Financial regulation

China backs plan to set up financial court in Shanghai as crackdown on freewheeling firms continues

Shanghai Finance Court will also boost city’s global financial hub ambitions

PUBLISHED : Thursday, 29 March, 2018, 7:03am
UPDATED : Thursday, 29 March, 2018, 7:02am

China’s leadership has endorsed a plan to establish a specialised court for finance in Shanghai, following an intensified crackdown on freewheeling asset buyers, to weed out unscrupulous financial conglomerates.

The Communist Party of China’s Leading Group for Comprehensively Deepening Reforms announced that the court will aim to “better serve the real economy, ward off financial risks and deepen financial reforms”, after a meeting chaired by President Xi Jinping on Wednesday, according to state news agency Xinhua.

“The decision echoes legal professionals’ calls to set up a court that is able to better handle finance-related lawsuits,” said Yan Yiming, a Shanghai-based lawyer. “But it is more important for the judges to respect the rule of law, so as to improve the country’s legal system and bolster global investors’ confidence in the mainland economy.”

Anbang’s ex-chief on trial for fraud and embezzling US$12b as China cracks down on freewheelers

The court, called Shanghai Finance Court, has been in the works for about two years, as part of the city’s efforts to hone its image as a global financial hub, according to two judges with the city’s intermediate courts.

Shanghai plans to transform itself into a global financial centre by 2020, and the announcement by the Communist Party’s high-profile team is being viewed as a symbolic move to push ahead with this ambition.

Tribunals that specialise in financial offences and finance-related civil cases at all levels of the city’s courts will be merged to set up the court, according to the judges.

Lu Hongbing, a deputy director of the All China Lawyers Association, told the Legal Evening Post this month that surging cross-border financial transaction values, thanks to channels such as the Shanghai and Hong Kong stock connect scheme, had increased the need for judges’ expertise and their knowledge base.

The decision echoes legal professionals’ calls to set up a court that is able to better handle finance-related lawsuits
Yan Yiming, lawyer

Lu, a deputy to the Chinese People’s Political Consultative Conference, was among the advocates for the establishment of a finance court.

The Leading Group said in a statement on Wednesday that regulation on financial and non-financial institutions’ asset management and investments will be strengthened to ensure financing is not misused with money flowing to risky areas.

Beijing is landing a blow to freewheeling conglomerates that have gone on an aggressive spree of asset purchases around the globe, accumulating massive debts in the process.

Companies such as HNA Group, Anbang Insurance Group and CEFC China Energy were forced to sell assets to repay debts amid tightening supervision of their financing and operations.

Shanghai to expand access to overseas funding for companies as part of plan for free port

Also on Wednesday, Wu Xiaohui, the founder and chairman of Anbang, was put on trial at the Shanghai No 1 Intermediate People’s Court for illegal fundraising and the infringement of investors’ interests.

The Leading Group also said the operating guides for reforms at three free-trade zones in Guangdong, Tianjin and Fujian had been endorsed, but it did not elaborate on what measures will be taken to support the further development of these zones, which are pilot areas for drastic economic reforms.