In the News: Unreliable Entities Blacklist; Ford's Antitrust Fine; End of Benchmark Lending Rates; and Local Permits for Foreign Fintech Firms
June 10, 2019 | BY
Marilyn RomeroMOFCOM's new Unreliable Entity List is mooted as possible trade war retaliatory tool; Ford's China JV hit with $23.6 million antitrust fine; PBOC may scrap its official benchmark lending rates; and SAFE says overseas digital finance firms must have local permits.
China sets up blacklist of foreign “unreliable entities”
China's Ministry of Commerce, or MOFCOM, has an announced the establishment of a list of “unreliable entities” which the government says are foreign companies that damage their Chinese counterparts. According to MOFCOM spokesman Gao Feng in an announcement on May 31, the list is of those foreign companies, organizations or persons which China deems to have “severely damaged the legitimate interests” of Chinese firms by not obeying market rules, violating contracts, or blocking or cutting off supplies for non-commercial reasons. “Necessary measures will be taken” against those on the list, says Gao. To date, no companies have been identified as being on the list, but in light of the U.S. administration's ban on companies doing business with Huawei, companies that have acted on the ban such as Google, Qualcomm, Toshiba, SoftBank and ARM Holdings, may be eligible.
According to Bloomberg, Chinese Vice Commerce Minister Wang Shouwen played down concerns that the “unreliable entities” list would be used to target foreign companies as a retaliation tool in the trade war, saying that might be an “over-interpretation”. MOFCOM has said more details will be released soon.
China slaps Ford with $23.6M fine for antitrust violations
China's antitrust regulator, the State Administration for Market Regulation, has fined Ford's main joint venture in China, Changan Ford, about $24 million for allegedly setting minimum prices for its dealers in Chongqing. The regulator said Changan Ford's actions deprived downstream of pricing autonomy; restricted competition; and damaged the legitimate interests of consumers. According to a CNN report, the fine amounts to about 4% of the company's sales in Chongqing last year. Ford owns 50% of the joint venture, with the rest controlled by its local partner, state-owned carmaker Changan Automobile. Ford said it respects the antitrust regulator's decision. Chinese regulators have acted against other automakers on similar grounds in the past.
PBOC mulls scrapping official benchmark lending rates
The People's Bank of China, or PBOC, is reportedly considering scrapping the official benchmark lending rates to make interest rates more market-oriented. PBOC Governor Yi Gang was quoted in a Securities Journal report as saying that the central bank is studying whether the official benchmark lending rate should be scrapped to allow banks to react to market conditions in near real-time. In the past, Chinese officials have said they want to reform the financial sector to fix interest rate distortions and make pricing more market-driven rather than government-determined. Yi stressed, however, that the role of benchmark deposit rates would continue within the financial system and the benchmark deposit rate will remain in place for a while. The current lending rates have not changed since October 2015, and are the basis for mortgages and car loan interest rates..
SAFE says overseas digital finance firms need local permit
Sun Tianqi, the chief accountant at the State Administration of Foreign Exchange, or SAFE, said overseas finance firms need a local permit for doing business with clients in China through the internet. He said those that only have foreign licences cannot provide relevant financial services to Chinese customers through digital platforms. These institutions must also be licensed to do business through the internet with clients in China. Furthermore, Sun also said that he prefers foreign institutions to be first required to set up a commercial presence in China before they can provide financial services.
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