The People's Bank of China. Photo: iStock

China has lowered the upper limit for non-financial firms’ cross-border financing amid efforts to rein in risks, according to a circular jointly issued by the People’s Bank of China and the State Administration of Foreign Exchange (SAFE).

The macro-prudential adjustment parameter, a multiplier that is part of an equation deciding the upper limit of outstanding cross-border financing a company can have, has been revised down from 1.25 to 1 for non-financial firms.

For companies that see their risk-weighted outstanding cross-border financing exceed the limit due to the revision, they will be allowed to hold the contracts signed before the change to maturity, said the circular.

The upper limit is basically decided by a non-financial firm’s net assets and the leverage ratio for cross-border financing as well as the adjustment parameter set by regulators.

On December 11, 2020, China lowered the macro-prudential adjustment parameter for financial institutions to 1 from 1.25, with the aim of further improving the macro-prudential management of cross-border financing and guiding the institutions to adjust their foreign debt structure.

Forex reserves

China’s foreign exchange reserves expanded to US$3.2165 trillion at the end of December, as the country’s forex market remained generally stable, official data showed Thursday.

The amount was up by $38 billion, or 1.2%, from the end of November, according to the SAFE. The December figure was a new high since May 2016, according to Wen Bin, chief analyst at China Minsheng Bank.

Commenting on the December rise, SAFE spokesperson Wang Chunying said the market was “basically stable” with orderly and rational transactions.

Company news

China’s largest chipmaker Semiconductor Manufacturing International Corporation (SMIC) was removed from the OTCQX, a financial market for over-the-counter securities in the US, at the close of trading on Wednesday.

SMIC’s shares began to trade on the OTCQX Market after delisting from the New York Stock Exchange (NYSE) in 2019.

The removal from the OTCQX is meant to comply with an executive order unveiled by the Trump administration in November banning US investment in companies identified as “affiliated with the Chinese military.”

First Automotive Works (FAW) Group, a Chinese automaker, saw its revenue increase 12.5% year-on-year to 695 billion yuan ($107 billion) in 2020.

The company sold a total of 3.7 million vehicles last year. Sales of its leading sedan brand Hongqi exceeded 200,000 vehicles in the period, an annual increase of about 100%.

The company said it stepped up its digital transformation in research and development, manufacturing and marketing in 2020, significantly raising its efficiency in R&D and production.

The stories were compiled by Nadeem Xu and KoKo and first published at ATimesCN.com.