China-ASEAN Monitor


Photo credit: Xinhua


Economy, Investment and Trade

Rail-sea routes help ASEAN goods extend reach in China
(2 December 2018) Southeast Asian commodities have benefited from the over 700 China-ASEAN rail-sea routes connecting traders from the region to Chinese cities over the past year, according to rail and port authorities in Guangxi Zhuang Autonomous Region. The route network, which includes the new International Land-Sea Trade Corridor (ILSTC), connects major ASEAN cities with China including the recently-linked inland cities such as Chongqing, Chengdu, Kunming, Lanzhou and Guiyang. According to the China Railway Nanning Group, there are presently 41 diverse categories of commodities being transported on these routes including ceramics and sheet materials, powdered milk and coconut milk.
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SGX launches ‘world’s first’ high-grade iron ore derivatives in tie-up to develop Belt and Road-related indices
(3 December 2018) The Singapore Exchange (SGX) recently launched a set of high-grade iron ore derivatives to meet the growing demand for new risk management tools, especially with China increasing its use of premium iron ore for steelmaking as it aims to pursue environmentally-friendly economic growth. SGX touted the derivatives as first-of-its-kind in the world and said that the initiative will provide investors with a platform to trade grade differentials and manage widening basis risks. Further, the high-grade contracts will provide access tools to bridge domestic pricing in China—iron ore’s most important market—to an international benchmark. Earlier, the SGX announced a partnership with Nanhua Futures, a China-headquartered financial derivatives services platform, to develop indices representative of China’s Belt and Road Initiative (BRI). With this partnership, SGX’s index business SGX Index Edge will work with Nanhua Futures’ subsidiary Nanhua Fund to identify the types of indices and respective methodologies that would be of interest to Chinese and international investors.
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China doubles down on Belt and Road collaboration in Myanmar
(30 November 2018) China reaffirmed its commitment to the China-Myanmar Economic Corridor (CMEC) during a visit by the vice chair of China’s National Development and Reform Commission (NDRC) to Myanmar. The CMEC, which stretches from China’s Yunnan to Myanmar’s Yangon and Kyaukphyu region, involves locations that are key to bilateral trade and investment. According to the Chinese embassy in Yangon, Myanmar has created a Belt and Road implementation steering committee chaired by the state counselor and includes chief ministers from sub-national governments as well as representatives from other departments. China is Myanmar’s biggest foreign investor in terms of approved FDI.
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China increases investment in Indonesia’s battery sector
(30 November 2018) Construction on a US$4 billion lithium battery plant on the island of Sulawesi will commence on 11 January 2019, according to Indonesian coordinating maritime minister Luhut Pandjaitan. The project is backed by unnamed investors from China, Japan and South Korea. This comes as Indonesia looks to tap its large nickel laterite ore reserves to become a key player in lithium batteries. Chinese battery firm GEM Co Ltd announced in September that it was collaborating with four other companies to invest a total of US$700 million to develop facilities to produce battery-grade nickel chemicals in Morowali. Tsingshan Holding Group which is Indonesia’s biggest nickel producer, announced in August that it was mustering investors for a nickel sulphate plant in a US$10 billion industrial park on the Halmahera island.
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Chinese investment in Cambodia to diversify into SME financing
(4 December 2018) Cambodia can expect Chinese investment in its microlending sector in the near future, according to Peter Wong, Southeast Asia and South Asia regional director of the Hong Kong Trade Development Council (HKTDC). China-based banks currently operating in Cambodia include the Industrial and Commercial Bank of China, Bank of China as well as microfinance lender Prince Microfinance. According to Wong, Cambodia is an important country under the BRI, and more trade opportunities will emerge between Cambodia and mainland China, with Hong Kong serving as a platform for professional services and a financial centre for investment. He also noted the increase in Chinese investment in Cambodia and foresees that many manufacturers will relocate to Cambodia amidst rising labour and operational costs in China. According to the HKTDC, Hong Kong is Cambodia’s second largest source of foreign direct investment with investment totalling US$347 million in 2017, and ASEAN countries can expect even greater exchange when the ASEAN-Hong Kong free trade agreement comes into force in January 2019.
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