Caixin
Dec 31, 2020 09:20 AM
CX DAILY

CX Daily: China and EU Reach Agreement on Investment Pact

China-EU /

China and EU reach agreement on investment pact

Chinese and European Union leaders concluded negotiations on a bilateral investment agreement that will expand European companies' access to the world’s second-largest economy, officials said at a virtual summit Wednesday.

The summit via video link involved Chinese President Xi Jinping, German Chancellor Angela Merkel, French President Emmanuel Macron, European Council President Charles Michel, and European Commission President Ursula von der Leyen. Germany holds the EU's rotating presidency.

Under the agreement, China would open up industries to EU companies including manufacturing, construction, advertising, air transport, maritime services, telecom and, to some extent, cloud computing, Reuters reported, citing unnamed EU officials.

Bonds /

China cuts red tape to spur growth in market-making for interbank bonds

China’s central bank took another step in restructuring the country’s interbank bond market by cutting red tape for market makers and delegating oversight in an effort to boost liquidity and streamline administration.

Financial institutions applying to become market makers (做市商) will no longer need to secure a permit from the central bank and will need only to sign an agreement with bond-trading platforms such as the National Interbank Funding Center (NIFC), the People’s Bank of China (PBOC) said (link in Chinese) in a notice Friday on its website. The National Association of Financial Market Institutional Investors (NAFMII), a self-regulatory body for the interbank market, will be given responsibility for supervising them.

Market makers play a crucial role in financial markets by providing liquidity and guaranteeing to buy or sell securities at publicly quoted prices. But although China now has the world’s second-largest bond market, it is still relatively immature, and market makers are much less important.

FINANCE & ECONOMY

credit

China Chengxin International Credit Rating Co. Ltd. was banned from rating new interbank bonds for three months

Ratings /

Yongcheng Coal default gets ratings agency a three-month ban

China’s bond market regulator slapped a three-month business ban on one of the country’s top credit rating companies, citing its role in the surprise Yongcheng Coal default that rattled China's bond market last month.

China Chengxin International Credit Rating Co. Ltd. was banned from rating new interbank bonds for three months over misconduct in rating services for state-owned Yongcheng Coal and Electricity Holding Group Co. Ltd. and its parent Henan Energy and Chemical Industry Group Co. Ltd. The National Association of Financial Market Institutional Investors (NAFMII), the interbank bond market’s self-regulatory body, disclosed the penalties Tuesday in a statement (link in Chinese).

Yongcheng Coal, to which China Chengxin gave its highest AAA rating, abruptly defaulted on a 1 billion yuan ($153 million) ultra-short-term bond, setting off a chain reaction that spread to other coal mining companies and local government financing vehicles in other provinces.

Defaults /

BMW’s Chinese partner cancels Hong Kong share pledge amid debt-dodging complaints

The parent of BMW AG’s main Chinese joint-venture partner canceled a plan to pledge shares in a Hong Kong-listed subsidiary for loans amid accusations that the state-owned automaker was deliberately failing to pay its debts.

Liaoning Xinrui Automotive Industry Development Co. Ltd., a wholly owned subsidiary of Brilliance Auto Group Holdings Co. Ltd., terminated a plan to pledge 30.4% of Hong Kong-listed Brilliance China Automotive Holdings Ltd., according to a Wednesday statement (link in Chinese) issued by Brilliance Auto.

The move by the Liaoning province-based company indicates that investor complaints have had an impact as Brilliance Auto defaulted on (link in Chinese) debts totaling 6.5 billion yuan ($995.2 million) as of Nov. 14, along with 144 million yuan in interest payments.

Investments /

Opinion: How China’s national security review would apply to foreign investments in financial services

On Jan. 18, 2021, the Measures on Security Review of Foreign Investments, jointly issued by the National Development and Reform Commission and the Ministry of Commerce, will be formally implemented.

"While there have been some references to national security review in respect to foreign investments in certain financial services under applicable regulatory rules, the security review measures have, for the first time, introduced 'important financial services' as one of the sensitive sectors," wrote partners of the financial institutions group at Fangda Partners, a law firm headquartered in Shanghai, in an article. "This means that foreign investments in targets falling within the scope of important financial services will be subject to submission to the Security Review Office for national security review."

The article highlights key implications of the security review measures on foreign investments in the Chinese financial services industry and highlights key issues about their application.

Quick hits /

Guangzhou rural lender scraps listing plan after corruption probes

From low base, China sees surge in locally transmitted Covid-19 cases

Personal data no longer up for grabs as regulators crack down on abuse

BUSINESS & TECH

PLANES

Short for One Two Three, OTT Airlines flew from Shanghai to Beijing for its maiden passenger flight Monday.

Airlines /

China Eastern unit completes maiden passenger flight with domestically built plane

OTT Airlines, a wholly owned subsidiary of China Eastern Airlines Corp. Ltd., completed its maiden passenger flight Monday with a Chinese-made ARJ21 as part of its plan to utilize domestically built planes, bolstering the nation’s main commercial aircraft-maker as it seeks to challenge international behemoths such as Airbus SE and Boeing Co.

Short for One Two Three, OTT Airlines flew from Shanghai Hongqiao International Airport to Beijing Capital International Airport, according to a statement on China Eastern’s website, with the majority of flights to eventually be operated with planes like the ARJ21 and the C919. Both of these planes are made by state-run Commercial Aircraft Corp. of China (COMAC), with China Eastern adding that it expects to scale up operation of these planes by 2030.

The debut flight comes as China seeks to leverage the nation’s vast air route network and massive domestic market to get a slice of the lucrative global industry for commercial aircraft.

Vaccines /

Sinopharm says Covid shot 79% effective and seeks general use in China

State-backed vaccine developer China National Biotec Group Co. (CNBG) said one of its shots is effective in preventing Covid-19 in 79.3% of people, allowing it to apply for authorization to market the inoculation for use in the general population.

The interim data shows the vaccine, which is already authorized for emergency use in China, is safe and people who took the shots in the trial all generated high levels of antibodies, according to a statement posted on the website of Beijing Biological Products Institute Co., a subsidiary of CNBG’s parent Sinopharm.

The effectiveness rate for the vaccine — one of two developed by CNBG —meets the minimum standard of 50% efficacy set by U.S. regulators for emergency authorization of Covid vaccines. However, vaccines using cutting-edge messenger RNA technology from Moderna Inc. and Pfizer Inc. have produced far better results.

Exclusive: Fosun will partner with Germany’s BioNTech to make Covid vaccine in China

Power /

Power generators grapple with debt as industry consolidation gathers steam

As part of a government-led consolidation plan that looks to reshape power generation in the country’s West, one of China’s five power giants will try to save a debt-ridden subsidiary through a restructuring and eventual transfer to a rival.

The asset at the center of the plan is Gansu Datang International Liancheng Power Generation Co. Ltd., which was previously undergoing a bankruptcy reorganization that has been terminated with the latest plan’s rollout. Operations at Gansu Datang have been suspended since last year.

Under the plan, Gansu Datang’s controlling shareholder Datang International Power Generation Co. Ltd. has accepted a debt-for-equity swap involving 93.6% of the 1.45 billion yuan ($222 million) it was owed by Gansu Datang. That move will lower Gansu Datang’s debt-to-asset ratio from 355.6% to 99%.

China Datang in $394 million deal for Indonesian power projects

5G /

China’s record 5G blueprint for 2021 electrifies telecom stocks

China unveiled plans to almost double its fifth-generation wireless capacity next year, sending shares of ZTE Corp. and other network gear makers soaring.

Carriers from China Mobile Ltd. to China Telecom Corp. will build upwards of 600,000 base stations to accelerate 5G coverage across major cities, Minister of Industry and Information Technology Xiao Yaqing said at an industry event, according to the official Xinhua News Agency. The envisioned rollout will come on top of at least 718,000 stations nationwide that transmit and amplify mobile signals.

Quick hits /

Top Singaporean developer’s woes grow over China investment

Satellite services firm seeks up to $506 million through share sale

Chinese chipmaker’s shipments surge 650% on strong domestic demand

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