Greater China 2009
IFR Asia magazine issue 606 special report (July 4 2009)Greater China 2009
China is having a good crisis. Its economic growth rate may have halved but the Chinese economy is still set to grow at 6.8% this year, a rate that would be blistering almost anywhere else in the world. Hong Kong and Taiwan are not doing as well but the mainland’s strength is a valuable prop.
China rides the storm
If China is struggling, it is the sort of struggle most countries would love to face. Sure, GDP growth almost halved between March 2007 and December 2008 – but that is from 13% to 6.8%. Even after its fall it was still much higher than any developed economy in boom-time full throttle.
From bust to boom to bust
The recovery in China’s property market has sparked a surge in property developers’ share prices and a lot of secondary fundraising. However, primary issuance from property names remains thin even though the IPO market is heating up. Many observers expect the market will correct downwards again and that sizable new issuances will only come in 2010.
China goes universal
When TPG’s Newbridge Capital arm agreed to sell its stake in Shenzhen Development Bank to insurer Ping An, international commentary focused on the successful exit by a western private equity firm from a Chinese business. But there was another, less remarked trend in evidence too: the growing interest in the universal banking model in China.
Taiwan’s back-door liberalisation
Taiwanese depositary receipts are Taiwan’s equivalent of B-shares – illiquid and largely ignored. That status is changing however, largely thanks to a rules easing introduced this year that allows companies to use funds raised from TDR listings to invest in China. The liberalisation flies the flag for Taiwan’s larger push for economic integration with the mainland.
Lending boom rolls on
China’s lending explosion is likely to continue into the second half of the year, causing concerns about inflation and leading to speculation that regulators may implement measures to dampen the country’s sizzling loan market.
On track for offshore record
The Hibor/Libor basis swap drives foreign borrowers’ issuance in Hong Kong dollars and a favourable basis situation in 2009 has ensured Hong Kong remains an issuing venue of choice more than any other domestic bond market in Asia. This year’s solid pace looks set to make 2009 the biggest yet for offshore issuance in Hong Kong.
Taiwan provides a lifeline
Taiwanese banks, flush with cash, have become a useful source of funding for borrowers around the world. It’s a happy coincidence of interests: a source of revenue and loan growth for the banking sector, and a well of capital for overseas banks and companies starved of many of their usual funding outlets.
JVs: the end-game
Every bank seems to have a Sino-foreign JV on the boil these days. However, the offshore institutions are still figuring this market out, and most do not have access to brokerage licences. All the offshore institutions are capped at a minority ownership, and all face challenges of having to repatriate cash out of China.