China's central bank, the People's Bank of China (PBOC), will focus solely on drafting and enforcing monetary policies while its original functions of supervising and administering the banking industry will be taken over by the newly-established China Banking Industry Supervision and Administration Commission. From February 2, banking institutions, including commercial banks, urban and rural credit cooperatives and policy banks will be subject to supervision from the Commission and its local branches. The same applies to non-banking financial institutions, which include financial assets management companies, trust and investment companies, financial companies, and financial lease companies

New rules that allow specially approved offshore investors to buy yuan-denominated A-shares were announced in early November. To be accepted as a qualified foreign institutional investor, a financial institution must have had a minimum of US$10bn in assets under management in its past financial year. Fund management companies must have had at least five years of operational experience, while insurance companies and brokerages are required to have a minimum of 30 years experience and paid-in capital of at least US$1bn. Banks have to be among the world's top 100 institutions. In addition, capital invested in closed-end funds � the preferred form of investment � can only be repatriated after a minimum of three years.

Speaking at the 16th Communist Party Congress, two of China's economics ministers promised domestic private firms treatment closer to that accorded to state enterprises and foreign-invested firms.

Zeng Peiyan, minister of the State Development Planning Commission, said that his department would give approval to bond issues by financially sound private firms of good standing – a privilege hitherto reserved for the government and state firms. Mean while, Li Rongrong, minister of the State Economic and Trade Commission, said that, with reform, banks could one day make lending decisions without distinguishing the kind of ownership of the borrower.

Environmental impact assessment reports must be submitted to the National Environmental Protection Agency (NEPA) for all construction projects, under a new law that will be introduced in September 2003, South China Morning Post said. Applicants will also be required to hold public hearings before putting forward their reports. Those who do not follow the procedure could be fined amounts up to Yn200,000. Local landuse would also have to include an environmental impact statement.

The newspaper commented that the new law would be a significant victory for NEPA over opposition from other ministries who argued that it would encroach on their jurisdictions and from local governments who said that it would expand the powers of central government.

A statement by Zhang Zuoji, Minister of Labour and Social Security, has set out the government's policy for China's pensions and social security fund, the Financial Times said. The fund would be financed in three ways: by transferring state shares into the fund in order to accumulate the dividends paid by them; by selling state shares to foreign investors; and by transfers from central government. A ceiling of 50 per cent of the fund's total assets would be held in bank deposits and treasury bonds, while a further 10 per cent could be directly invested in enterprises and the remainder could be put into the stock market.

The minister added that foreign joint venture funds could help manage the social security fund, which amounted to Yn60bn, but gave no indication of when the rules would be changed to permit this.