EU asks China to meet its globalization promises
EU asks China to meet its globalization promises
Chinese President Xi Jinping’s speech at the World Economic Forum (WEF) in Davos in January painted a picture of China as an open economy in contrast to a rising wave of global protectionism.
However, the Chinese government has faced increasingly fervent criticism from foreign business groups and governments alike, who say China has done little to remove discriminatory policies and market barriers that favor Chinese companies.
EU Ambassador to China Hans Dietmar Schweisgut said Europe was impressed by Xi’s defense of globalization and open markets in Davos, calling them important messages.
“They are important also because they have raised expectations,” Schweisgut told a press briefing. “We obviously also hope that China will implement domestically what it is preaching globally.”
Schweisgut’s comments come days before next week’s “One Belt, One Road” (OBOR) forum, which will draw heads of state to Beijing to discuss Xi’s plan to expand trade links between Asia, Africa and Europe through billions of dollars in infrastructure investment.
China has repeatedly rebuffed concerns that the plan is part of a grand strategy to expand its economic interests and seek global dominance, saying that while it is a Chinese-led scheme anyone can join to boost common prosperity.
Representatives from more than 100 countries will attend the summit, China’s biggest diplomatic event of the year, though only one leader from the Group of Seven (G-7) industrialized nations, Italian Prime Minister Paolo Gentiloni, is set to join.
Jyrki Katainen, EU Commission vice president for jobs, growth, investment and competitiveness, will attend for the EU.
Schweisgut said Europe supported carefully vetted initiatives to upgrade infrastructure in Eurasia, which could unleash “growth potential for all.”
“It is in our view something that should also be based on open platforms with sustainability in terms of financing, market-based principles, like open and transparent tender procedures. All of these are very important principles to make it succeed,” Schweisgut said.
China will pay close attention to the impact of non-bank financial institutions on financial stability, which could have global repercussions, according to a central bank working paper published on Tuesday.
In recent years non-bank institutions such as trust and investment companies, or fund and asset management firms have expanded their activity — much of it a less regulated form of lending — even as policymakers have tried to rein in leverage in the Chinese economy.
“Though banks still dominate China’s financial system, non-bank financial institutions have considerable influence as well,” the paper published on the People’s Bank of China (PBoC) website said.
The paper analyzed the impact of changes in China’s stock market and financial sector on developed countries — the US, Britain, Germany and Japan.
“China’s financial sector exerts considerable influence on global financial markets, especially on the Japanese financial sector,” it said.
The central bank has gingerly raised short-term rates recently to contain financial risks and encourage companies to deleverage, though economists expect authorities will move cautiously to avoid hurting economic growth.
SABIC prepares to meet investors to offer bond
- The Kingdom’s petrochemical giant will be meeting investors in London, New York, Los Angeles and Boston from Sept. 25
- SABIC has also confirmed the appointment of BNP Paribas and Citigroup as global coordinators on the sale
LONDON: Saudi Basic Industries Corp. (SABIC) is preparing to offer its dollar-denominated unsecured bond to the global market with investor meetings due to start this week.
The Kingdom’s petrochemical giant will be meeting investors in London, New York, Los Angeles and Boston from Sept. 25, according to a filing on the Saudi stock exchange on Tuesday.
The Saudi company is likely to be keen to tap into the heightened international interest in the Kingdom’s financial markets following the lifting of some restrictions on foreign investors’ activities at the start of the year.
SABIC has also confirmed the appointment of BNP Paribas and Citigroup as global coordinators on the sale, alongside HSBC Bank, Mitsubishi UFG Securities EMEA and Standard Chartered Bank acting as joint lead managers, in its Tadawul note.
The proposed issuance has been well-received so far by analysts with ratings agency Moody’s Investor Service assigning an ‘A1’ rating to the proposed senior unsecured notes to be issued by the financial vehicle, referred to as SABIC Capital II, and guaranteed by SABIC itself.
“SABIC’s A1 rating reflects its strong business position in the chemical sector and its ability to weather industry volatility, particularly given its healthy operational cash flows and conservative liquidity profile,” said Rehan Akbar, a senior analyst at Moody’s, in a note on Monday.
The bond is anticipated to be used in part to refinance an existing SR11.3 billion ($3 billion) one-year bridge loan raised in January this year to fund the company’s 24.99 percent stake in the Swiss chemical company Clariant, according to the Moody’s note. All regulatory requirements were completed on this acquisition earlier this month.
Cash proceeds from the bond may also be used to repay a $1 billion bond due on Oct. 3, according to Moody’s.
On Tuesday SABIC confirmed that the bond will be used mainly to refinance “outstanding financial obligations” of the company and its subsidiaries.
Analysts at rating agency S&P Global were also upbeat about SABIC’s outlook, with research published on Monday stating that the company has “strong profitability” via its KSA operations and a “strong” liquidity position.
“The debt issuance is helpful for the credit profile in the sense that it extends the company’s debt maturity profile and strengthens its liquidity position,” said Tommy Trask, corporate and infrastructure credit analyst at S&P Global.
The agency currently assigns the petrochemical firm an ‘A Minus’ rating, with a “stable outlook,” which it said reflects its “view on the sovereign as well as its expectations that SABIC will maintain high profitability under current benign industry conditions.”
S&P Global’s report said margins in the global chemical industry will “largely stabilize in 2018 following several years of improvement, attributable to the increase in commodity chemical capacity.”
However, it also warned that a key risk to credit quality is
the trend for mergers and acquisitions within the sector and the “potential negative impact on credit metrics from funding them with debt.”