China Direct

Simmons & Simmons advises on China-Kuwait finance deal

 

CBI member Simmons & Simmons advised the Kuwait Investment Authority on establishing an investment platform in China. The firm helped KIA obtain a license to set-up a wholly foreign-owned enterprise (WFOE) dedicated to asset management in Shanghai. KIA is one of the world’s oldest sovereign wealth funds, and is also one of the world’s largest institutional investors with more than $500 billion in assets.

The Simmons & Simmons team was led by Melody Yang, a funds and corporate partner based in Beijing, who said: “China’s financial sector is constantly opening up to foreign investors. We have seen more institutional investors like KIA as well as asset managers coming to China to expand their asset management business here. We are very pleased to advise on this area and to further contribute to their ambitions in China.”  

Ms. Yang and her team coordinated the deal with local government officials from Shanghai Lujiazui Financial City Development Bureau. The deal broke new ground in China since few sovereign wealth funds are allowed to run their own asset management business company in China through an asset management WFOE. Kuwait is the first foreign country to be granted this license since a WFOE license is usually only granted to companies.

Negotiations started two years ago and were far-reaching since KIA hopes to use its Shanghai platform to manage all of KIA’s assets in China, so that it can operate at full capacity. Many other international asset management companies with China operations have decided to forfeit parts of their global business in order to obtain a license to practise in the country at least in-part. However, not only did Simmons & Simmons manage to negotiate a deal allowing KIA to offer its full range of services in China, the license contains a clause extending KIA’s permissions within China to the Investment Office of Kuwait, who is allowed to practise investment management in China on behalf of KIA.

The Kuwait Investment Authority intends to use its Shanghai base to trade shares offered in the Chinese stock exchanges and acquire bonds and direct acquisitions in China companies – particularly within the banking sector and the information technology sector.

 

Linklaters China Summary 2018

CBI member, Linklaters has published a detailed summary of what took place across their key practise areas in China during 2018, and what to expect from the PRC over the coming year.

According to William Liu, Linklaters Managing Partner in China: “2018 saw many significant changes in the foreign investment and financial markets regimes in China, accompanied by various regulators tightening their approach to enforcement.” Other developments across Linklaters key practise areas in 2018 and for 2019 include:

Banking:

• Control of local government debt. The Chinese authorities took broad measures to deleverage local governments and state-owned enterprises to clean up hidden debt.
• Restrictions on foreign debt. Insurance groups in particular were reined in from freely providing outbound guarantees for offshore debt, and real estate developers were restricted from using foreign debt towards real estate projects. Capital Markets:
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• Shanghai-London Stock Connect. Intensive preparations for the impending link-up between the London and Shanghai stock exchanges were made in the second half of 2018 and are continuing. The scheme will enable issuers in each side’s home market to issue depository receipts in the other market.
• China releases highly anticipated provisional Panda bond guidelines. Foreign issuers have been waiting for further clarity on the steps the Chinese authorities would take to align China’s bond market with the international bond market.
• Chinese regulators encourage banks to issue innovative loss absorbing bonds. Detailed rules and guidance still need to be published, but the People’s Bank of China is encouraging the issue of bonds to replenish capital by financial institutions in the banking industry. Competition:
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• Antitrust regulatory activism. 2018 saw a steady increase in the number of merger control cases reviewed by Chinese regulators. Sanctions against a record number of 10 cases for failure to file were imposed
• Corporate:
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• Outbound investment. In March and May, respectively, the National Development and Reform Commission published a catalogue of sensitive industries for which outbound investments would be subject to more stringent requirements.
• Foreign investment reform. In July the “negative list” of restrictions on foreign investment were updated. Newly liberalised sectors include, aircraft manufacturing, power grid and gas operation, and by November, international freight forwarding agencies will no longer need to apply for a license from the Ministry of Transport. Financial Regulation:
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• Expansion of RMB. Since June, offshore investors who carry out financial investment in the PRC securities markets can hedge their currency risks by entering into derivative transactions with qualified onshore and offshore banks.TMT / Data Privacy:
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• Personal data. Voluntary best practise guidelines on the collection, storage, usage and processing of personal data came into effect in May. They require consent from individuals to be obtained in order to collect or process personal data.
• Cybersecurity compliance monitoring. Chinese authorities issue guidelines for the inspection of providers and users of internet services in the PRC. The public security bureau may carry out on-site or remote inspections to ascertain whether cybersecurity responsibilities have been fulfilled.
• Please find the full detailed report here.
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Clifford Chance advises Bank of China on first Greater Bay bond deal

 

CBI member, Clifford Chance advised on Bank of China’s first multi-currency, multi-tranche bond deal to support the development of the Greater Bay Area in southern China. The deal involved four currencies and five tranche transactions and was valued in USD at $1.83 billion.

Clifford Chance advised on a total of 5 transactions, these were:

• Bank of China, Hong Kong Branch on the issuance of its RMB 1 billion 4.45% notes due 2021;
• Bank of China, Hong Kong Branch on the issuance of its HK$ 4 billion 3.3% notes due 2020 – which was the largest public bond issue in the HK$ of last year;
• Bank of China, Macau Branch on the issuance of its US$ 550 million floating rate notes due 2021;
• Bank of China, Macau Branch on the issuance of its US$ 250 million floating rate notes due 2023;
• Bank of China, Macau Branch on the issuance of its Macanese Pataca (MOP) 3 billion 3% notes due 2020 – the first public Macanese Pataca bond issue in the offshore capital markets.

Head of Capital Markets for Asia Pacific, partner Connie Heng led on the deal and said: “We [Clifford Chance] are honoured to be working with Bank of China on these landmark transactions. This transaction highlights the exceptional expertise and bench strength of our market-leading Capital Markets practise.”

This deal was the second time Clifford Chance has advised Bank of China, having previously acted in the past on Bank of China’s previous issuances medium term note programme. The proceeds from the transactions will be used to finance various loan projects in the Greater Bay Area, such as the recently opened Hong Kong – Zhuhai – Macau Bridge.

The Greater Bay Area is a Chinese government initiative to link the cities of Hong Kong, Macau, Guangzhou, Shenzhen, Zhuhai, Foshan, Dongguan, Huizhou, Jiangmen and Zhaoqing into an economic and business hub. The Bay is also one of the starting points for China’s Belt & Road Initiative.

Please read more here.

Making sense of new China Foreign bank regulations - Norton Rose Fulbright

CBI member, Norton Rose Fulbright have published a helpful guide to the China Banking & Insurance Regulatory Commission (CBIRC) Regulations on Foreign Invested Banks, which have just been released for public consultation.

The latest draft includes amendments to the (Doc.1) Detailed Rules for the Implementation of the Regulation on the Administration of Foreign-Funded Banks. The aforementioned draft sits within a wider set of draft amendments, known as the (Doc.2) Regulation on the Administration of Foreign-Funded Banks.

Published a few days before the (Doc.1) Detailed Rules for the Implementation…, together they form the (Doc.3) Draft Foreign Investment Enterprise Bank Rules (Draft FIE Bank Rules).

Complicated introduction aside, the Draft FIE Bank Rules are significant because the document is the first ever offering from the CBIRC to clearly set out how the principles of “national treatment” and “same market entry and administrative standards” are managed through legislation within the banking sector.

A commonly-cited market access issue within the financial services sector for foreign companies is the fact that Chinese regulators are reluctant to provide clear, published and publicly available definitions on how different established ‘principles’ should be managed practically.

Norton Rose Fulbright have released a useful and short guide covering the Draft FIE Bank Rules and where they see significant movements that are of note to the foreign banks who have already opened wholly-owned subsidiary banks and/or branches in China.

This set of regulations will take on more significance, as more foreign banks announce, and take steps to, own their joint ventures – partnerships with which they may have already established branches.

Norton Rose Fulbright’s Key Points:

• A foreign bank is allowed to hold in China (a) wholly-owned subsidiary bank(s) and branch(es) at the same time, or (b) joint venture bank(s) and branch(es) in parallel at the same time. This is in line with the “one control or two participations” principle applied to domestically-funded commercial banks, i.e. one bank is only allowed to control one domestically-funded bank or participate into no more than two domestically-funded banks in the same nature.
• FIE Banks (i.e. wholly-owned subsidiary banks and joint venture banks) and foreign banks’ Chinese branches, in synergy with their parent banks, are allowed to provide comprehensive financial services to their Chinese clients to support them to issue bonds, launch IPO, conduct M&A and seek financing overseas. This seems to suggest that FIE Banks and foreign banks’ Chinese branches, together with their parent foreign banks, can provide investment banking services to Chinese clients for their overseas transactions without any specific licence or permit from CBIRC. Meanwhile, foreign banks who hold both FIE Banks and branches in China are required to ensure:

• Their Chinese branches shall always meet the prudential conditions set out by CBIRC.
• The FIE Banks and Chinese branches have distinguished functions and corporate governance, separate management, business, staff and information risk segregation mechanisms.
• Any business conducted between the FIE Banks and/or branches with their foreign parent banks shall comply with the business principles and shall not be subject to the terms and conditions which are more favourable than those offered to non-connected parties.

 

• Their Chinese branches can only conduct wholesale business, i.e. business with entities, not individuals, if a FIE bank is set up in China.In addition to these 6 main points, the Draft FIE Bank Rules also cover: amendments to reporting RMB requirements for conducting derivative business, approval requirements for conducting business in RMB, various thresholds for regulatory asset/debt ratios, as well as the procedures behind the review and inspection requirements of foreign banks operating within China. As noted by Norton Rose Fulbright, although the implementation of the new rules, if published (which would be a major step in itself), is still subject to rest, at least these Draft FIE Bank Rules demonstrate the commitment made by the Chinese government to further open the banking sector to foreign investment. Furthermore, it demonstrates that the CBIRC is trying to improve the consistency of the regulatory environment, whilst developing it in a more transparent way.

Please read more here.

Pinsent Masons MPillay to launch consulting service in Singapore

This represents another step in the firm's expansion of innovative services, which saw CBI member Pinsent Masons MPillay take the Vario model to Australia in July 2017. The firm is witnessing increased client demand for its flexible lawyer solution globally and is enhancing its services for clients across APAC.

Pinsent Masons MPillay will formally launch this service in mid 2018 led by Kate Cauldwell-Hunt who will transfer from the UK. Kate will be working closely with Vario Australia to engage with organisations operating within and into Singapore, whilst building the local network of consultants. Pinsent Masons MPillay plans to appoint 30 consultants to the Singaporean bench over the coming six months.

Please read more here.

 

DLA Piper wins China Business Law Awards

CBI Member DLA Piper is delighted to announce it has received four awards from China Business Law Journal’s China Business Law Awards 2017-18, in the categories of Employment, Intellectual Property (Trademark and Copyright), Taxation and Shipping.

The China Business Law Awards are based on nominations from law firms, alongside comments received from China-focused corporate counsel, senior managers and legal professionals around the world.

To determine the winners, researchers consulted with law firms' clients to evaluate each firm’s landmark deals, cases and other notable achievements over the past year. The awards are designed to showcase the diversity of talent in the legal services market, while offering assistance to in-house readers as they consider and select their legal advisers.

Please read more here.

Simmons & Simmons advises Silicon Valley-based Vobile Group in HK Offering

CBI member Simmons & Simmons has advised Vobile Group Limited (Stock code: 3738) on its initial public offering and listing on the Main Board of the Hong Kong Stock Exchange.

Simmons & Simmons acted as issuer's Hong Kong counsel to Vobile Group Limited. Silicon Valley-based Vobile Group is the leading provider of online video content protection services. Priced at HK $2.58 per share, the Global Offering raised approximately HK$143.5m (subject to the exercise of the over-allotment option) with an initial market capitalisation of approximately HK$1.1bn.

Please read more here.

Clifford Chance advises on China Literature's US$1.1 billion IPO

CBI member and leading international law firm Clifford Chance advised the joint sponsors and underwriters including Morgan Stanley, Bank of America Merrill Lynch and Credit Suisse on China Literature's US$1.1 billion (HK$8.3 billion) initial public offering on the Hong Kong Stock Exchange.

The deal received exceptionally strong demand in all three tranches of the offering. The retail tranche was more than 625 times oversubscribed attracting over 400,000 applications and application monies of over US$66 billion (HK$520 billion), making it the second most oversubscribed deal in Hong Kong. Both the preferential offering for existing Tencent shareholders and the international offering for institutional investors were also significantly oversubscribed.

Please read more here.

 

CBI Sterling Assets Report on China Roadshow

 

  

The inaugural Sterling Assets Report has been on a pan-China Roadshow since its launch on Thursday 02 November in Beijing.

The objective of the Roadshow was to circulate the Report's key findings to the diverse and dynamic UK business network in China and encourage policymakers and local officials to use the Report to promote greater UK-China business investment. 

Additionally the Report was received by business stakeholders the CBBC, British Chambers, Department of International Trade (DIT) and a visiting delegation of the All Party Parliamentary China Group in Guangzhou.

China Direct would like to sincerely thank HM Consuls Cecile Elbeleidi in Chongqing, HM Consul Karen Maddocks in Guangzhou, HM Consul John Edwards in Shanghai and HM Consul Nick Whittingham in Wuhan for their support.

 

    

Please note that China Direct will have the Chinese language version of the Report available for review and download by mid-November.

Kindly find the original Report and Executive Summary attached below for your reference.

Download CBI China Sterling Assets Report

Download Sterling Assets China Executive Summary

Thank you. 

  

Dentons secures important arbitration win for the People's Republic of China

Global law firm and new CBI member Dentons has secured a landmark win for the People’s Republic of China, represented by the Ministry of Commerce of People’s Republic of China, at the very beginning of its first investment treaty arbitration proceeding.

On 9 March, an ICSID arbitration tribunal dismissed all claims against China in the case of Ansung Housing Co. Ltd. v. People's Republic of China (ICSID Case No. ARB/14/25) regarding a property development project.

The tribunal recognized the claims as manifestly without legal merit, and awarded China legal costs and post-award interest. The tribunal based the dismissal on the treaty’s requirement that any claim be brought within 3 years of the claimant’s first knowledge of loss. China applied for dismissal of the claim shortly after the arbitral tribunal was constituted in September 2016.

The application for dismissal was heard in December 2016, at the first meeting between the tribunal and the parties. After hearing the parties’ arguments, the tribunal announced at the hearing that it had decided to dismiss all claims.

Please read more here