To see the digital version of this report, please click here.
To see the digital version of this report, please click here.
Citigroup’s coverage of all aspects of the Australian bond business paid dividends in 2013, as the US bank raised more for its clients than any of its Australian or international rivals. In addition to the depth of its local operations, the US financial giant showed plenty of breadth in making full use of its impressive global debt distribution platform. It handled almost A$14bn (US$13bn) of bond offerings in onshore and offshore jurisdictions during IFR’s review period, a substantial improvement on recent years. “This is the first year that Citigroup has reached critical mass across all our franchises,” said Alex Hayes-Griffin, its head of Australian debt capital markets. Citigroup has transformed its Australian dollar business, going from 12th on the league table in 2010 to end IFR’s review period as third among global banks, with a 6.0% market share involving 33 transactions. Most prestigiously, Citigroup was a joint lead manager for April’s record-breaking 12-year Commonwealth Government bond, which, at the time, was the largest Australian dollar long bond. Another Citigroup mandate, November’s A$5.9bn April 2033 print, smashed that record. Citigroup also glittered in structured deals, as the top bookrunner of non-self led deals in the RMBS sector. The bank helped arrange CBA’s bumper A$3bn April trade – the biggest public deal in the RMBS market – among other jumbo deals. In the Kangaroo market, Citigroup kept a high profile among Triple A rated issuers, but also brought lower-rated firms to Australia, with deals for South Korea’s Hyundai Capital and Korea South-East Power, as well as Transpower New Zealand. Its efforts to bridge the gap between Australia and the rest of Asia Pacific certainly paid off for Transpower, which saw orders from two key Japanese accounts anchor its A$300m 10-year offering. “We have long identified that Asia plays a vital part in the Australian dollar market and stress the need to make sure issuers visit there,” said Ian Campbell, syndicate director. Offshore, Citigroup showed its ability to adapt to market conditions when it led two inaugural euro deals from Westfield Retail Trust and Melbourne Airport. In its bread-and-butter US dollar market, Citigroup’s long-serving syndication team took all four of Australia’s biggest banks to New York for multi-billion dollar deals. Citigroup also carried out the first liability-management exercise for an Australian issuer in the 144A market, handling Woolworths notes of US$615m. Further down the credit curve, Citigroup successfully priced a US$500m four-tranche deal for CSL, an unrated biopharmaceutical company, achieving the lowest coupons seen for an Aussie corporate issuer in the US private-placement market. To see the digital version of this report, please click here.
Bank of the year UBS was the surprise performer in Asian investment banking in 2013, increasing its market share despite shrinking its overall platform. UBS maintained its lead in Asian equities, increased its dominance in key markets and won a bigger share of the region’s bond market. Any bank would have been proud of those achievements, but UBS achieved success alongside an overhaul of the group’s strategy and some drastic cuts. Competitors wrote off UBS as a serious rival at the end of 2012, when the bank announced it would scale down its fixed-income business and cut as many as 10,000 jobs. Rather than sounding the death knell for the investment bank, however, the move has seen UBS play to its strengths, focusing its efforts on growing fee revenues and deepening ties with its private bank. While many of its rivals are struggling to justify their bloated cost bases, UBS’s approach to investment banking goes against the grain. Indeed, by showing that it is possible to drive shareholder returns without the traditional trappings of capital-intensive trading desks or giant lending books, the capital-lite Asian franchise is becoming a model for the rest of the firm. “We are all being invited to be more thoughtful about where we allocate our resources,” said Matthew Hanning, co-head of investment banking for Asia. “It’s been a sea change internally, but, as far as our clients are concerned, the offerings have been uninterrupted.” UBS’s Asian management remained unchanged again in 2013. An agreement to ringfence bonuses in Australia has again paid dividends, helping protect the bank’s dominant position amid a resurgence of IPOs and acquisitions, under the stewardship of Sydney-based Matthew Grounds, now head of corporate client solutions for Asia Pacific and CEO for Australasia. Its South-East Asian rainmakers, a group of well-connected individuals, such as Philippines head Lauro Baja, allowed UBS to capitalise on a bull run in emerging markets in the first half of the year, producing healthy returns on the bank’s investments. Numerous lucrative mandates showcased UBS’s entrepreneurial spirit in 2013, including an opportunistic solution that funded the acquisition of a stake in Ping An Insurance by Dhanin Chearavanont’s CP Group. The combination of margin loans and equity derivatives in a US$5.5bn financing underlined the bank’s ability to deliver and distribute complex deals at short notice.Punching above its weight UBS has proven especially adept at using its wealth-management platform to drive investment-banking revenues, a trick that many of its rivals are now trying to pull off. The success of that strategy was clear from the bank’s performance in the debt-capital markets arena, where UBS punched well above its weight, despite running only a small dedicated product team and in spite of the many negative headlines surrounding its wider fixed-income platform. UBS grew its market share by more than 25% in 2013, handling 6.3% of all Asian bond sales in US dollars, euros and yen during IFR’s review period, up from 4.9% in the previous 12 months. It climbed from 10th to seventh on the league table for the entire review period, and had even featured among the top four underwriters in the first quarter of 2013. More importantly for UBS, which has stated its ambition to achieve a 15% return on equity from its investment bank, the DCM business posted record revenues. According to Thomson Reuters/Freeman Consulting estimates, UBS earned fees of US$71.9m during the review period, behind only two of its far bigger rivals. UBS has long enjoyed strong corporate relationships in China, having brought a number of companies to the international equity markets. Its private bank, however, offered another dynamic, as a powerful source of demand for Asian credit. Market dynamics suited UBS’s model in early 2013. Wealthy individuals were hungry for the income that high-yield bonds generated, and issuers – including many private bank clients – were
Political capital Regulators across Asia have set out to improve governance and transparency in their capital markets, but regional experts worry they could create a host of self-defeating distortions if long-standing structural contradictions are ignored. The biggest changes have been in China, where the Year of the Snake may go down as one of the regulator. The Chinese Government has either proposed or followed through on a raft of economic and financial reform measures in its capital markets. Authorities in India and the Philippines also have been working hard, particularly to hone their respective free-float rules. In all jurisdictions, regulators are struggling to strike a balance between ensuring ample flexibility to encourage investments and growth, while discouraging the kinds of inflows or speculative activity that can threaten the stability of a financial system. The question for investors in Asia is whether or not they are likely to get that balance right and if they can find opportunities during the regulatory flux. For China, a lively debate has ensued over what measures the government should undertake to wean the country off its investment-fuelled economic model, set it on a path towards consumption-driven growth and, finally, establish a regulatory regime to enable international investors to trust fully its often-opaque capital markets. “If the zone is walled off from the rest of China, then the attraction of investing in it for foreign companies should be fairly limited.” “China’s government is good at building roads and airports, and pouring concrete, but, in terms of winning people’s trust, it falls short. Trust in the legal system, openness – these are not things that the Chinese Government can easily legislate for,” said Mark Williams, chief Asia economist for Capital Economics, an independent macroeconomic research company. In 2013, securities market regulations in the PRC continued to evolve, as the China Securities Regulatory Commission persisted with the suspension of any new IPOs on either the Shanghai or Shenzhen stock exchanges, while it worked to restore confidence in the listing process. The suspension of listings in China drove some listings to the Stock Exchange of Hong Kong. The SEHK, meanwhile, introduced changes to listing rules that significantly increased the onus on IPO sponsors to ensure listings were compliant and credible. One measure has made sponsors criminally liable for the contents of their IPO prospectuses. The PRC bond market is also slowly opening, with 17 central banks now authorised to invest in Chinese debt, according to Stephen Green, head of research for Greater China at Standard Chartered Bank. “These rules are engendering resentment and, practically, people are avoiding dealing with US counterparties. Even the largest Asian banks are struggling, since they haven’t sorted out the implications of Dodd-Frank compliance. Compliance costs outweigh any revenue you can make.” While the number and volume of domestic Chinese bond sales are increasing, the PRC has yet to address the problem of having two major bond markets under the jurisdiction of separate regulators in the People’s Bank of China and the CSRC. The regulatory split could easily nullify the impact of any well-meaning reforms, exacerbating the tensions that animate an already-dysfunctional market. “Issuing lots of bonds does not a bond market make — since a bond market is about pricing risk,” said Patrick Chovanec, chief strategist at Silvercrest Asset Management. “If there’s no connection between risk and return, you’re going to have misallocation of capital,” Chovanec said. “The government still defines risk, and decides what goes bad and what doesn’t. The market is not pricing in the real economic risks on investments.” Third Plenum reform In November, the Third Plenum of the Communist Party’s 18th Central Committee resulted in a long-awaited statement on government policy priorities for the next decade. After a v
World of possibilities After another debt-dominated year, Asia has now surely shrugged off its reputation of being an equity-focused region. Any arranger or portfolio manager waiting for stock offerings to rebound to their 2010 levels – or even to pre-crisis highs – was in for a frustrating year. While 2012 proved a one-way bet for bonds, however, the picture at the end of 2013 is far more complex. Low US interest rates and easy-money policies in the world’s three biggest economies drove bond issues to another record over the last year, but a sharp correction during the summer was a reminder of the damage that rising interest rates can do in Asia’s emerging markets. Higher yields will reduce the appeal of global debt for Asian companies, and 2013’s record for international bond sales will prove hard to beat. The inevitable slowdown of US quantitative easing, when it finally comes, should see equities regain some prominence, but that will put Asia’s investment banking industry in a tricky spot. Positioning for an uptick in equity underwriting is an expensive investment with uncertain returns, and analysts have been wrongly predicting a “great rotation” from bonds into equities for the last two years. Competition is swelling bookrunner groups and eating into fees in both debt and equity as more players push for a share of the already overbanked business. While that may be good for issuers, it is already looking unsustainable for underwriters. The top houses in debt and equity managed to expand their market shares in 2013, suggesting that the hopeful competitors are finding it hard to make any profitable inroads. It’s becoming clear that banks need a defined strategy for Asia’s capital markets: new capital rules make the old scatter-gun approach to coverage too expensive. Issuers, too, need to be careful to choose the right option at the right time The deals and institutions featured in these pages all did exactly that. This year’s awards showcase arrangers that excelled in their chosen arenas, rather than attempted to be all things to all people, as well as individual deals that helped develop Asia’s financial markets in their own way. New equity products, new financing currencies and new bank capital formats all feature among the list of winners, providing an encouraging glimpse of the innovation that is a constant in Asia’s capital markets. Some rocky conditions across Asia’s markets provided another test of staying power in 2013 – both for investors and investment bankers. Those that stuck it out, however, look well placed as the year comes to a close. The next chapter may be uncertain, but it is clear that Asia’s financing markets reward commitment and innovation. As long as those two factors remain in place, 2014 offers a world of possibilities. To see the digital version of this report, please click here.
Domestic bank of the year CIMB broke out of its comfort zone in 2013, reaping the benefits of an expanded investment banking platform and connecting issuers and investors across Asia. An array of equity and advisory mandates showed the bank’s ability to make its new acquisition strategy work for its clients. While Malaysia’s second-biggest lender has expanded its footprint significantly, it has done so without diluting its focus or losing grip on costs. “We are moving the platform out of Malaysia and into Asia Pacific,” said Kong Sooi Lin, deputy chief executive of CIMB Investment Bank. “We want to be strong in our local markets, but also in the cross-border business.” CIMB bought most of Royal Bank of Scotland’s Asian equities and investment banking units in 2012 in a cherry-picked acquisition that complemented its existing South-East Asian platform. The acquisition included RBS’s cash equities, equity capital markets and investment banking businesses in Australia, China, Hong Kong and Taiwan, as well as its ECM and investment banking units in Malaysia, Singapore, Indonesia and Thailand. The purchase presented a number of regulatory challenges, with the final licence falling into place in Taiwan only in June 2013, and brought together two very different banking cultures. With deal flows in Malaysia and Indonesia under pressure, however, CIMB’s expanded footprint paid dividends in 2013. The bank completed 73 cross-border deals in 2013, up from 30 in 2012. It turned numerous former RBS customers into CIMB clients, using the newly acquired platform to break into IPOs in Hong Kong, structured finance in Australia and business trusts in Singapore. “The RBS platform plays a big role in our cross-border business and we’ve also taken on several of RBS’s clients, such as China Huishan Dairy,” said Kong. CIMB was a bookrunner on Huishan Dairy’s high-profile HK$10bn (US$1.3bn) IPO in September. It was Asia’s second-largest IPO of the year at the time, and was credited with reopening the city’s equity market for big new issues after a drought of several months. CIMB’s roster of deals during IFR’s review period demonstrated a newfound ability to work on deals well beyond its home markets. It advised on an A$532m (US$484.5m) securitised sale and leaseback of warehouses for Australian supermarket Wesfarmers, and underwrote an A$500m block trade in Australian miner Fortescue in November. The bank was also a joint bookrunner on Asian Pay Television Trust’s Singapore IPO of US$914m in May, bringing a Taiwanese asset to the Singapore market for an Australian sponsor. “Asian Pay TV is one of our biggest clients,” said Kong. “How did that business come about? It’s from our relationship with Macquarie in Australia.” Macquarie International Infrastructure Fund sold its stake in cable TV business Taiwan Broadband in the Singapore listing. CIMB’s plans for a Philippines acquisition hit a stumbling block in mid-2013, but the bank chalked up an IPO mandate with the listing of casino resort developer Travellers in October. It also worked with private-equity group CVC on its US$1.5bn re-IPO in April of Indonesian retail chain Matahari, one of the year’s most popular share offerings. CIMB remained a leader in Malaysian equities in a less active year. Malaysia’s elections kept a lid on deal-flows in the early part of the year, followed by a sharp selloff in global emerging-market stocks and currencies during the summer. The Malaysian equity market was less active, compared with the blockbuster 2012, but CIMB was involved in seven of the 10 largest Malaysian ECM deals during the period under review. The deals included the M$2.7bn (US$844m) IPO of UMW Oil & Gas, the biggest float of the year and the most popular, with an institutional order book more than 50x subscribed. Demand for Malaysian securities throughout Asia in the period under review helped CIMB execute its expansion strategy. “If you look at the individual markets in the region, investors dem
UBS has dominated Australasian equities for about a decade and this year was no exception. Not only did it lead in terms of volumes, but it also continued to innovate. Twice during the review period, UBS priced block trades at a premium to the market level. In March, a block of A$806m (US$756m) in coal-freight operator Aurizon priced at a 0.4% premium to the five-day weighted average. The clean-up trade was a repeat selldown for the Queensland government, and UBS managed every trade. The extra value UBS brings to the Australian market was especially clear in its trade on August 14. Earlier that day, Sydney Airports priced a placement at A$3.60 per share. An hour later, sole bookrunner UBS managed Abu Dhabi Investment Authority’s selldown in the same stock at A$3.67. In March, it helped Westfield Retail Trust’s largest shareholder, the Lowy family, cut its stake in a tightly priced A$663.7m sole-led trade. UBS also helped reopen the Australian IPO market, after a prolonged lull, as joint bookrunner on the A$339m offering of Virtus Health in June. Private-equity exits have been treated with suspicion in Australia in recent years, but the deal met with a strong response from investors and, importantly, made them money, jumping 9.2% on the first day of trading. The offering priced at the top of guidance and was increased on strong demand, allowing the vendor, Quadrant Private Equity, to exit fully and remove any potential overhang on the stock. It was the first Australian IPO to raise more than US$100m in nearly two years, and its success was critical to restoring market confidence UBS was also sole bookrunner for an audacious A$553m equity raising by stock exchange operator ASX, which used a pro-rata structure introduced a few years ago to make entitlement offers fairer for retail investors. The bank showed itself to be comfortable and capable of raising equity for issuers of all sizes and in all sectors from property to infrastructure, to energy and to pharma. It earned its stripes in the New Zealand market, which returned to life in the past 12 months. In February, it was sole bookrunner for the New Zealand Superannuation Fund’s NZ$277.4m (US$229.2m) block trade in Auckland International Airport. UBS was one of two underwriters for pharmaceutical and medical products group Ebos’ two-part equity raising of NZ$239m to help fund the NZ$1.1bn acquisition of Zuellig Healthcare Holdings Australia. This was particularly impressive because Ebos had a market capitalisation of just NZ$515m before the transaction. To see the digital version of this report, please click here.
Sleeping giant awakes Abenomics looks to be pulling Japan out of its decades-long torpor, but its near-term impact across Asia remains decidedly mixed. While the surge in the Nikkei Index and the stream of Japanese acquisitions in South-East Asia will continue, China and South Korea could unleash their own measures to protect against a devalued yen. The long-term effects of Abenomics on both Japan and the wider Asian region will depend on Prime Minister Shinzo Abe’s ability to deliver on badly needed structural reforms. However, the year-old stimulus programme – a bold attempt to eradicate deflation via currency devaluation, labour policy reform, and spending on infrastructure – is already scoring points for its positive impact on inbound and outbound investments across the region. “Japan was considered a sleepy market until Abe’s arrival,” said Izumi Devalier, a Hong Kong-based economist with HSBC. “That has changed in the past year. Turnover of Japanese equities by foreigners reached a record ¥108trn (US$1.08trn) from April to June 2013.” “Investors have revised their Japan underweight positions. The excitement died down somewhat in Q3 2013, but the investing community is looking closely at Japan again,” Devalier said. The Nikkei has surged 46% year to date, although the rally has often given way to doubts that Japan will truly be able to break through decades of stagnation and deliver on the entire suite of structural reforms. The reforms are also prompting Japanese investors to move more capital beyond their borders. Japanese investors’ net outward portfolio investments into Asian equities in the first half of 2013 amounted to ¥305.6bn, up from ¥232.3bn in the preceding six months, according to HSBC’s Devalier. South-East Asia is a particularly popular destination for Japanese funds as investors seek returns abroad. “Trading amounts in both inward and outward [flows] increased, compared with January–September 2012,” said Harumi Taguchi, principal economist at research firm IHS. “By country, Japanese investors are net buyers in the Philippines, Malaysia, Vietnam and Singapore.” Thailand’s equity market also stands to gain from a sustained economic resurrection in Japan. “In Asia, Thailand has the closest trade ties with Japan and I would expect the SET [Stock Exchange of Thailand] would experience the greatest repricing for improved economic prospects in Japan when the third arrow of Abenomics kicks in,” said Tim Condon, chief economist, Asia, ING Bank. The outward investment goes far beyond short-term equity portfolios. Newly confident Japanese companies have gone on buying sprees in Asia this year as they pivot away from China, although acquisitions will become increasingly expensive for Japanese buyers if the yen depreciates too much. Two such examples are Sumitomo Mitsui Banking Corp’s agreement to acquire a 40% stake in Indonesia’s Bank Tabungan Pensiunan Nasional for roughly US$1.5bn and Mitsubishi UFJ’s US$5.6bn bid in July for a majority interest in Thailand’s Bank of Ayudhya.QE conundrum The so-called “three arrows” of Abenomics, namely monetary stimulus, fiscal stimulus of ¥10.3trn and growth-enhancing structural reforms, are fairly conventional, yet bold initiatives for a country that has slumped under 15 years of deflation and become a “zombie” economy. The first arrow, a vigorous programme of quantitative and qualitative easing, has arrested deflation, but concerns remain that the 1.9% inflation figure projected for 2015 may remain out of reach. Moreover, Japan’s ambitions are not immune to the influence of neighbours, such as Korea and China, who could blunt the impact of such strident QE if they choose to follow a similar agenda. “Should other central banks now choose to relaunch their own QE programmes, this could overshadow the BOJ [Bank of Japan] and dilute the market impact of their efforts,” said Stefan Hofer, emerging-market economist, Julius Bär. “However, this seems very unlikely under current circums
Issuer of the year China Petrochemical Corp, better known as Sinopec Group, raised nearly US$12bn from international investors in 2013, setting the pace among the PRC’s top issuers in both the debt and equity markets. Sinopec Group and its subsidiaries issued in multiple formats and currencies throughout the year. Its equity issues overcame considerable uncertainty towards China’s economic growth, while its bond offerings set new benchmarks for top Asian issuers. The PRC growth story was starting to show serious signs of wear during IFR’s review period. The International Monetary Fund lowered its 2013 GDP growth forecast for China to 7.6% from 7.75%, confirming that years of double-digit economic expansion, the last recorded as recently as 2010, were history. Likewise, a liquidity squeeze in China’s banking system in June had raised fears of default in the country’s previously immune money markets. On top of that, demand for new Greater China equities had almost vanished and mixed signals about the end of the US quantitative-easing programme sent the debt capital markets into panic mode at various times throughout the year. Asia’s largest oil refiner, however, did not let the fickle equity or debt markets crimp its plans for 2013. Instead, it used the markets to its advantage. Sinopec had much to accomplish. It was on a mission to restructure its business lines to become more competitive in the offshore markets. China Petroleum & Chemical Corp, or Sinopec Corp, planned to buy overseas exploration and production assets from Sinopec Group, its parent. In the same vein, Sinopec International Petroleum Exploration and Production, another subsidiary, had agreed to buy a one-third stake in Apache’s Egypt oil-and-gas business. All of that needed financing and, because the assets were offshore, foreign-currency funding was necessary. Perhaps, the most daunting challenge, however, was the spinoff of Sinopec Engineering through an IPO. At the beginning of the year, a new issue on the Stock Exchange of Hong Kong – even if it was a reliable PRC name – seemed a near-impossible feat. To complicate things further, Sinopec also had to manage the often conflicting demands of the Chinese Government, existing and potential investors, bankers and regulators. Sinopec executives also did not want to increase leverage very much. None of this would be easy.Smart execution The Chinese issuer started working early in the year. For any company looking at the capital markets in January, two things were obvious: bonds were in hot demand and equity markets for Chinese issuers basically were frozen. Naturally, Sinopec executives decided it would be smart to use the debt markets to fund growth. They could expand their investor base and take advantage of still-low rates. Yet, it was important to the company to keep its gearing under control. For that, it needed equity, as well. Timing was important. Sinopec Corp wanted the China Securities Regulatory Commission to approve its funding plans – a typically tiresome process – and price a US$3.1bn offering of Hong Kong shares before Chinese New Year. In the end, the company priced the private placement on the same day the CSRC approved the plans, on February 4. It sold 2.845bn new H shares, about 17% of existing shares, at HK$8.45 apiece to 10 investors. The regulator, after asking a lot of questions, approved the deal three weeks after the company applied – a short time by local standards. “Getting US$3.1bn in one day from 10 investors is astonishing,” said Huang Wensheng, secretary of the board of directors at Sinopec Corp. The company’s next trick was a trip to the bond market. This, again, was no regular fundraising. The issuer sold a US$3.5bn four-tranche bond in April that scored a number of firsts. It was Asia’s largest US dollar bond since Malaysian oil-and-gas giant Petronas raised US$4.5bn in August 2009, and all four tranches printed at the lowest coupons from any Chinese oil major at their respecti
In a crowded and competitive field, ANZ’s leadership, innovation and unparalleled distribution network stood out as it executed a number of key and diverse transactions. Among these was Origin Energy’s mammoth A$6.6bn (U$5.8bn) refinancing, Australia’s second-largest corporate loan and the country’s largest leveraged buyout this year, backing TPG’s acquisition of poultry producer Inghams. ANZ has one of the largest syndications teams in the region with 42 dedicated syndicators in Melbourne, Sydney, Hong Kong, Singapore, Auckland, Taipei, Beijing, Tokyo and Mumbai. ANZ has led Australia’s mandated lead arranger and bookrunner league tables, with nearly a third of the market in 21 deals worth US$6.1bn and is also the undisputed market leader in New Zealand after its acquisition of National Bank in 2003. It has consistently topped the MLA and bookrunner tables since 2007. “It is important for ANZ to have a vibrant, strong and market-leading loan business. Our holistic approach has delivered,” said Christina Tonkin, MD, global loans. ANZ’s ability to underwrite deals on a sole basis testified to its distribution capability in Australia and beyond. One innovative deal was a US$200m iron-ore prepayment facility with Fortescue Metals Group and commodities trader Noble Group. It was the first syndicated prepayment loan in Australia and ANZ was the sole underwriter. ANZ Commodities will buy iron ore from Fortescue and sell it to Noble Group using a back-to-back agreement, and will be repaid from the delivery of 4.6m tonnes of iron ore over a two-year period. The structure allows Fortescue to treat the prepayment as a trade credit on its balance sheet rather than a financial debt. ANZ also did other resource-related deals, including a US$550m loan for Glencore Xstrata and Sumitomo Corp to acquire Rio Tinto’s majority stake in the Clermont coal mine in Queensland and a A$255m seven-year project finacing for listed Cockatoo Coal’s expansion of its coking-coal mine in the Bowen Basis. The bank was also the sole underwriter of a financing to back Taiwan-based Formosa Plastics’ US$1.15bn investment in the Western Australia iron-ore project of Fortescue and Baoshan Iron & Steel. These showed ANZ leveraging its Asian distribution to clinch inbound financing mandates. “Our position in Asia is very important to our Australian business to bridge the gap in both markets, “said Sean Joseph, head of loan syndications in Australia. In the corporate segment, ANZ was sole co-ordinating arranger and bookrunner for an increased A$1.4bn three-year syndicated performance bonding facility for Leighton Holdings, having fronted A$950m of it. To see the digital version of this report, please click here.
Divining intentions China’s foreign policy is premised on its desire to ensure uninterrupted economic growth, while promoting political stability and prolonging the rule of the Chinese Communist Party. For decades, the Chinese Government has deployed both soft and hard power to promote its influence and status overseas, while, at the same time, discouraging foreign interference in China’s affairs. Yet, China is trying to have its cake and eat it, too, in portraying itself, on the one hand, as a good neighbour and, on the other, making sure its neighbours know who is boss. China cannot have it both ways. The country’s approach to foreign affairs is linked with its national identity, characterised by its sense of “national humiliation” about the loss of territories it held under the Qing Dynasty. In the 19th Century, parts of Central and South-East Asia, Nepal, Bhutan, Mongolia and the Koreas were considered “tributary” states of China. Maps from the period portray a confident China with strong regional influence. More recent maps, such as one published in the popular, hyper-nationalist book China’s Road Under the Shadow of Globalization (China Social Science Press, 1999), portray the country as the victim of an international conspiracy to divide its formerly held territories into independent states. “China now ranks second only to the US in military spending (2.0% versus 4.4% of GDP, respectively) according to the World Bank.” China’s modern geopolitical psyche is very much linked to this sense of loss and humiliation. It is also characterised in the often-used Chinese saying “hide one’s brilliance and bide one’s time”. China sees its return to global prominence as inevitable, based on its modern history as a global leader in such areas as trade, finance, and industrial production. China’s global strategy today, and its path to global prominence, is to embrace multi-polarity, while supporting the principle of state sovereignty and self-determination. So, while it engages major powers and increasingly uses foreign aid to enhance its influence, it also uses its veto power in multilateral development banks and on the UN Security Council to get what it wants. It generally serves Chinese interests to exist in a world with no single dominant power, and Beijing has perfected the art of sitting on the sidelines and waiting for an end-game to emerge, then swooping in and claiming the spoils. A good example of this was the Iraq War, where China did not participate in combat, but aggressively pursued oil contracts, ultimately winning a large percentage of them. However, the principle of embracing multi-polarity does not apply in Asia, where China clearly sees itself as the dominant power. Beijing views the US “pivot” to Asia as a containment strategy and an effort to disrupt China’s emerging sphere of influence in the region. Neither Beijing nor Washington has been clear about where their “core” interests lie on this subject. Beijing raised the ante in late November when it declared an air defence zone over disputed islands in the South China Sea. Japan and China claim sovereignty for the islands, which Japan calls Senkaku and China calls Diaoyu. The US remains neutral on the islands’ sovereignty, but it recognizes Tokyo’s administrative control and has stood by its treaty obligations to Japan in its view of the air zone. Still, it remains unknown how the US would react if a conflict with China actually erupted, raising the risk that both sides could cross an unknown red line. Similarly, Beijing views the gradual remilitarisation of Japan with great suspicion. While, on the one hand, China sees the Japan/US military alliance as a “check” on the notion of Japan’s gradual remilitarisation, through the alliance the US is enhancing Japan’s ability to defend itself. The US has, over the years, provided Japan with early-warning radar, anti-ballistic missile systems, surveillance and anti-submarine airplanes, long-range drones, squadrons of vert