In the News: Hong Kong Law; JPMorgan Futures Approval; and Huawei Standards

The report goes on to say that the national security law will override any local Hong Kong laws should conflicts arise. Under the new law, Hong Kong's chief executive, currently Carrie Lam, will choose which judges preside over national security cases. The report says that the new law and institutions to be established on the back of it will follow common law principles as well as protect human rights that Hong Kong is accustomed to. Beijing has repeatedly tried to assuage fears among foreign businesses and investors in Hong Kong about the new law, saying that the new law will only target a small section of Hong Kong's society. The Trump administration has responded to Beijing's plans to introduce national security legislation for Hong Kong by beginning to strip Hong Kong of its special treatment under U.S. law, although no concrete measures have been unveiled yet. On June 19, the European Parliament passed a non-binding resolution calling on the European Union to take China to the International Court of Justice should the national security law be implemented in Hong Kong. The resolution also called for economic sanctions against China to be considered.

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JP­Mor­gan approved to become first fully foreign-owned futures business

JPMorgan's bid to take full control of its futures joint-venture (JV) in China has been approved. On June 18, the China Securities Regulatory Commission (CSRC) announced that it will allow the JPMorgan's local JV, Guangdong-based J.P. Morgan Futures, to become the first wholly foreign-owned futures business in the country. The U.S. investment bank previously held a 49% stake in the JV, which was established in 1996.

In its statement, the CSRC said that it will further open up the futures market to qualified foreign players. According to JPMorgan, its futures JV has memberships with five Chinese exchanges including Shanghai Futures Exchange and China Financial Futures Exchange. The investment bank has been quick to capitalize on China's recent spate of measures opening up its financial industry. The cap on foreign ownership in the futures sector was fully removed on Jan. 1, 2020.

China's futures sector was first opened up to foreign investment in 2005 under the Closer Economic Partnership Arrangement (CEPA) with Hong Kong, where foreign ownership of local businesses was capped at 49%. In 2014, more foreign investors were allowed into the market, including those from the U.S., Canada and Australia. In July 2019, it was announced that foreign ownership caps would be fully lifted in 2020, a year ahead of schedule as part of China's accelerated opening up of its financial industry. However, despite being open to foreign investment for more than a decade, China's futures sector has seen little foreign investment due to restrictions on the scope of activities permitted for derivatives companies in the country, according to Norton Rose Fulbright partner Sun Hong and associate Wenqi Zheng. JPMorgan has led the pack in various areas since China fully opened up several of its financial sectors. In December 2019, it became the first U.S. bank to receive approval to launch a majority-owned local securities JV. It is also close to becoming the first foreign firm to fully own its asset management business in China after agreeing to buyout its local partner's stake in the business in early April, which is still pending CSRC approval.

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U.S. allows companies to work with Huawei on 5G standards

The Trump administration is allowing U.S. companies to work with Chinese telecom giant Huawei in joint efforts to develop global standards for 5G and other emerging technologies. On June 16, the Department of Commerce released a new rule that will allow U.S. companies to do so despite Huawei being blacklisted by the Trump administration following its inclusion on the Department of Commerce's Entity List in May 2019.

"The United States will not cede leadership in global innovation," Commerce Secretary Wilbur Ross said in a statement. The rule clears up previous confusion about whether Huawei's blacklisting meant that U.S. companies cannot work with Huawei in global standards setting bodies. These bodies are the forum in which industry players globally decide on technical specifications for next-generation technologies.

Global standards are hugely important for the development of next-generation technologies. They "serve as the building blocks for product development and help ensure functionality, interoperability and safety of the products," according to the new rule. Huawei said in a statement that it wants to continue standards discussions with U.S. counterparts, according to Reuters. China is set to release a 15-year plan named "China Standards 2035" (中国标准2035) later in 2020, laying out its plans to lead the world in setting global standards for the next-generation of technologies including 5G, the Internet of Things and artificial intelligence. 

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