BEIJING
LinkSpace’s reusable rocket RLV-T5, also known as NewLine Baby, is carried to a vacant plot of land for a test launch in Longkou, Shandong province, China, April 19, 2019. REUTERS/Jason Lee
April 26, 2019
By Ryan Woo
LONGKOU, China (Reuters) – During initial tests of their 8.1-metre (27-foot) tall reusable rocket, Chinese engineers from LinkSpace, a start-up led by China’s youngest space entrepreneur, used a Kevlar tether to ensure its safe return. Just in case.
But when the Beijing-based company’s prototype, called NewLine Baby, successfully took off and landed last week for the second time in two months, no tether was needed.
The 1.5-tonne rocket hovered 40 meters above the ground before descending back to its concrete launch pad after 30 seconds, to the relief of 26-year-old chief executive Hu Zhenyu and his engineers – one of whom cartwheeled his way to the launch pad in delight.
LinkSpace, one of China’s 15-plus private rocket manufacturers, sees these short hops as the first steps towards a new business model: sending tiny, inexpensive satellites into orbit at affordable prices.
Demand for these so-called nanosatellites – which weigh less than 10 kilograms (22 pounds) and are in some cases as small as a shoebox – is expected to explode in the next few years. And China’s rocket entrepreneurs reckon there is no better place to develop inexpensive launch vehicles than their home country.
“For suborbital clients, their focus will be on scientific research and some commercial uses. After entering orbit, the near-term focus (of clients) will certainly be on satellites,” Hu said.
In the near term, China envisions massive constellations of commercial satellites that can offer services ranging from high-speed internet for aircraft to tracking coal shipments. Universities conducting experiments and companies looking to offer remote-sensing and communication services are among the potential domestic customers for nanosatellites.
A handful of U.S. small-rocket companies are also developing launchers ahead of the expected boom. One of the biggest, Rocket Lab, has already put 25 satellites in orbit.
No private company in China has done that yet. Since October, two – LandSpace and OneSpace – have tried but failed, illustrating the difficulties facing space start-ups everywhere.
The Chinese companies are approaching inexpensive launches in different ways. Some, like OneSpace, are designing cheap, disposable boosters. LinkSpace’s Hu aspires to build reusable rockets that return to Earth after delivering their payload, much like the Falcon 9 rockets of Elon Musk’s SpaceX.
“If you’re a small company and you can only build a very, very small rocket because that’s all you have money for, then your profit margins are going to be narrower,” said Macro Caceres, analyst at U.S. aerospace consultancy Teal Group.
“But if you can take that small rocket and make it reusable, and you can launch it once a week, four times a month, 50 times a year, then with more volume, your profit increases,” Caceres added.
Eventually LinkSpace hopes to charge no more than 30 million yuan ($4.48 million) per launch, Hu told Reuters.
That is a fraction of the $25 million to $30 million needed for a launch on a Northrop Grumman Innovation Systems Pegasus, a commonly used small rocket. The Pegasus is launched from a high-flying aircraft and is not reusable.
(Click https://reut.rs/2UVBjKs to see a picture package of China’s rocket start-ups. Click https://tmsnrt.rs/2GIy9Bc for an interactive look at the nascent industry.)
NEED FOR CASH
LinkSpace plans to conduct suborbital launch tests using a bigger recoverable rocket in the first half of 2020, reaching altitudes of at least 100 kilometers, then an orbital launch in 2021, Hu told Reuters.
The company is in its third round of fundraising and wants to raise up to 100 million yuan, Hu said. It had secured tens of millions of yuan in previous rounds.
After a surge in fresh funding in 2018, firms like LinkSpace are pushing out prototypes, planning more tests and even proposing operational launches this year.
Last year, equity investment in China’s space start-ups reached 3.57 billion yuan ($533 million), a report by Beijing-based investor FutureAerospace shows, with a burst of financing in late 2018.
That accounted for about 18 percent of global space start-up investments in 2018, a historic high, according to Reuters calculations based on a global estimate by Space Angels. The New York-based venture capital firm said global space start-up investments totaled $2.97 billion last year.
“Costs for rocket companies are relatively high, but as to how much funding they need, be it in the hundreds of millions, or tens of millions, or even just a few million yuan, depends on the company’s stage of development,” said Niu Min, founder of FutureAerospace.
FutureAerospace has invested tens of millions of yuan in LandSpace, based in Beijing.
Like space-launch startups elsewhere in the world, the immediate challenge for Chinese entrepreneurs is developing a safe and reliable rocket.
Proven talent to develop such hardware can be found in China’s state research institutes or the military; the government directly supports private firms by allowing them to launch from military-controlled facilities.
But it’s still a high-risk business, and one unsuccessful launch might kill a company.
“The biggest problem facing all commercial space companies, especially early-stage entrepreneurs, is failure” of an attempted flight, Liang Jianjun, chief executive of rocket company Space Trek, told Reuters. That can affect financing, research, manufacturing and the team’s morale, he added.
Space Trek is planning its first suborbital launch by the end of June and an orbital launch next year, said Liang, who founded the company in late 2017 with three other former military technical officers.
Despite LandSpace’s failed Zhuque-1 orbital launch in October, the Beijing-based firm secured 300 million yuan in additional funding for the development of its Zhuque-2 rocket a month later.
In December, the company started operating China’s first private rocket production facility in Zhejiang province, in anticipation of large-scale manufacturing of its Zhuque-2, which it expects to unveil next year.
STATE COMPETITION
China’s state defense contractors are also trying to get into the low-cost market.
In December, the China Aerospace Science and Industry Corp (CASIC) successfully launched a low-orbit communication satellite, the first of 156 that CASIC aims to deploy by 2022 to provide more stable broadband connectivity to rural China and eventually developing countries.
The satellite, Hongyun-1, was launched on a rocket supplied by the China Aerospace Science and Technology Corp (CASC), the nation’s main space contractor.
In early April, the China Academy of Launch Vehicle Technology (CALVT), a subsidiary of CASC, completed engine tests for its Dragon, China’s first rocket meant solely for commercial use, clearing the path for a maiden flight before July.
The Dragon, much bigger than the rockets being developed by private firms, is designed to carry multiple commercial satellites.
At least 35 private Chinese companies are working to produce more satellites.
Spacety, a satellite maker based in southern Hunan province, plans to put 20 satellites in orbit this year, including its first for a foreign client, chief executive Yang Feng told Reuters.
The company has only launched 12 on state-produced rockets since the company started operating in early 2016.
“When it comes to rocket launches, what we care about would be cost, reliability and time,” Yang said.
(Reporting by Ryan Woo; Additional reporting by Beijing newsroom; Editing by Gerry Doyle)
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FILE PHOTO: Small toy figures are seen in front of a displayed Huawei and 5G network logo in this illustration picture, March 30, 2019. REUTERS/Dado Ruvic
April 26, 2019
By Charlotte Greenfield
WELLINGTON (Reuters) – China’s Huawei Technologies said Britain’s decision to allow the firm a restricted role in building parts of its next-generation telecoms network was the kind of solution it was hoping for in New Zealand, where it has been blocked from 5G plans.
Britain will ban Huawei from all core parts of 5G network but give it some access to non-core parts, sources have told Reuters, as it seeks a middle way in a bitter U.S.-China dispute stemming from American allegations that Huawei’s equipment could be used by Beijing for espionage.
Washington has also urged its allies to ban Huawei from building 5G networks, even as the Chinese company, the world’s top producer of telecoms equipment, has repeatedly said the spying concerns are unfounded.
In New Zealand, a member of the Five Eyes intelligence sharing network that includes the United States, the Government Communications Security Bureau (GCSB) in November turned down an initial request from local telecommunication firm Spark to include Huawei equipment in its 5G network, but later gave the operator options to mitigate national security concerns.
“The proposed solution in the UK to restrict Huawei from bidding for the core is exactly the type of solution we have been looking at in New Zealand,” Andrew Bowater, deputy CEO of Huawei’s New Zealand arm, said in an emailed statement.
Spark said it has noted the developments in Britain and would raise it with the GCSB.
The reports “suggest the UK is following other European jurisdictions in taking a considered and balanced approach to managing supplier-related security risks in 5G”, Andrew Pirie, Spark’s corporate relations lead, said in an email.
“Our discussions with the GCSB are ongoing and we expect that the UK developments will be a further item of discussion between us,” Pirie added.
New Zealand’s minister for intelligence services, Andrew Little, did not immediately respond to a request for comment.
British culture minister Jeremy Wright said on Thursday that he would report to parliament the conclusions of a government review of the 5G supply chain once they had been taken.
He added that the disclosure of confidential discussions on the role of Huawei was “unacceptable” and that he could not rule out a criminal investigation into the leak.
The decisions by Britain and Germany to use Huawei gear in non-core parts of 5G network makes it harder to prove Huawei should be kept out of New Zealand telecommunication networks, said Syed Faraz Hasan, an expert in communication engineering and networks at New Zealand’s Massey University
He pointed out Huawei gear was already part of the non-core 4G networks that 5G infrastructure would be built on.
“Unless there is a convincing argument against the Huawei devices … it is difficult to keep them away,” Hasan said.
(Reporting by Charlotte Greenfield; Editing by Himani Sarkar)
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International Monetary Fund (IMF) Managing Director Christine Lagarde attends a thematic forum of the second Belt and Road Forum for international cooperation in Beijing, China, April 25, 2019. REUTERS/Jason Lee
April 26, 2019
BEIJING (Reuters) – China’s massive Belt and Road infrastructure program should only go where it is needed and where the debt it generates can be sustained, International Monetary Fund Managing Director Christine Lagarde said on Friday.
In brief remarks to nearly 40 world leaders and other high-ranking officials at China’s second Belt and Road summit in Beijing, Lagarde said the program to build ports, railroads and other trade-enhancing infrastructure was having a positive impact on growth in certain countries but needed to be managed carefully.
She called for a revamped “Belt and Road 2.0” to include increased transparency, an open procurement process with competitive bidding and better risk assessment in project selection.
“History has taught us that, if not managed carefully, infrastructure investments can lead to a problematic increase in debt,” Lagarde said in remarks prepared for delivery at the conference. “I have said before that, to be fully successful, the Belt and Road should only go where it is needed. I would add today that it should only go where it is sustainable, in all aspects.”
Lagarde said that Chinese authorities were taking positive steps with a new debt sustainability framework that will be utilized to evaluate projects.
The sustainability initiative was announced on Thursday as China seeks to allay concerns that the Belt and Road plan to boost trade links was saddling poor countries with debts they cannot repay.
She also applauded the launch of a green investment principle for Belt and Road projects at the Beijing conference, emphasizing low-carbon and climate resilient investments.
“Debt sustainability and green sustainability will strengthen BRI sustainability,” Lagarde said.
The IMF chief said the Belt and Road initiative was helping to stimulate infrastructure investment and developing new global supply chains. She cited a new manufacturing zone in Kazakhstan linked to Belt and Road and construction of a highway in Senegal linking three cities to the country’s main airport, which has helped underpin strong growth.
(Reporting by David Lawder in Washington; Editing by Richard Borsuk)
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FILE PHOTO: World Bank Group President David Malpass and IMF Managing Director Christine Lagarde at the IMF and World Bank’s 2019 Annual Spring Meetings, in Washington, U.S. April 13, 2019. REUTERS/James Lawler Duggan
April 26, 2019
By David Lawder
WASHINGTON (Reuters) – Nearly 40 world leaders and scores of finance officials, including International Monetary Fund Managing Director Christine Lagarde, are gathered in Beijing for China’s second Belt and Road infrastructure summit, but the World Bank’s new president isn’t among them.
David Malpass, fresh from a senior Trump administration post at the U.S. Treasury Department, is instead making his first foreign trip as the World Bank’s leader to sub-Saharan Africa to highlight his vision for the bank’s poverty reduction and development agenda.
A World Bank spokesman said Malpass will be traveling this weekend to Madagascar, Ethiopia and Mozambique before flying to Egypt and a debt conference in Paris. Malpass has said that Africa is a key priority for the bank due to its high concentration of the world’s poorest people.
World Bank Chief Executive Officer Kristalina Georgieva, who had been acting president during the leadership selection process, is representing the institution at the summit and had accepted China’s invitation before Malpass started at the bank on April 9, the bank spokesman said.
Former World Bank President Jim Yong Kim attended China’s first Belt and Road summit two years ago.
Leaders of two of the countries on Malpass’ trip, Ethiopia and Mozambique, are among a number of African leaders also attending this year’s summit.
Malpass, who was the Treasury’s undersecretary for international affairs, is a longtime critic of China’s Belt and Road lending practices and had worked to raise alarms about them with G7 and G20 countries in that role.
“In lending, China often fails to adhere to international standards in areas such as anti-corruption, export credits, and finding coordinated and sustainable solutions to payment difficulties, such as those sought in the Paris Club,” Malpass told a U.S. House Financial Services subcommittee in December.
His absence coincides with a significant downgrade of the Belt and Road summit by the United States as the Trump administration tries to negotiate a deal to resolve longstanding trade and intellectual property disputes with China — talks in which Malpass frequently participated.
No high-level U.S. officials are attending, a State Department spokesman said, citing similar concerns about Belt and Road debt.
Malpass said at the IMF and World Bank spring meetings this month that meeting the development lender’s goals of ending extreme poverty by 2030 calls for a focus on Africa.
“By 2030, nearly 9 in 10 extremely poor people will be Africans, and half of the world’s poor will be living in fragile and conflict-affected settings,” he told a news conference at the meetings. “This calls for urgent action, by countries themselves, and by the global community.”
He told reporters on his first day on the job that he wanted to “evolve” the bank’s relationship with China to one where Beijing is a bigger contributor of capital and cooperates more closely with the bank on development issues and poverty reduction.
But Treasury Secretary Steven Mnuchin, Malpass’ former boss, on the same day told lawmakers that the World Bank under Malpass’ leadership and a new U.S. development agency “can be a serious competitor to (China’s) Belt and Road.”
(Reporting by David Lawder; editing by Jason Neely)
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Chinese President Xi Jinping speaks at the opening ceremony for the second Belt and Road Forum in Beijing, China April 26, 2019. REUTERS/Florence Lo
April 26, 2019
By Brenda Goh and Yilei Sun
BEIJING (Reuters) – China’s Belt and Road initiative must be green and sustainable, President Xi Jinping said at the opening of a summit on his grand plan on Friday, adding that the massive infrastructure and trade plan should result in “high quality” growth for everyone.
Xi’s plan to rebuild the old Silk Road to connect China with Asia, Europe and beyond with huge spending on infrastructure, has become mired in controversy as some partner nations have bemoaned the high cost of projects.
China has repeatedly said it is not seeking to trap anyone with debt and only has good intentions, and has been looking to use this week’s summit in Beijing to recalibrate the policy and address those concerns.
Xi said in a keynote speech to the summit that environmental protection must underpin the scheme “to protect the common home we live in”.
“We must adhere to the concept of openness, greenness, and cleanliness,” he said.
“Operate in the sun and fight corruption together with zero tolerance,” Xi added.
“Building high-quality, sustainable, risk-resistant, reasonably priced, and inclusive infrastructure will help countries to fully utilize their resource endowments.”
Western governments have tended to view it as a means to spread Chinese influence abroad, saddling poor countries with unsustainable debt.
While most of the Belt and Road projects are continuing as planned, some have been caught up by changes in government in countries such as Malaysia and the Maldives.
Those that have been shelved for financial reasons include a power plant in Pakistan and an airport in Sierra Leone, and Beijing has in recent months had to rebuff critics by saying that not one country has been burdened with so-called “debt traps”.
Since 2017, the finance ministries of 28 countries have called on governments, financial institutions and companies from Belt and Road countries to work together to build a long-term, stable and sustainable financing system to manage risks, China’s finance ministry said in a report released on Thursday.
Debt sustainability has to be taken into account when mobilizing funds, the finance ministry said in the report, which outlined a framework for use in analyzing debt sustainability of low-income Belt and Road nations and managing debt risks.
The framework is based on the IMF/World Bank Debt Sustainability Framework for Low Income Countries while penciling in local conditions and development of partner nations, according to the report.
CHINESE PROMISES
The Belt and Road initiative will also open up development opportunities for China just as China itself is further opening up its markets to the world, Xi said.
“In accordance with the need for further opening up, (we’ll) improve laws and regulations, regulate government behavior at all levels in administrative licensing, market supervision and other areas, and clean up and abolish unreasonable regulations, subsidies and practices that impede fair competition and distort the market,” he said.
Xi promised to significantly shorten the negative list for foreign investments, and allow foreign companies to take a majority stake or set up wholly-owned companies in more sectors.
Tariffs will be lower and non-tariff barriers will be eliminated, Xi added.
China also aims to import more services and goods, and is willing to import competitive agricultural products and services to achieve trade balance.
“China will strengthen macroeconomic policy coordination with major economies in the world and strive to create positive spillover effects to promote a strong, sustainable, balanced and inclusive growth for the world economy,” said Xi.
VISITING LEADERS
Visiting leaders include Russia’s Vladimir Putin, as well as Prime Minister Imran Khan of Pakistan, a close China ally and among the biggest recipients of Belt and Road investment, and Prime Minister Giuseppe Conte of Italy, which recently became the first G7 country to sign on to the initiative.
The United States, which has not joined the Belt and Road, is expected to send only lower-level officials, and nobody from Washington, citing concerns over opaque financing practices, poor governance, and disregard for internationally accepted norms.
“The United States is not sending high level officials from Washington to the Belt and Road Forum,” a spokesman for the U.S. Embassy in Beijing said.
“We continue to have serious concerns that China’s infrastructure diplomacy activities ignore or weaken international standards and best practices related to development, labor protections, and environmental protection.”
(Reporting by Brenda Goh and Yilei Sun; Additional reporting by Tony Munroe, Stella Qiu, Ryan Woo, Cate Cadell and Tom Daly; Writing by Ben Blanchard; Editing by Simon Cameron-Moore)
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FILE PHOTO: An aerial photo looking north shows shipping containers at the Port of Seattle and the Elliott Bay waterfront in Seattle, Washington, U.S. March 21, 2019. REUTERS/Lindsey Wasson
April 26, 2019
By Lucia Mutikani
WASHINGTON (Reuters) – The U.S. economy likely maintained a moderate pace of growth in the first quarter, which could further dispel earlier fears of a recession even though activity was driven by temporary factors.
The Commerce Department’s gross domestic product (GDP) report to be published on Friday at 8:30 a.m. EDT (1230 GMT) is expected to sketch a picture of an economy growing close to potential, mostly reflecting the impact of an ebbing boost from a giant fiscal stimulus and past interest rate increases.
Gross domestic product probably increased at a 2.0 percent annualized rate in the first quarter as a burst in exports, strong inventory stockpiling and government investment in public construction projects offset slowdowns in consumer and business spending, according to a Reuters survey of economists.
With global growth still sluggish, the surge in exports is likely to reverse and the inventory build will probably need to be worked off, which could curtail production at factories. That could restrain growth in the second quarter.
The economy grew at a 2.2 percent pace in the October-December period. Growth has stepped down from a peak 4.2 percent pace in the second quarter of 2018, when the White House’s $1.5 trillion tax cut package jolted consumer spending.
Economists estimate the speed at which the economy can grow over a long period without igniting inflation at between 1.7 and 2.0 percent. The economy will mark 10 years of expansion in July, the longest on record.
“The economy remains solid, but we anticipate a slowing in the pace of growth in the medium term as the tailwinds from fiscal stimulus fade and the headwinds of tighter monetary policy take hold,” said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.
The economy stumbled at the turn of the year, with a batch of weak economic reports suggesting first-quarter GDP growth as low as a 0.2 percent rate. The soft data stream stoked fears of a recession that were also exacerbated by a brief inversion of the U.S. Treasury yield curve.
Some of the weak data, especially retail sales, were blamed on a 35-day partial shutdown of the federal government, which hurt confidence and delayed processing of tax refunds. Since the shutdown ended on Jan. 25, economic data have mostly perked up, leading to a sharp upgrading of first-quarter GDP estimates.
“Slower, but moderate economic growth is continuing and we might see some slight acceleration as we head into second quarter,” said Sung Won Sohn, an economics professor at Loyola Marymount University in Los Angeles.
WEAK DOMESTIC DEMAND
The improvement in the economy’s fortunes has been mirrored by strong corporate profits for the quarter.
Some economists caution that growth could surprise on the downside because of a seasonal quirk. The so-called residual seasonality has tended to understate economic growth in the first quarter. Though the government said last year it had addressed the methodology problem, economists believe residual seasonality has not been entirely eliminated from the data.
A surge in exports and weak imports are expected to have sharply narrowed the trade deficit in the first quarter. Trade is believed to have added more than one percentage point to GDP after being neutral in the fourth quarter.
Trade tensions between the United States and China have caused wild swings in the trade deficit, with exporters and importers trying to stay ahead of the tariff fight between the two economic giants.
The trade standoff has also had an impact on inventories, which are expected to have increased in the first quarter at their strongest pace since 2015. Part of the inventory build is related to weak demand, especially in the automotive sector.
Inventories are expected to have contributed a full percentage point to first-quarter GDP after adding one-tenth of a percentage point in the October-December period.
Excluding trade and inventories, the economy is expected to have expanded at a roughly 1.6 percent rate in the first quarter. Economists said Federal Reserve officials were likely to focus on this growth measure.
The Fed recently suspended its three-year monetary policy tightening campaign, dropping forecasts for any interest rate hikes this year. The U.S. central bank increased borrowing costs four times in 2018.
“The composition of the data will not look favorably on domestic economic activity, nor provide a positive forward look at current quarter activity,” said Joe Brusuelas, chief economist at RSM in New York. “Policymakers will likely look past this growth report when formulating rate policy.”
Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, is expected to have slowed significantly from the fourth quarter’s 2.5 percent rate. Economists said the government shutdown was the main factor behind the anticipated deceleration in spending.
A moderation is also expected in businesses spending on equipment because of the delayed impact of sharp drops in oil prices toward the end of 2018 and fading depreciation provisions in the 2018 tax bill. Supply chain disruptions caused by Washington’s trade war with Beijing were also seen crimping business investment.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
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FILE PHOTO: A HNA Group logo is seen on the building of HNA Plaza in Beijing, China February 9, 2018. REUTERS/Jason Lee
April 26, 2019
By Jennifer Hughes and Julie Zhu
HONG KONG (Reuters) – Shareholders summoned by Hong Kong Airlines this month for a meeting were greeted with some shocking news: the airline needed at least HK$2 billion in fresh funds or it would lose its operating license.
The carrier had lost HK$3 billion ($382.54 million) in 2018, they were told, and an infusion was crucial, according to people present.
Dialed in, but silent for the hour-long meeting on April 1, were executives for Hainan-based HNA Group,, which holds 29 percent of the airline’s shares.
Investors were blunt about HNA’s role in the company’s troubles, according to people at the meeting – including accusations that it was siphoning off cash, which the conglomerate denies.
“There’s no point raising fresh capital if we cannot solve the problem of (a) major shareholder pumping out HKA’s assets,” said Zhong Guosong, who holds 27 percent of the shares and is vying for chairmanship of the company.
Another shareholder echoed his views: “This is Hong Kong, not Hainan.”
In the last week, drama from the call has spilled into the open as HNA and a rival group battled for control of Hong Kong Airlines’ chairmanship. The airline declined to comment on shareholders’ activities and said its operations “remain normal.”
The infighting illustrates the convoluted nature of HNA’s holdings around the world, which range from real estate to banks and are often divided among opaque, related entities.
On paper, HNA gave up control of Hong Kong Airlines two years ago just as it began selling off assets collected in a $50 billion worldwide acquisition spree.
But the carrier has close ties with several HNA affiliates.
“HNA’s shareholding structure and how they structure investments has always been very complicated, and the HKA case isn’t any different,” said David Yu, adjunct professor of finance at New York University, Shanghai. “The issue now is that there is some distress at the parent group, and this is obviously having implications on the underlying companies, including HKA.”
HNA TANGLE
Since Beijing in 2017 began cracking down on Chinese conglomerates’ rapid debt-fuelled global expansions, HNA has sold about $26 billion in assets, according to Dealogic data and Reuters calculations.
Disposals include control of the Radisson hotel group; a quarter stake in Hilton Hotels; prime property in New York, Sydney, Shanghai, San Francisco and Hong Kong; regional Chinese airlines; a stake in aircraft lessor Avolon; and half of its stake in Deutsche Bank.
But the prices HNA has sought and the complex structures, loans and other business links that bind its holdings have made unwinding its investments difficult.
HNA’s wider Hong Kong interests are a case in point. This week, HNA-controlled CWT International said lenders had seized assets, including U.S. property and its Singapore-based commodity trading and logistics unit, because it failed to repay a HK$1.4 billion ($178 million) loan.
HNA said that it was monitoring the situation, but that it was a matter for CWT and its creditors. Yet HNA units own 51 percent of CWT’s shares, and each of CWT’s executive directors has ties to other HNA businesses. CWT’s co-chairman, Mung Kin Keung, is a shareholder in Hong Kong Airlines.
HNA’s involvement with the airline is just as complicated. The conglomerate took control of CR Airways in 2006 and renamed it Hong Kong Airlines. In July 2017 it cut its stake, according to filings, by selling 34 percent to Chinese private equity group Frontier Investment Partners.
According to Hong Kong Airlines’ 2017 accounts, seen by Reuters, the airline held shares in four unlisted HNA affiliates, worth $367 million at the end of 2017, and had loaned $300 million to two other HNA firms.
That year, the airline’s trade receivables – money owed to it but not collected – jumped 50 percent even as revenue rose only 11 percent. Of those payments due, the amount HNA companies owed the airline more than doubled to HK$1.3 billion, or 73 percent of receivables.
Zhong is closely linked with HNA as well, having been a director of the airline for almost four years until August 2018. Since 2017, he has also been chairman of Hong Kong Express, Hong Kong Airlines’ low-cost sister, which HNA recently agreed to sell to Cathay Pacific for HK$4.93 billion.
Cathay’s announcement of the deal contained a warning that an HK Express shareholder planned to contest it. That shareholder is Zhong, according to two sources with direct knowledge of the issue. They declined to be identified because they were not authorized to speak to the media.
In a further sign that the relationship between Zhong and HNA had soured, court papers show that HNA in December sued the company through which Zhong holds his 27 percent stake in the airline, seeking repayment of a HK$854 million debt from 2010.
A representative for Zhong did not provide comment.
CONTROL DISPUTES
Since the April 1 meeting, Frontier has aligned itself with Zhong, working to appoint him chairman of the airline as part of efforts to seize control and investigate its financial ties with HNA.
Late last week they won an injunction that blocked directors and executives from removing or destroying the airline’s documents.
That followed a week in which both Zhong and airline executive Hou Wei – still listed on its website as chairman – claimed control and fought over who had access to the company’s headquarters.
Adding to the confusion, a group called Grand City Investment Capital Limited this week said it owned the Frontier stake after a transfer dated April 11.
A spokesman for Grand City declined to discuss his company’s ownership. Frontier disputes Grand City’s claim to the stake.
Frontier and Zhong have also accused HNA of “embezzlement of HKA assets and serious financial misappropriation by HNA Group parties” – accusations that HNA has denied.
They and other shareholders are still demanding access to the airline’s 2018 accounts and details of how it lost so much money before they address its HK$2 billion capital shortfall.
Amid the court orders and competing statements uncertainty remains over who is in charge – although both sides have gone to lengths to ensure the airline keeps operating normally.
“There are so many moving parts that corporate control is under dispute because the changes are happening too rapidly for the company to organize coherently,” said Andrew Collier, managing director of Orient Capital Research, which focuses on China. He described HNA as “a poster child for overexpansion of China’s worst conglomerates.”
He added: “Because there is always a lack of transparency at HNA, this makes it twice as hard to figure out what the nature of the dispute is.”
(Reporting by Jennifer Hughes, Julie Zhu, Kane Wu and Alun John; Additional reporting by Shellin Li and Jamie Freed; Editing by Gerry Doyle)
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FILE PHOTO: U.S. President Donald Trump departs after delivering remarks at the Rx Drug Abuse & Heroin Summit in Atlanta, Georgia, U.S., April 24, 2019. REUTERS/Leah Millis
April 25, 2019
WASHINGTON (Reuters) – U.S. President Donald Trump said on Thursday he will soon host Chinese leader Xi Jinping at the White House, setting the stage for a possible agreement on trade between the world’s two largest economies.
The White House said on Tuesday that Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer will travel to Beijing for additional talks on a trade dispute that has led to tit-for-tat tariffs between the two countries.
(Reporting by Jeff Mason; Writing by Doina Chiacu; Editing by Tim Ahmann)
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FILE PHOTO: Chile’s President Sebastian Pinera attends a meeting with Chinese Premier Li Keqiang (not pictured) at the Diaoyutai State Guesthouse in Beijing, China, April 24, 2019. Parker Song/Pool via REUTERS
April 25, 2019
(Reuters) – Chilean President Sebastian Pinera kicked off an investment forum in China on Thursday with an invitation for the Asian giant to use Chile as a jumping off point to do business in Latin America, even as Washington has warned Chile to proceed with caution.
Pinera told the forum that Chile’s objective was to attract more investment from Chinese companies in technology, electric vehicles, telecommunications, and e-commerce.
“We want to transform Chile into a business center for Chinese companies, so that you can, from Chile, reach out to all of Latin America,” Pinera told Chinese investors at an investment and innovation forum in Beijing, according to a Chilean government statement.
The Chilean president’s visit to China, the Andean nation’s top trading partner, comes just weeks after U.S. Secretary of State Mike Pompeo visited Chile and slammed China’s “nefarious” actions and “predatory” lending practices, which critics say leave borrowers beholden to Beijing.
China rejected Pompeo’s criticisms, calling them “slanderous” and “irresponsible.”
Pinera has met with several Chinese electric vehicle makers during his week-long visit to Asia, including BYD and Yutong. Chile is one of the world’s largest producers of lithium, a key ingredient in electric vehicle batteries.
He also met executives from ride-hailing giant Didi Chuxing, which is planning to take on U.S. rival Uber in some of Latin America’s fastest-growing markets, including Chile.
It was not immediately clear whether Pinera would meet with Chinese telecommunications company Huawei during the visit. Chile has been in talks with Huawei since at least 2017 regarding a possible trans-Pacific fiber optic cable, and other projects.
Pompeo earlier this month warned Chile that Chinese technology, including equipment made by Huawei, poses a security risk that could affect information sharing by the United States.
U.S. influence in Latin America has been increasingly challenged by China, whose booming economy over the past two decades has driven up demand for South America’s raw materials.
Chile, among Latin America’s most open economies and the world’s top copper exporter, has sought to remain neutral amid the growing tensions, promoting instead the need for open markets and trade.
(Reporting by Dave Sherwood and Natalia Ramos in Santiago, writing by Dave Sherwood, Editing by Rosalba O’Brien)
Source: OANN
The Belt and Road Initiative is fully in harmony with Hungarian interests, Prime Minister Viktor Orban said on Thursday in Beijing, at talks with Chinese Prime Minister Li Keqiang.
Ahead of the talks, Orban said it was a great “honor” to be invited to the second forum of the economic initiative, to be held on Friday and Saturday in Beijing.
Belt and Road is a “serious safeguard of worldwide free trade and the freedom of world economy”, Orban said. As “Hungarians need an open world economy,” Hungary is ready to cooperate further within the initiative, and will reject “all outside ideological pressure” to the contrary because the Hungarian government will “always act according to national interests”, Orban said.
Chinese companies have greatly contributed to modernizing the Hungarian economy, Orban said. Chinese investments have now reached some 4.5 billion dollars in Hungary, he noted, and proposed that the inflow of capital investments be upheld in the future.
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In his greeting to the Hungarian delegation, Li Keqiang praised Sino-Hungarian cooperation and expressed hope that it should be extended further in sectors such as digitization. Cooperation between the countries has already brought results and offers great opportunities for large companies as well as SMEs of both countries, he said. Free trade and economic development will strengthen world peace, too, Li said.
After the talks, Hungarian Foreign Minister Peter Szijjarto and Innovation and Technology Minister Laszlo Palkovics signed bilateral agreements with Chinese officials. Among them were agreements to set up a Hungarian-Chinese cooperation center, cooperation in sports, creating a “digital Silk Road”, setting up a working group to facilitate bilateral trade and the export of Hungarian poultry to China.
Orban met Chinese President Xi Jinping later on Thursday, the prime minister’s press chief told MTI. They marked the 70th anniversary of diplomatic ties between Hungary and China, the successes in economic cooperation and European affairs.
On Friday and Saturday, Orban will attend the Belt and Road forum, where 37 heads of state and world leaders are expected.
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Source: InfoWars
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