Chinese capital is finally entering international financial power circles - 2 very significant even

Aerial view of Shanghai Financial District.

Two major events occurred last month that were more or less unreported. Although Chinese and foreign media didn't make a big fuss about them, these events are announcing a global trend and they are the signal that Chinese capital is finally invading financial higher power circles.

The first major event is that Chinese Hainan Airline Group (HNA Group) became a shareholder of Deutsche Bank. The other is that the largest oil company of the world, Saudi Aramco will be listed, and they have announced that they are considering the possibility of inviting Chinese banks for underwriting.

China and Deutsche Bank

Reuters reported on February 17 that according to the shareholder voting rights changing statement, which was made by the largest commercial bank in Germany, Deutsche Bank, HNA Group has become one of Deutsche Bank's new major shareholders, holding 3.04% voting rights of Deutsche Bank, with a book value of 750 million euros (about 5.463 billion yuan). A HNA Group spokesman stated HNA Group has full confidence in the management of Deutsche Bank, and that HNA Group might hold more shares in the future, the highest ratio possible being 10%.

Deutsche Bank, the crown of German banking business, that controls more than $ 2 trillion assets, finally welcomed Chinese capital. They can be grateful to Americans.

Difficult times

Last year, Americans brought bad luck to Deutsche Bank which was in a difficult period.

The Justice Department of United States accused Deutsche Bank of manipulating inter-bank interest rates, and threatened the German bank to pay a $ 14 billion fine - it was later cut to 50%.

In fact, the manipulation of interest rates is very common among giant banks. Only few of the American, British, French, or German banks are innocent. Why did Deutsche Bank get blamed?

Because Deutsche Bank is the bank leader in the Eurozone, a stabilizer of the market. Giving DB a hard time is strategic for Americans in order to destabilize the Euro.

If Germany had tried to save Deutsche Bank, then it would have been a dangerous precedent. If banking institutions in Italy, Greece and other countries would run into any crisis in the future, they would certainly expect the same kind of bailouts from governments or the European Central Bank. Thus, the uniform requirements of minimum deficit in the Eurozone would be a worthless piece of paper.

Further consideration is that, if Germany saved Deutsche Bank this time, then in the future there would be no reasons for Germany to be against Italian government saving Italian banks, or the Greek government saving Greek banks, and it would make European financial institutions be held in boundaries of governmental power. Financial institutions in Germany and France, the two giants of the Eurozone, would then loose the opportunities of controlling foreign financial institutions forever.

Saving Deutsche Bank would also make the Eurozone look unified, but in essence it is still a feudal separatist area. The European Union will never really be able to shake the dominant power of dollar in financial markets.

At that time, the Italian banking industry was suffering from bad debt crisis. The fact the US decided to strike on Deutsche Bank was not a mere coincidence. Deutsche Bank started trying to raise funds everywhere in order to pay for the penalty, and there were rumors circulating that Deutsche Bank was ready to sell its shares of Huaxia Bank.

This is when we first heard that Chinese capital might be about to enter.

A nice fight back

Here's a quote from what the author of the article wrote in October last year in his 'A weekly interpretation of political and economic trends' 《一周政经趋势解读》:

“Among the financial institutions in Europe with whom China has a good and influential relationship, Deutsche Bank is undoubtedly ranked very high on the list. Deutsche Bank holds some shares of Huaxia Bank, and now the rumors say that they will be sold, in order to be able to pay the fine.

Obviously, this action will affect the external judgments of RMB assets, and based on the fact that foreign media are now focusing on rumors about China imposing restrictions on the departure of Deutsche Bank, apparently certain persons are hoping that it will deteriorate the relationship between Deutsche Bank and China, and create the impression that China fears the departure of foreign exchange.

From Deutsche Bank's capital leaving China, to the selling of its Huaxia Bank shares, the only party that gets a lot of attention other than Deutsche Bank and Americans is China. One can not help but make certain associations.

The logic seems obvious. The most important channel for the internationalization of RMB in the future would be non-American financial institutions such as Deutsche Bank. The internationalization of RMB will be unobstructed only if these institutions are willing to provide RMB products to investors, or financial bridges for RMB assets.

This dirty strike- the one consisting in threatening Deutsche Bank with a massive fine to push them to leave China and sell Huaxia Bank shares, would hit several birds with one stone. But if Deutsche Bank brings in Chinese investors, then it would be a nice fight back.”

Now, observant persons made it happen within three months. Chinese capital buying Deutsche Bank shares expands new potential opportunities for Sino-German cooperation in financial and monetary partnerships. And the help offered by China at a difficult time for Deutsche Bank will have positive effects on the diplomatic relationship between Germany and China.

So, when Chinese Foreign Minister Wang Yi was attending the Munich Security Conference in Germany on February 18, the organizers made him have a speech on the first day, ahead of the Vice President of the United States. The sequence of speeches in this kind of international conference is not arranged by the alphabetical order.

Therefore, from the end of last year to the beginning of this year, influential media such as Handelsblatt Business Daily and other German newspapers refer to the importance of China with regard to German economy, way more than that of the United States.

Perhaps we will soon be reading reports about the RMB settlement system in Deutsche Bank. Of course, it is more likely that a German top-class delegation will come to Beijing to attend ‘One belt one road’ summit in May.

Politicalized Saudis

Now let’s have a look on the other event.

According to a Reuters’ report on February 22, Saudi Arabian National Oil Company (Saudi Aramco) has asked JPMorgan and Morgan Stanley to assist in the upcoming initial public offering (IPO) work. They may also invite another bank which has access to Chinese investors.

Fundamentally, the fact Saudi Arabia is seeking Chinese financial institutions to send stocks means that Saudi Arabia has already taken oil RMB to be a possible hedge in the future against the risks of dollar.

This event, in fact, has been paved long time ago.

On September 4, last year, in his ‘A weekly interpretation of political and economic trends’, the author predicted that, after RMB had been included in the SDR, Saudi Arabia would issue bonds in Asia and try for the first time to find Chinese financial institutions for underwriting:

“Saudi Arabia will issue $ 15 billion sovereign debts in Asia after October this year. We believe that if Saudi Arabia issued bonds in Asia, it is very likely that they will try to find Chinese financial institutions for underwriting. In that case, it will improve the financial cooperation between China and Saudi Arabia. As the largest buyer of Saudi Arabian crude oil, China is not worried about the possibility that Saudi Arabia may not pay back.

It is possible that the financial cooperation between China and Saudi Arabia could considerably grow with the help of bond issuance. To raise dollars this time, and the next time to possibly raise RMB.

Saudi Arabia's strategy behind their attempt to reach out to Chinese financial institutions, is a 'Look East’ strategy.It is not merely a question of oil dollars, but a logical consideration derived from the entire Middle East strategic changes.

What changes? With Russia advancing in the Middle East, The US retreating on the Syrian issue, and Turkey's ‘betrayal’, the strategic structure of Middle East has changed into something different from the past. In the future, Russia or even China may keep advancing in the Middle East.”

Sure enough, in October last year, Saudi Arabia chose Bank of China as one of the underwriting agencies, issuing 17.5 billion dollars of bonds in total.

For the first time, Chinese banking institutions, along with the international bigwigs such as French BNP Paribas, Deutsche Bank, Goldman Sachs, and Morgan Stanley, are doing debt issuance businesses with the oil powers.

And this time, Chinese banks participated in stocks issuance of Saudi Arabia's largest crude oil company. The valuation of Saudi Aramco is nearly 2 trillion dollars. They raised almost 100 billion.

It is quite a big deal. Investment banks from all over the world are jealous.

Why would they want to invite Chinese banks to join? Benjamin Quinlan, a financial services consultant at Saudi Aramco says, "At present, Saudi's interest in Chinese investors has given Chinese banks a great advantage in this important international event. The friendly offer from Saudi government indicates both political and economic trends."

A towering tree grows from one seed

The financial adviser's comment is quite political.

HNA buying Deutsche Bank’s shares, or Saudi Arabia asking Chinese financial institutions to issue bonds seem to be trivial events. In fact, these events mean that Chinese capital and Chinese financial industry have been counted as global first-class participants. That is to say, they are now ready to join the feast with imperialist bankers. This is far more impressive than earning some hard money in the manufacturing industry.

We often hear that we want to change the irrational international financial order. How ? By creating more feasting scenes in the future.

A few years earlier, Chinese capital could not have had a share in such core financial assets in developed countries. Similarly, Chinese banks and investment institutions were not invited to enjoy foreign companies' IPO profits in foreign markets. Basically, they only served as the capital flow channel for Chinese.

15 years ago, a small joke in Europe and United States was that, some of the country's well lids went missing, because they were sold to China. Now, all of a sudden, we are all realizing that China is already the largest factory in the world.

A towering tree can grow from one seed, and a mansion is built on its foundation. All macroscopic changes are rooted in the microcosmic level.

These two ‘trivial events’ show that Chinese international financial power has began to "invade" the highest power circles on the micro level.

This ‘invasion’ that started from Western Europe and Middle East, also means that the heavy fortifications in East Asia which were forged by American capital have finally became a Maginot Line.

Original article here

#China #Finance #HNAGroup #DeutscheBank