Opening of the Capital market: Shenzhen pioneers with foreign bonds
IfW event: how genuine is China’s foreign aid?
Disinformation campaigns often miss their goal
China protests US-Taiwan rapprochement
Short-term climate commitments published
Small industrial companies receive tax breaks
Profile: Klaus Zenkel of the EU Chamber of Commerce in the South
Inflation as dessert: Spinach prices rise steeply
The financial world came up with some funny nicknames for their products. Dim sum is no longer just a delicious Guangdong specialty, but a special type of bond. Borrowers from southern China can use them to raise money on the international financial market. The city of Shenzhen now has issued such a bond to foreign investors – breaking new ground. Until now, municipalities were not allowed to borrow money from outside China.
Frank Sieren analyses why this bond is a historic game-changer for the opening of the Chinese capital market. Permeability will increase in both directions in the future. The yuan will thus become a global currency after all.
Our second analysis today also covers international capital flows. But the direction of capital flows is quite different. It is about China’s spending on development aid. Researchers investigated where in China it’s coming from, where it goes, and what strings are attached. Beijing, after all, gives out aid loans worth $85 billion a year.
An event organized by the Kiel Institute for the World Economy (IfW) now concludes: While loans to low-income countries are often granted under regular market conditions, the Chinese bureaucracy behind it is reminiscent of the Byzantine Empire.
And now for a public service announcement: There is a time change on the weekend. Please keep this in mind when you call your Chinese contacts on Monday: the difference will then be seven hours instead of six.
Your Finn Mayer-Kuckuk
Shenzhen is allowed to obtain funds on the global market
A big step for the opening of China’s financial markets: Shenzhen has become the first Chinese city to issue a bond to international investors. Until now, borrowing by Chinese municipalities has been an internal affair. Foreign participation could bring a new professionalism to local government financing. But it also ties the global financial market more closely to China – for better or worse.
The local government of southern China’s tech hub Shenzhen and the provincial government of the southern province of Guangdong now issued yuan offshore bonds in the special administrative regions of Hong Kong and Macau for the first time:
Shenzhen issued bonds worth €675 million to international investors;
the Guangdong provincial government issued €295 million worth of offshore bonds.
This is the first time that a city or provincial government from the mainland has received permission to issue such offshore bonds. Beijing gave the go-ahead for the Southbound Link to Hong Kong in late September. The northern route of the program, which allows international investors to trade in mainland China’s bond market, was launched in 2017. At the time, however, cities were not yet allowed to use such instruments.
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