Financial Services Talking Points | 04/05/2018

In Today’s Talking Points: Baidu to Sell Part of Its Financial Services Unit for US$ 1.9 Billion; China’s Service Sector Grows in April; Set To Buy 33% Stake in Allianz Insurance’s China Business; China Pledges to Open Up Financial Markets, as US Trade War Looms

Baidu to Sell Part of Its Financial Services Unit for US$ 1.9 Billion

Baidu Inc Has stated it plans to sell a majority stake in its financial services business to a consortium led by TPG Capital for over US$ 1.9 billion. The move sets Baidu up to acquire further funding to take on established financial technology (fintech) firms in China. The 1.9-billion-dollar investment will allow Baidu to perform more competitively with its competitors Alibaba and Tencent who have both recently entered the Chinese fintech arena. The move is necessary for Baidu due to the Chinese Government’s recent tightening on the capital market in an attempt to cut down on shadow-banking and risky loans. The financial services division of Baidu includes Baidu wallet, a mobile payment system and wealth management system widely utilised around China. The deal will leave Baidu with around 42% of its financial services division and will allow for more room for diversification in the industry.

Read more on Reuters

China’s Service Sector Grows in April

China’s service sector growth picked up in April as new business and job growth grew at an increasing rate.  The service sector growth is significant as Chinese officials are likely relying on the services sector in order to maintain a high level of economic growth throughout this year. The sector already accounts for more than half of China’s economy, as rising wages over the last 10 years have allowed Chinese consumers to shift spending from consumption to the services sector. Despite the rumblings of a trade war with the US, the growth in the sector sends positive signals out through the domestic economy. Economists expect China’s economic growth to ease slightly to 6.5%, in line with government targets, but below the 6.9% growth seen in 2017 which beat forecasts.

Read more on CNBC Set To Buy 33% Stake in Allianz Insurance’s China Business in Order to Increase Presence in Financial Services Sector

China’s second largest e-commerce company will invest US$85 Million (RMB537 million) in Allianz Insurance China, acquiring a 33% stake and becoming their second largest shareholder. The deal is tentatively agreed, however to proceed it requires approval from China’s Banking Regulator Commission. Further to the investment, and Allianz have agreed a partnership going forward to build a digital insurance platform to meet the evolving needs of Chinese consumers. The move comes as JD aims to increase their presence in the e-commerce arena and increase competitiveness against their rivals Alibaba and Tencent, both of whom have made similar acquisitions in recent months.

Read more on China Money Network

China Pledges to Open Up Financial Markets and Treat Foreign Capital Equally, as US Trade War Looms

The Central Bank of China released a host of new measures on how to treat foreign capital in order to paint itself as an open economy and bastion of globalisation as the US-China trade war looms over the economy. The new measures include pro-trade legislation such as removing foreign ownership caps for banks, allowing foreign investors to take a maximum 51% of equity in futures companies, brokers and fund management firms. The People’s Bank of China also pledged to remove foreign equity ceilings completely within three years. The new measures are designed to ease trade tensions with the US, however there are still many sceptics questioning the authenticity of the legislation.

Read more on South China Morning Post