property market. Other investments have recently included solar energy, baby formula and bottled water – businesses with no link to real estate. Analysts have expressed concern about the group's strategy due to its high debt levels and large inventory of apartments, and have predicted high expenditures and losses over the next year or two due to little experience in these new areas. It is worth following the investment strategies of Chinese property developers given the situation of real estate in the country. Some may fail and some may not, but the market will eventually see what works and what doesn't.

More from CLP:
Removing roadblocks (Annual Review 2014: M&A special)
Change and transformation (Annual Review 2014: Real Estate & Construction special)
Opening the gates for outbound investment