CHINA BANKING AND FINANCE NEWSLETTER
Vol. 3, No.5 - April 4, 2002
TOPICS THIS ISSUE:
- BNP Paribas Wants to Establish Joint Venture
- China National Petroleum To Invest Seven Hundred Million USD
- Shell Joins Largest JV in China
- China Sets Tighter Scrutiny for Use of T-Bond Funds
- Competition
BNP Paribas Wants to Establish Joint Venture
The joint-venture investment bank that BNP Paribas wants to establish in Shanghai hopes to extend into other cities once it secures regulatory approval.
BNP Paribas Peregrine plans to have branches in Beijing, Wuhan and possibly in Shenzhen."
The French banking group is represented in the venture by BNP Paribas Peregrine, its Asian investment-banking arm.
BNP Paribas hopes to obtain regulatory approval this year.
Foreign investors are allowed to take up to a 33 per cent stake in joint securities firms within the first three years of China's membership in the World Trade Organization, rising to 49 per cent afterwards.
The venture would target Chinese firms with mainland and overseas fund-raising ambitions, international companies wishing to float in China and high-caliber mainland companies with domestic listing plans.
BNP Paribas Peregrine was one of the first foreign investment banks to reap a bonanza from the overseas fund-raising spree undertaken by mainland banks.
Over the years, the bank has been involved in the initial public offerings of 43 per cent of the H-share firms in the Hang Seng China Enterprise Index and 41 per cent of the red chips in the Hang Seng China-Affiliated Corporations Index.
(Source: SCMP.Com)
China National Petroleum To Invest Seven Hundred Million USD
China National Petroleum Corp plans to invest about US$700 million in a proposed US$2 billion Sino-Russian pipeline project expected to be operational by 2005.
The 2,400km pipeline will ship Siberian crude to China, with most of the oil set to be used by refineries in the Daqing oil-producing region in northeast China, industry newsletter China OGP reported. It said Russia's financial commitment to the project was expected to be US$1 billion. A feasibility study would be completed in July or August.
It would take a further 10 months for both governments to approve the project, and then construction could begin.
State-owned CNPC, China's top oil company and parent of Hong Kong-listed PetroChina, was the first of the country's three oil majors to cross foreign borders in search of oil.
The company last year pumped 6.53 million tons of crude from foreign projects, of which about 50 per cent came from Sudan. Domestic output during the same period was about 106.5 million tons.
Industry sources said the oil giant planned to reap as much as five million tons of crude oil from Algeria by 2005, making the North African state its second-biggest overseas producing asset.
CNPC has turned its attentions to Algeria following its success in Sudan, where it owns a 40 per cent stake in the 12 million ton per year Unity field.
CNPC hopes to win a contract in the Sbaa basin in southern Algeria to produce crude and build a one million ton per year refinery.
Apart from Algeria and Sudan, which faces United States sanctions, CNPC also has assets in the politically isolated state of Myanmar.
(Source: SCMP.com)
Shell Joins Largest JV in China
A long-awaited US$4 billion petrochemical complex will be built by the China National Offshore Oil Corp (CNOOC) and Shell Chemicals -- a member of the Royal Dutch/Shell group -- in Guangdong Province.
Wei Liucheng, CNOOC president, and Evert Henkes, Shell Chemicals' CEO, signed a contract on Saturday for China's largest foreign-funded project in the presence of Li Peng, chairman of the Standing Committee of the National People's Congress.
The scheme will see the production of 2.3 million tons of high-grade petrochemical products every year. China imports 3-4 million tons of such petrochemical products each year to meet domestic demand, which continues to rise. The joint venture, which should reduce the dependence on imports, is expected to go into operation in 2005.
The joint venture, whose yearly sales are expected to be US$1.7 billion, will be built in the Daya Bay Economic and Technical Development Zone in Huizhou, about 80 kilometers from Hong Kong.
The plant, which CNOOC and Shell executives promised would conform to environmental standards, is expected to boost the economy in Guangdong, especially in Huizhou, which is well known for its ambitious programs for rapid economic growth and social development.
The joint venture, Shell's largest investment in a single project, is expected to create at least 1,500 jobs. Shell, which has co-operated with CNOOC for two decades, has already invested US$1 billion in China, excluding investment in this venture.
Major construction work is expected to kick off in early 2003.
China Petrochemicals Investment Ltd, in which CNOOC has a 90 per cent stake, has half of the shares in the joint venture and Shell Nanhai Ltd - a subsidiary of Royal Dutch/Shell group - the rest.
The project was first conceived at the end of the 1980s. After marathon negotiations between Shell and CNOOC, the two partners signed a framework agreement in 1998.
(Source: China Daily)
China Sets Tighter Scrutiny for Use of T-Bond Funds
A ministerial task force is planning to place the capital raised from treasury bonds under strict scrutiny to tighten supervision of its utilization and management.
The inspection campaign was announced in a statement over the weekend in Wuhan, the capital of central China's Hubei Province, by the State Development Planning Commission (SDPC), the Ministry of Supervision and the Ministry of Finance.
The task force will tighten supervision and management over the use of the capital, project construction and quality of engineering and severely deal with any misappropriation of these funds, so as to avoid their ineffective use and redundant construction according to a government spokesman.
The Chinese government encourages individuals and organizations to report illegal activities in projects financed with capital from treasury bonds.
Another priority of the task force is to stop the embezzlement of construction funds or random levies made upon them.
China has resorted to a pro-active fiscal policy as its main tool of macroeconomic management since 1998 and treasury bonds have played an important role in promoting economic and social development.
A total of RMB 150 billion (18 billion U.S. dollars) worth of long-term treasury bonds was issued in 2001, bringing the total in bond issues from 1998 through 2001 to RMB 510 billion (61.4 billion U.S. dollars).
(Source: People's Daily)
Competition
On March 21, the New York-based financial giant Citibank, a pioneering US bank that began operating its business in China 100 years ago, was granted the first license to offer foreign-exchange services in China and began operations in Shanghai.
A week later, the Hong Kong and Shanghai Banking Corporation (HSBC) became the first overseas bank to run similar services in Beijing.
As China's central bank gave the green light to overseas banks to provide Chinese customers with forex services early this year, the foreign banks are not the only ones to move into China.
On March 25, China UnionPay Co Ltd set up in Shanghai with the aim of building a unified national electronic bank network to allow any bank card holders to use their card at any terminal throughout the country. The big four State-owned commercial banks are among the first 85 domestic shareholders.
The rationale behind the recent moves of the domestic banks is clear: The World Trade Organization (WTO) time schedule for China's banking sector is pushing them into a race for survival and eventual success in the huge Chinese market.
Under its commitment to the WTO, China has agreed to gradually ease geographic and client restrictions on overseas banks. Restrictions on overseas banks to conduct foreign exchange business will be completely erased this year. Within two years of WTO entry, overseas banks will be allowed to provide local-currency services for local corporate clients and will be given permission to operate full domestic currency business within five years.
The five-year transitional period will cushion domestic banking institutions from fatal hits, and the question is how fast they can get ahead.
If domestic banks can hold the big private credit market with the five-year head start, they will be better positioned to withstand the international competition.
(Source: People's Daily)
Lehman Lee & Xu
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