For a quick glimpse at how Europe is turning to China in times of economic turmoil, we present a rundown of banking giant BNP Paribas in China…
First, the bad. Lawyers are already licking their chops as Chinese company Sinopec revealed it is suing BNP Paribas for $47 million, claiming BNP breached a stand-by letter of contract.
Bloomberg reports that the giant oil company can also pursue damages in relation to the breach of contract.
BNP has been making inroads to China for years now, and the lawsuit might be coming at a bad time. The Chinese government recently granted combined quotas of $700 million to five overseas investors in the first two weeks of April, allowing them to buy Chinese stocks and bonds under the Qualified Foreign Institutional Investor (QFII) scheme. BNP Paribas has had QFI status since 2004, according to Reuters:
“Some institutions saw their quotas lowered as a result of business mergers or other reasons. China has stepped up QFII approval as part of efforts to further deregulate its capital markets. The China Securities Regulatory Commission (CSRC) said earlier this month the total QFII quota would be raised by $50 billion to $80 billion.”
The lawsuit also comes just as Fox Business reported that China is considering further deregulating its markets by selling so-called Dim Sum bonds:
“Bank of East Asia (China) Ltd. is considering selling offshore yuan bonds, or so-called dim sum bonds, a person familiar with the situation said Friday.
The offering, if successfully launched, will be the second dim sum bond sale by the Shanghai-based unit of Bank of East Asia Ltd. (0023.HK), Hong Kong’s fifth-largest lender by assets. Its first such sale was in July 2009 when it raised CNY4 billion ($637 million) from an offering of two-year dim sum bonds.
The bank has mandated Bank of East Asia, BNP Paribas and HSBC to arrange investor meetings in Hong Kong in May to gauge demand, said the person, who declined to be named.”
Read more on France, China, and big business in the latest edition of Carnet Atlantique!