New U.S. restrictions on 33 Chinese firms and institutions take effect June 5 By Reuters


© Reuters. FILE PHOTO: Chinese and U.S. flags flutter near The Bund in Shanghai

By David Shepardson and Karen Freifeld

WASHINGTON/NEW YORK (Reuters) – The U.S Commerce Department said on Wednesday that new restrictions on 33 Chinese firms and institutions it announced last month will take effect Friday.

The agency has added the companies and institutions to an economic blacklist, accusing them of helping China spy on its minority Muslim Uighur population in Xinjiang or because of alleged ties to weapons of mass destruction and China’s military.

China’s foreign ministry said last month it deplored and firmly opposed U.S. sanctions over Xinjiang, calling it a purely internal affair for China.

The move will restrict the sales of U.S. goods to the companies and institutions on the list, as well as certain items made abroad with U.S. content or technology. Companies can apply for licenses to make the sales, but they must overcome a presumption of denial.

Seven companies and two institutions were listed for being “complicit in human rights violations and abuses committed in China’s campaign of repression, mass arbitrary detention, forced labor and high-technology surveillance against Uighurs” and others, the Commerce Department said.

Two dozen other companies, government institutions and commercial organizations were added over Washington allegations that they supported procurement of items for use by the Chinese military.

The blacklisted companies focus on artificial intelligence and facial recognition, markets in which U.S. chip companies such as Nvidia Corp (O:) and Intel Corp (O:) have been heavily investing.

The new listings follow a similar October 2019 action, when the Department of Commerce added 28 Chinese public security bureaus and companies – including some of China’s top artificial intelligence startups and video surveillance company Hikvision (SZ:) – to a U.S. trade blacklist.

The actions follow the same blueprint used by Washington in its attempt to limit the influence of Huawei Technologies Co Ltd [HWT.UL] for what it says are national security reasons. Last month, the Department of Commerce took action to try to further cut off Huawei’s access to U.S. chipmakers.

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Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Some global firms consider moving treasury operations out of HK: sources By Reuters


© Reuters. A general view of skyline buildings, in Hong Kong

By Sumeet Chatterjee

HONG KONG (Reuters) – Some global companies are considering shifting some of their treasury operations out of Hong Kong as the United States moves to end the city’s privileges, senior bankers said, in the latest blow to the territory’s status as a major financial hub.

U.S. President Donald Trump has begun the process of eliminating special U.S. treatment for Hong Kong to punish Beijing’s decision to impose new national security laws there – which China and Hong Kong say will not hurt rights and freedoms.

Against the backdrop, a handful of global firms are eyeing a move of some of their corporate treasury operations to countries like Singapore, Malaysia, Thailand, and Vietnam, four senior bankers with knowledge of the matter said.

“Companies’ treasury operations follow trade flow and now there are many questions around Hong Kong’s status as a trade hub,” said a Hong Kong-based banker with a leading global trade finance bank.

Trade flows could be hit if the end of Hong Kong’s special relationship with the United States sees the city’s goods subject to the same – higher – rates paid by companies in mainland China, which has been fighting a trade war with the United States. Hong Kong’s zero tariff rates on U.S. imports could also be at risk.

“Some (multinational corporations) are considering shifting a part of their treasury operations (out of Hong Kong) to start with and then gradually scale it up,” the banker said.

A leading U.S. retail chain, which operates hundreds of stores around Asia, is already in early talks with its banks to move some cash management related operations to Singapore from Hong Kong, the banker said.

The bankers, who declined to be named due to the sensitivity of the matter, help companies set up the treasury centres and manage them. They are in talks with the companies about their likely relocation plans but said there was no strict timeline.

If it happens, the development would deal another blow to Hong Kong’s status as a major financial hub, following widespread pro-democracy protests last year.

Already there are signs rich Chinese are seeking to park fewer funds in Hong Kong.

But the Hong Kong Monetary Authority (HKMA), the city’s de-facto central bank, told Reuters via e-mail that interests from corporates in setting up treasury operations in Hong Kong remained strong.

“There is no noticeable sign of fund outflow from either the Hong Kong dollar or banking system,” it said.

SINGAPORE EDGE

The end of the preferential treatment could hurt Hong Kong’s hard-fought progress in competing with Singapore for treasury operations centres – which manage risk, borrowing, lending and raise capital for companies – in Asia.

While Singapore has historically had the edge thanks to its low tax base and pro-business policies, Hong Kong recovered some ground in recent years as the HKMA unveiled sweeping tax measures in 2016.

Chinese and global companies favour Hong Kong to run their treasury operations and reroute enormous amounts of trade via the city lured by the presence of large trade finance banks, ease in capital flow and access to foreign exchange liquidity.

All of this could come under threat if the U.S. pulls the plug on Hong Kong’s special relationship.

“These political moves will see global companies putting in place back-up plans for their critical treasury operations,” said another banker with an European bank.

(The story refiles to corrects to delete extraneous word in the headline).





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Exclusive: Renewable firms in Mexico must contribute to grid backup


© Reuters. Federal Commission of Electricity (CFE) Director Manuel Bartlett attends a news conference at the National Palace in Mexico City

By David Alire Garcia

MEXICO CITY (Reuters) – Private renewable energy firms in Mexico should pay for part of the baseload power underpinning the flow of electricity on the grid, the head of the state power company said on Friday, as a dispute on the future of the local industry roils the market.

Manuel Bartlett, director of the Comision Federal de Electricidad, or CFE, told Reuters that his company nevertheless favors more clean energy and will seek to further reduce its use of fuel oil as a major source of power generation.

“Wind and photovoltaic (plants) don’t pay the CFE for the backup,” Bartlett said in an interview, referring to the cost of power generation from fossil fuels to ensure a uninterrupted flow to the grid. “And I can’t allow that.”

Last month, Mexico’s power grid regulator CENACE issued a ruling supported by Bartlett that prevented several dozen new renewable energy plants from connecting to the network.

CENACE cited the national crisis over the coronavirus pandemic as a justification, arguing that the intermittent nature of wind and solar power is not consistent with ensuring constant electricity supply.

The decision prompted letters of complaint to the energy ministry by the European Union and Canada, whose governments were upset that their companies had been shut out.

Mexican business associations also criticized the move, saying it puts more than $6 billion in renewable power plants scheduled to begin operating this year or next in limbo.

In a provisional ruling this week, a judge ordered CENACE to back down and allow the renewable firms to continue with tests needed to bring plants online.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Italy’s banks fail to get wider virus support measures for already struggling firms By Reuters


© Reuters.

By Valentina Za and Giuseppe Fonte

MILAN (Reuters) – Italy has rebuffed calls to widely include businesses who were already struggling to repay their debt in its latest coronavirus economic aid package, two officials who worked on the measures said, leaving lenders to face rising loan losses.

Rome this week approved an emergency decree that offers guarantees on more than 400 billion euros ($435 billion) of new bank loans to companies hit by the coronavirus outbreak.

Banking and business lobbies had called for the package to include loans extended to firms already in trouble before the virus hit and deemed still to have a chance to be restored to good health, the officials told Reuters.

Italian banks held 76 billion euros in such loans, known as ‘unlikely to pay’ (UTP), as of mid-2019, which are now more likely to default in the deep recession expected to follow the pandemic.

Under the decree, a set of state guarantees reserved for smaller companies with no more than 499 staff can be tapped by firms that were regularly repaying their debt up until Jan. 31.

That pre-dates the coronavirus contagion which emerged in Italy on Feb. 20-21, in a limited concession to companies whose troubles cannot be traced back solely to the virus.

The two officials said there had been intense discussions on the cut-off date, which is relevant in terms of compliance with European state aid rules.

“By setting Jan. 31 as the cut-off date for the set of guarantees that can be tapped to refinance existing debt, the decree excludes the vast majority of problem loans,” Tommaso Foco, a partner at law firm Portolano Cavallo, said.

A government official said the Treasury was not currently considering extending further state guarantees for UTP loans.

In efforts to curb the spread of the virus, the government has enforced a progressively wider shutdown and it must now prop up companies at risk of buckling under mounting payment deadlines through debt moratoriums and guarantees on new bank debt.

The debt holiday applies only to companies that were performing up until March 17.

Annalisa Dentoni-Litta, a partner at law firm Orrick, said the new decree, though it had limitations, was “a step forward” compared to the debt moratorium package in terms of support for borrowers already in trouble.

While praising the new liquidity package, the head of Italy’s third-largest bank Banco BPM (MI:) this week said UTPs remained a problem.

“There are companies that, helped by banks, were getting back on track. If they are denied the guarantees available to performing companies it’s clear there’ll be problems there,” CEO Giuseppe Castagna said in a television interview.

“I understand the government faces constraints due to European rules but it’s an important issue – these companies are still in business.”

As of mid-2019, Italian banks’ provisions against losses covered only around 40% of their UTP loans, against a 65% coverage for defaulted loans, pointing to a 19 billion euro gap in terms of additional writedowns. ($1 = 0.9205 euros)





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China plans to make it easier for foreign life insurers to buy domestic firms: sources By Reuters


© Reuters.

By Sumeet Chatterjee

HONG KONG (Reuters) – China plans to make it easier for foreign life insurers to make controlling acquisitions and large equity investments in domestic peers, five people with knowledge of the matter said, as the country pushes ahead in opening up its financial sector.

The plan being drafted by the sector regulator is also part of Beijing’s efforts to bolster the capital levels of small and mid-sized local players, sources said, amid concerns about the impact of the new coronavirus pandemic on their financial foundations.

The new rules for the world’s third-largest insurance market after the United States and Japan – worth about $318 billion in premiums according to a Swiss Re Institute report – are likely to be finalised in the second half of the year, sources said.

They will pave the way for foreign insurers to acquire a controlling or significant minority stake in a local peer, and run that business separately from existing joint ventures or wholly owned operations, they added.

“The move is aimed at giving the provincial insurance firms access to capital and an opportunity to leverage the best practices of a foreign insurance company,” said a Beijing-based lawyer, who works with the China Banking and Insurance Regulatory Authority (CBIRC).

Existing regulations allow overseas life insurers, with operations in China, to own up to 15% stake in a local rival. Under the new rules being considered, the CBIRC will allow a foreign life insurer to own more than one main business license, the people with knowledge of the matter said.

“There is great M&A potential in the Chinese insurance sector,” the Beijing-based lawyer said. Sources interviewed by Reuters for this story declined to be identified as they were not authorised to speak to the media.

The CBIRC did not respond to request for comment.

Opaque guidelines for acquisitions and a lack of majority control, with foreign ownership capped at 50% until recently, have long frustrated global insurers looking to expand market share in China, where individual wealth is on the rise and comparatively few people have life insurance cover.

Britain’s Prudential (L:) and Canada’s Sun Life Financial (TO:) and Aviva (L:) have been in China for decades, but their collective market share remains below 10% as a result of ownership curbs and limited geographical presence.

But China has been gradually easing access to its financial sector for foreigners in the last couple of years. As part of that push it already allowed overseas firms to take full control of their local joint ventures from Jan. 1 this year.

The regulator also plans to dismantle the “international division” within its set-up over the next year, which deals with the licensing issues of foreign insurers, with an aim to create “a level-playing field” with local peers, two people said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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