Geert Bekaert and Campbell R. Harvey's


Chronology of Economic, Political and Financial Events in Emerging Markets




Major Political and Economic Events


Regulations governing the establishment of foreign joint ventures in Shanghai Province were relaxed.a3(first entry)


China and India signed a three-year agreement to develop economic and trade relations; the accord provided for encouraging joint ventures, the creation of consultancy services, the exchange of economic, trade, and technical delegations, and participation in international fairs in the two countries.a3


The Foreign Economic Contract Law was adopted.a3


The Chinese Patent Law, enacted in 1984, came into effect. The Ministry of Petroleum and Industry announced that foreign oil companies would be allowed to participate in exploration and development of oil and gas reserves in nine provinces and one autonomous region.a3


The State Council introduced a regulation on the control of foreign banks and joint venture banks in special economic zones.a3


China approved establishment of the first foreign branch bank office in the country since 1949. Hong Kong and Shanghai Banking Corporation (a foreign commercial bank) announced a plan to begin branch operations in Shenzhen in Oct.5, 1985.a3


China and Libya signed a protocol aimed at consolidating bilateral cooperation between the two countries.a3


A joint venture bank was opened in Xiamen with the Panin Group of Hong Kong.a3


Provisional regulations were approved permitting financial institutions and enterprises with sources of foreign exchange income to guarantee foreign exchange obligations of other debtors.a3


Provisional regulations were issued on a new system requiring the timely registration of external borrowing with the SAEC.a3


The National People's Congress adopted a new Chinese-foreign cooperative joint ventures law.a3


All foreign commercial borrowing required the approval of the PBC and is to be channeled through one of ten domestic entities. The short-term debt of each entity may not exceed 20% of the entity's total debt, and short-term borrowing is to be used only for working capital purposes.a3


The SAEC announced procedures governing Chinese direct investment abroad, which required government and SAEC approval, a deposit of 5% of the investment to secure repatriation of dividends and other income from the investment, and repatriation of earnings within six months.a3


The State would not nationalize joint ventures, simplified the approval procedures for new foreign investment enterprises, and extended the management rights of foreigners.a3


The Shanghai City Government announced plans for the development of the Pudong New Area, offering foreign joint ventures tax incentives similar to those available in the special economic zones.a3


The State Council issued regulations for the sale and transfer of land use rights in cities and towns to encourage foreign investors to plan long-term investment.a3


The Shanghai Securities Exchange reopened.a8


The State Council adopted the Law Concerning the Income Tax of Foreign-Funded Enterprises and Foreign Enterprises and eliminated a 10% tax imposed on distributed profits remitted abroad by the foreign investors in foreign-funded enterprises.a3


"Regulations on Borrowing Overseas of Commercial Loans by Resident Institutions" and "Rules on Foreign Exchange Guarantee by Resident Institutions in China" were issued.a3


Shenzhen opened the country's second exchange.a8


The "B" share came into existence. "B shares" can be owned by foreigners only, but they are afforded the same right of ownership as "A shares", which are reserved for Chinese nationals. In China, a share entitles the owner to a dividend distribution, but not to a right to influence the operations of the company.jj


The policy on foreign trade and investment was further liberalized, opening a large number of island and border areas to such activities.a3


The introduction of the Insider Trading Laws.a4


Interim regulations were issued governing the activities of domestic investors, but there is no law explicitly covering the presence or activities of foreign firms. Foreign securities firms may establish respresentative offices, but they cannot establish local branches or subsidiaries. They can only purchase seats to broker "B" shares (dominated in RMB but must be purchased with foreign currency, issued by Chinese companies for sale exclusively to non-Chinese). Foreign firms can not underwrite local securities issues or act as dealers or brokers in RMB dominated securities.a8




The Chinese government converted four "specialized" banks into "commercial" banks by transferring their responsibilities for making noncommercial loans to three newly established "policy" bankings. The first PRC's central and commercial banking laws was passed to allowed new, non-state-owned banks to set up business.a8


The People's Bank of China (PBOC) issued new supervisory guidelines requiring all banks to apply new credit control procedures designed to bring China in line with the risk-weighted capital adequacy established in the Basle Agreement. It also got approval to undertake a special US$32 billion bond issue to re-capitalize the state-owned commercial banks and enable them to meet the 8% capital-adequacy ration of the Basle Agreement.a8


Real interest rates turned positive as inflation has been squeezed out of the economy.a8


Exports surged by 62% over last year, increasing trade surplus by $ 7 billion. 


The central bank increased the subsidy rate on bank deposits from 11.47% to 12.27%.


A new commercial bank law went into effect. 


Inflation rate had decreased to 14.5% from 27% in October 1994.


China launched its first national inter-bank market linking 30 short-term credit offices across China into a single computer network. 


China carried out three rounds of military exercise across the Taiwan Straits, clouding the relationship between two countries. 


The government removed the authority of local city governments to manage the Sanghai and Shenzhen stock exchanges. 


The Shanghai city government cut the income tax rate of Shanghai based companies to 15% from 33%. 


The regulation on External Guarantees Provided by Domestic Entities was passed, allowing for the provision of guarantees by authorized financial institutions and nonfinancial legal entities that have foreign exchange receipts.a3


The CSRC issued a circular prohibiting Chinese from opening up stock trading accounts in the name of their work units. 


The CSRC tightened restrictions on Chinese residents opening B-share accounts, which are reserved for foreign investors. A new regulation that will limit the maximum daily change to 10% was imposed. 


Paramount Chinese leader Deng Xiaoping died at age 92 on February 19th. 


The government agreed to extend the preferential 15% corporate tax rate for nine of 25 H-share stocks for another year. 


The CSRC decided to retroactively boost the annual ceiling on new shares issued for 1996 by 50%. China's State Council opted to raise the stamp tax on stock trading to 0.5% from 0.4%. 


The Hong Kong was handed over to the China on July1.


Securities Commission promulgated rules for establishing mutual funds.


(Controls on capital and money market instruments) Regulations for issuing bonds denominated in foreign currency by domestic institutions were issued. (Controls on credit operations) (1) The implementation bylaws of regulations for external guarantees by domestic institutions were issued. (2) Forward LCs with a maturity exceeding 90 days and less than 365 days have been included in the category of short-term credit, while those exceeding one year have been included in the category of medium- and long-term international commercial loans. (3) External borrowing regulations were changed. a3


Three month interbank rates in Hong Kong drop to 7.143%,  the lowest level since last October.


The consumer price index fell 1.9%, marking the fifth straight monthly decline. 


S&P revised Chinese foreign currency rating from stable to negative.


The government banned all activities of direct sales companies such as Amway and


Weak Japanese yen forces Chinese exports to see its first decline in 22 month. The government cuts the stock trading tax to 0.4% from 0.5%.


China cut bank lending rates on July 1 by 1.12 %. The Japan Rating and Investment Information downgraded China's sovereign rating to A+ from AA-. 


Catastrophic floods along the Yangtze River, the country’s worst since 1954. It is speculated that Beijing may devalue its currency because of a weaker Japanese yen  and slower domestic growth.


(Controls on credit operations) Enterprises are barred from advance prepayment of debt.a3


The central bank has ordered all companies to repatriate foreign currency held overseas without authorization by October 1. On September 7, the  HKSE instituted a “tick rule” for short-sellers. 


China closed  the 18-year-old Gitic (the Guangdong International Trust and  Investment Corp) on October 6, after the company missed an $8.75 million payment on a bond. 


China’s first securities law was passed on December 29. Under the laws, brokers are banned from using client funds to finance their own operations and foreigners may not buy A-shares.


More  than 70 companies in Shenzhen and at least 63 companies in Shanghai announced that they would report a net loss for 1998. 


The government decides to allow cash-strapped brokerages to tap funds from the interbank market and state debt repurchase market. Measures that exempt foreign companies from 3 percent of local income tax are adopted by Beijing Municipal


The stamp duty on B-share trading was cut to 0.3% from 0.4% this month.


The People’s Bank of China announced it would cut rates on deposits by an average of 0.75%.


The tension in the Taiwan Straits was raised by a speech of President Lee Teng Hui that scraps the "one China" policy.


(Controls on credit operations) Some controls on renminbi loans to FFEs under foreign exchange liens or guarantees were eased.a3


China plans to allow more banks and hi-tech private firms to tap the stock market for financing.


The government imposed 20% tax on bank deposit interest income and other market initiatives. Beijing allowed two state firms to sell state-owned shares and permitted certain share buybacks for Chinese B- and H-shares.


The Tracker Fund, representing part of the Hong Kong Special Administrative Region government's HK$208 billion (US$27 billion) share portfolio, was listed. The Stock Exchange of Hong Kong launched the Growth Enterprise Market (GEM) for small-cap and high tech firms, creating an out-flow of foreign liquidity from the Mainland B-share market to the Hong Kong GEM market.


The China Securities Regulatory Commission (CSRC) allowed state and listed firms to purchase domestic IPOs without restrictions on the size of these stakes.


China Unicom Ltd. became the third-largest IPO in the world.


The Chinese government decided to delay the set up of a NASDAQ-style market for high-growth companies and announced the launch of its first mutual fund to be advised by foreign fund companies. Beijing formally approved the merger of the A-share markets of the Shanghai and Shenzhen exchanges.


The government announced a planned interest rate reform and published regulations on the opening of the telecommunications sector. China Petroleum & Chemical Corp.'s IPO became the fifth largest in the world for the year.


The crackdown on share price manipulation by the China Securities Regulatory Commission rekindled investor concerns about China's volatile stock market.


The opening of the B-share market to domestic investors boosted the markets.


China cut interest rates on its foreign currency deposits, following U.S.'s rate cuts.


During the third quarter, the government crackdown illegal bank loans to stock market speculators and its practice of selling of shares to finance pension obligations.


China Mobile and China Unicom, the two leading telecommunications companies, saw share prices plunge on investor fears about market growth potential and profit margins.


The government suspended the sale of state-owned shares.


New regulations were announced to tighten delisting rules. A major international rating agency upgraded China's sovereign rating.


The regulations governing foreign banks and financial institutions were issued by the People's Bank of China yesterday and are to take effect on 1 February, replacing the five sets of regulations in force since 1996.


US President George W Bush visits, on the 30th anniversary of President Nixon's visit to China - the first by a US president.


The government announced to ease restrictions limiting foreign investors to minority stakes in port infrastructure projects and approved foreign investment in urban pipeline projects for gas, heating and water as part of the revised Industrial Catalogue for Foreign Investment, due to come into effect on 1 April 2002. b1


The US says China is modernizing its military to make possible a forcible reunification with Taiwan. Beijing says its policy remains defensive.


China is to let private and foreign investors buy controlling stakes in domestically listed firms for the first time.


The authorities have announced that foreign companies will be allowed to buy shares in listed Chinese companies


Vice-President Hu Jintao is named head of the ruling Communist Party, replacing Jiang Zemin, the outgoing president. Jiang is re-elected head of the influential Central Military Commission, which oversees the armed forces.


China went back on its plan to allow foreign investors into the country's bond market as the registration process for Qualified Foreign Institutional Investors (QFIIs) opened yesterday (2 December).


The seven-year Rmb60bn (US$7.25bn) bond sale completed. The bond was oversubscribed by 22 times on generous terms offered by the Ministry of Finance. b1


National People's Congress elected Hu Jintao as president. He replaced Jiang Zemin, who stepped down after 10 years in the post.


A new rural land reform in China, extending land-use rights to 30 years, should provide a significant boost to the rural economy by encouraging new investment and providing a source of capital.


China and Hong Kong were hit by the pneumonia-like SARS virus, which was thought to have originated in Guangdong province in November 2002. Strict quarantine measures were enforced to stop the disease spreading. b1


New rules on mergers and acquisitions were issued as China seeks to facilitate M&A activity and boost inward investment. b1


Two foreign brokers were granted the right to trade in renmimbi denominated securities for the first time, marking a milestone in the development of China's capital market.


Sluice gates on Three Gorges dam closed to allow reservoir to fill up. Construction of $25 billion project displaced almost one million people to make way for world's largest hydroelectric scheme. b6


China and India reached de facto agreement over status of Tibet and Sikkim in landmark cross-border trade agreement.


S&P Estimates That Chinese Banks Need US$500bn Bail-Out. b1


Some 500,000 people march in Hong Kong against Article 23, a controversial anti-subversion bill. Two key Hong Kong government officials resign. The government shelves the bill.


The Chinese government announced to reduce the size of the country's armed forced by 200,000 by 2005.


Wu Bangguo, the Standing Committee chairman of the National People's Congress (NPC), has confirmed that exchange rate policy would continue to focus on renmimbi (RMB) stability, but asserted that a shift to market-based determination remained the government's ultimate goal.


Authorities in China Assert No Change in Foreign Exchange Policy.


The Chinese government has dipped into its US$400bn foreign exchange reserves in order to recapitalize two of the 'Big Four' state-owned banks, in a move to accelerate reform in the country's ailing financial sector. b1



The World Bank's private-sector division - the International Finance Corporation (IFC) - has announced that it intends to double its investment in China, up to US$500m by 2006


The country's State Council has issued new investment guidelines for listed companies, clearing the way for greater capital investment and brokerage opportunities. The plan calls for the establishment of a multi-layered capital market system, consisting of a main board market and a secondary one for venture capital projects and corporate bond/futures products. b1


The International Finance Corp (IFC) arm of the World Bank confirmed today that it has committed US$2m to the Chinese mortgage market.


The US government has filed its first official suit against China under the auspices of the World Trade Organization (WTO), claiming that a tax on semi-conductors gives domestic exporters unfair advantage. The suit underlines the US's increasingly hard-line stance over bilateral trade, the iniquities of which are embodied in the US's trade deficit with China, which ballooned to US$124bn in 2003.b1


Legislators rule out direct elections for Hong Kong leader in 2007.


Liu Mingkang, head of the China Banking Regulatory Commission, said that China's banks should sue the firms and people whose bad debts are destabilizing the banking system


China's banking regulator has ordered tighter scrutiny of bank lending as part of a government campaign against reckless investment.


China's Premier Wen Jiabao has stressed the need for local officials to implement policies designed to cool down China's overheating economy. b6


Regulations on Foreign Investors


Restrictions: Foreign investors can only hold Class B shares. Investment amounts must be registered separately with each exchange. Holdings of more than 5% of total issued shares of a company must be reported to the People's Bank of China.

Taxation: Rules on capital gains tax are being finalized. Dividends are untaxed. 0.30% stamp duty, 0.50% value transaction fee, 0.10% registration fee. $8 per transaction clearing fee with a custodian bank, and 4$ without a custodian bank, $20 depository fee for each registration number. a6


Restrictions: Same. All settlements and income receipts are in USD or HKD, without repatriation difficulty.

Taxation: No capital gains tax. Dividend income is subject to 20% withholding tax applied at the registration company on the portion of dividends above the PBoC's (the central bank) one-year Renmibi certificate of deposit rate for the same period.a7


Restrictions: Requirements on foreign-exchange balancing and domestic sales ratios were eliminated.


Restrictions: Foreign-funded firms who wish to list on the Shanghai and Shenzhen stock exchanges must have operated in China for 3 years, give details of all foreign shareholders with more than 5% of the firm's stock.

Taxation: 30% national corporate tax, 3% local corporate tax, 33% capital gains tax.


Restrictions: 1. Foreign bank branches must have at least US$72.5 million in operating capital, and they will be able to conduct foreign and domestic currency business. Wholly foreign-owned banks and Sino-foreign joint venture banks must maintain a minimum registered capital of US$120.8 million, 60% of which must be held in local currency and 40% in hard currencies. 2. Non-bank financial institutions, wholly foreign-owned and joint venture firms, are required to have a minimum registered capital of US$84.6 million.

Taxation: no change.