Bonds seen as means to ride Belt and Road

Suc­cess of Gansu-based GHATG’s euro bonds her­alds de­vel­op­ment

China Daily European Weekly - - BUSINESS - By ZHONG NAN zhong­nan@chi­nadaily.com.cn

Gansu Pro­vin­cial High­way Avi­a­tion Tourism In­vest­ment Group Co, or GHATG, the largest State-owned en­ter­prise by as­set vol­ume in North­west China’s Gansu prov­ince, plans to sell more bonds to in­vestors in ma­jor Euro­pean economies, in­clud­ing the United King­dom, Ger­many and France, in the sec­ond half of this year.

That GHATG is keen to boost its earn­ing ca­pac­ity is a given. It is­sued its first round of euro-de­nom­i­nated bonds in Hong Kong and Europe last month. Its three-year bonds to the global mar­ket in late De­cem­ber for 410 mil­lion eu­ros ($ 509 mil­lion; £357 mil­lion) are part of a ma­jor move by GHATG to heed the coun­try’s call and par­tic­i­pate in the de­vel­op­ment of the Belt and Road Ini­tia­tive.

Be­fore the move, the group sent teams to Lon­don, Frank­furt and Hong Kong to con­duct pre­sen­ta­tions of the new bond is­sue to po­ten­tial in­vestors.

It was the sec­ond time that GHATG floated bonds in overseas mar­kets. It is part of its broader push to go global. Based in Lanzhou, the pro­vin­cial cap­i­tal, the SOE raised $500 mil­lion from its first bond is­sue in Novem­ber 2016.

Shi Peirong, chair­man of GHATG, says the com­pany has been plan­ning this for a long time. The money will be used to build high­ways, roads, air­ports and other in­fra­struc­ture fa­cil­i­ties within the prov­ince.

The deal was co­or­di­nated and com­pleted by fi­nan­cial in­sti­tu­tions in­clud­ing Bank of China, Citibank and Lon­don-based Bar­clays Bank. For credit rat­ing ser­vices, the group opted for agen­cies in­clud­ing Stan­dard & Poor’s and Fitch.

“Even though the eco­nomic growth pace of Europe, Ja­pan and many de­vel­oped coun­tries has rel­a­tively slowed in sev­eral years, the group’s bonds were fa­vored by in­ter­na­tional in­vestors, in­clud­ing banks, funds, as­set man­age­ment com­pa­nies and pri­vate in­vestors,” Shi says.

“The fi­nal or­ders we re­ceived from 36 global in­vestors were dou­ble what we ex­pected, and 83 per­cent of our in­vestors were from Asia and the rest were from Europe.”

The bond’s 1.87 per­cent in­ter­est rate was lower than the av­er­age bond is­sued in the do­mes­tic mar­ket. It not only con­tin­ued to high­light the fame of Gansu in the global cap­i­tal mar­ket, but it also set an ex­am­ple in the home mar­ket of us­ing euro-de­nom­i­nated bonds for big-ticket in­fra­struc­ture projects.

The group now man­ages as­sets worth 32 bil­lion yuan and is the only com­pany au­tho­rized by the Na­tional De­vel­op­ment and Re­form Com­mis­sion to is­sue bonds in the global mar­ket.

“Big-ticket in­fra­struc­ture projects sup­ported by euro-de­nom­i­nated bonds will fur­ther fa­cil­i­tate GHATG’s ex­ports of agri­cul­tural, heavy in­dus­try and new en­ergy prod­ucts to global mar­kets via a bet­ter-de­vel­oped trans­porta­tion net­work,” Shi says. “This will also cre­ate more jobs in the ser­vices sec­tor in the long term.”

Tang Ren­jian, the gover­nor of Gansu prov­ince, says the suc­cess­ful sale of euro-de­nom­i­nated bonds has re­vealed a lot about the per­cep­tion of the Chinese econ­omy and the on­go­ing sup­ply-side struc­tural re­form. The sta­bil­ity and the po­ten­tial of the Belt and Road Ini­tia­tive have been widely ac­knowl­edged by global in­vestors.

“The grow­ing trade op­por­tu­ni­ties, tourism re­sources and in­dus­trial up­grad­ing boom of west­ern China will fur­ther at­tract in­vest­ment,” Tang says. “It also showed that Gansu has cul­ti­vated a num­ber of out­stand­ing com­pa­nies, which are ready to ac­cept the chal­lenge from the global cap­i­tal mar­ket.”

In­suf­fi­cient in­fra­struc­ture in trans­porta­tion has been one the main bar­ri­ers to Gansu’s eco­nomic growth. The pro­vin­cial gov­ern­ment re­leased its ac­tion plan to achieve a break­through in its build­ing of a trans­porta­tion net­work in 2015.

Ac­cord­ing to the plan, a to­tal of 800 bil­lion yuan is ex­pected to be in­vested in in­fra­struc­ture, in­clud­ing 67,000 kilo­me­ters of high­ways and 3,400 kilo­me­ters of rail­roads be­fore 2020.

The plan is thought to solve the trans­porta­tion prob­lem once and for all, and lay a foun­da­tion for bet­ter com­mu­ni­ca­tion along the Silk Road Eco­nomic Belt.

The pro­vin­cial gov­ern­ment there­fore gave per­mis­sion to al­low GHATG to step in and take over high­ways and air­port de­vel­op­ment, in­clud­ing han­dling of fi­nanc­ing, in­vest­ment, build­ing and man­age­ment.

“Gansu has long been a strong­hold on the an­cient Silk Road. It con­nects East and West and pro­vides an im­por­tant path for cul­tural and eco­nomic ex­changes,” says Wang Zhile, a se­nior re­searcher at the Chinese Academy of In­ter­na­tional Trade and Eco­nomic Co­op­er­a­tion in Bei­jing.

“How­ever, the de­vel­op­ment of this on­ce­flour­ish­ing in­land prov­ince has slowed be­cause of its cli­mate, en­vi­ron­ment and in­dus­trial struc­ture.”

Wang says that un­der the na­tional call to de­velop mar­kets re­lated to the Belt and Road Ini­tia­tive, Gansu has again been put un­der the spot­light, thanks to its strate­gic lo­ca­tion, di­ver­si­fied eco­nomic de­vel­op­ing mod­els and new growth mo­men­tum gen­er­ated from the ser­vices sec­tor.

XINHUA

Four US air­craft per­form stunts in Zhangye city, Gansu prov­ince, dur­ing the first Silk Road In­ter­na­tional Gen­eral Avi­a­tion Con­ven­tion in 2016, which was sup­ported by the lo­cal gov­ern­ment and GHATG.

XINHUA

Work­ers of GHATG paint a bridge that con­nects Lanzhou city and Yongjing county in Gansu prov­ince, as part of main­te­nance work.

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