China: the trade shows must go on

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Good morning from Singapore, where there is at long last at least a glimmer of hope that regional travel in the east Asia region might be possible in the not too distant future, even without a vaccine for Covid-19 yet available.

The reason for this optimism is the recent announcement by authorities in Singapore and Hong Kong that they will soon allow each other’s residents to travel relatively freely between the region’s two leading financial centres. So long as people test negative for coronavirus, they will be able to travel quarantine-free between the south-east Asian city-state and the Chinese special administrative region.

Now imagine that other Chinese cities — say Beijing, Shanghai, Guangzhou and Shenzhen — could be integrated into this scheme. There is a rough template for it already. China has long allowed international travellers to stay visa-free in certain cities for a number of days between transit flights, provided they do not leave city limits. This has made it easy for someone travelling from London to Hong Kong to fly via Beijing and conduct a few days of business in the Chinese capital without ever having to apply for a formal visa.

If Singapore, Hong Kong and some of China’s largest cities could all agree to allow quarantine-free travel, it could be the start of a long-awaited return to normal in the Asia-Pacific region — and help revive events such as the Canton Fair, which is the main subject of today’s post.

Policy watch looks at steps taken by the EU markets regulator to quell some investor concerns about post-Brexit trading while our chart of the day highlights how China has become the dominant force for bilateral lending in sub-Saharan Africa.

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China trade

A virtual Canton Fair

On March 12 China’s premier, Li Keqiang, issued a surprising statement. The country’s largest and longest-running trade fair, held annually in the southern city of Guangzhou since 1957, would hold its spring session as normal.

It seems inconceivable now, given the speed with which the coronavirus pandemic has spread across the world, but at the time holding the Canton Fair did seem like it might be possible. By early March, China had successfully contained the virus, especially in cities and provinces far away from its centre in central Hubei province, and it was not yet clear that major outbreaks would emerge in other parts of the world.

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In these circumstances, holding the Canton Fair as scheduled would be an important symbol that the world’s second-largest economy was still open for business. After all, the fair was famous for not missing a session since its establishment in 1957 — surviving traumatic events such as the Great Leap Forward famine of 1959-61 that killed tens of millions of people, the decade-long turmoil of the Cultural Revolution and the Tiananmen Square protests and ensuing massacre in the spring of 1989. Chinese officials did not want to see the fair’s streak broken.

In the end, however, this year the government had to bow to reality. As outbreaks gathered pace in late March in Europe, the US and across the developing world, China closed its borders to foreign travellers — including foreign residents with valid permits to live and work in China.

The Canton Fair’s spring session was postponed from April to June and moved online only. Its autumn session, also convened virtually, concluded on October 24. Guangzhou’s hotels, restaurants and bars had to do without hundreds of thousands of visitors.

So in terms of keeping the fair’s long streak alive, do two online sessions count — or is this cheating?

Mr Li’s government says it was a triumph. Both he and President Xi Jinping “attended” the spring session’s online opening ceremony and “visited” online booths. Some 26,000 exhibitors displayed their wares on the fair’s website to registered buyers from 217 countries and regions.

“The virtual Canton Fair blazed a new path of international development,” its organisers argue. They contend this is just the beginning of a brave new future for the event: “A Canton Fair that never ends will be built with integrated online and offline functions to make new contributions for Chinese and foreign companies to develop broader markets.”

For Guangzhou in particular, the significance of the fair extends far beyond its inaugural session in 1957 and what it said about the city’s relative openness even during the darkest periods of Maoist China.

For Guangzhou, the significance of the fair extends far beyond its inaugural session in 1957
For Guangzhou, the significance of the fair extends far beyond its inaugural session in 1957 © Alamy

China’s largely Beijing-based rulers have waxed and waned in their enthusiasm for foreign trade over the centuries. But no matter whether such commerce was actively encouraged or barely tolerated, Guangzhou has long prided itself on being one of country’s leading trade centres.

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The city is dotted with ancient mosques which stand as monuments to Guangzhou’s trading links to the Arab world, which date back at least 1,300 years. And not far from the Canton Fair’s cavernous exhibition halls on the banks of the Pearl river is Shamian Island, where western traders were allowed to establish trading posts in the late 18th century.

With such a proud heritage at stake, letting the fair formally lapse was not an option for the Chinese government — not even during a once-in-a-century pandemic. Having saved face with this year’s two online sessions, Beijing’s hope now is that the fair can resume business as usual in the spring of 2021. If it can, it will be an important sign that life is continuing to return to normal — at least in this part of the world.

The Canton Fair’s official name is the China Import and Export Fair, but it is a misleading one. The event has always been about exports, with a focus on matchmaking domestic manufacturers with foreign buyers. Over time this emphasis became problematic for the Chinese government, especially as US President Donald Trump railed against China’s trade surpluses and sought to slow down its export sector.

So two years ago, at a time of heightened trade tensions with the US, President Xi Jinping’s administration launched the annual China International Import Expo, held every autumn in Shanghai. The idea was to show the world that it need not fear China’s export prowess, for it also has a huge and growing demand for imports.

The CIIE’s third annual session will open next week. But unlike the Canton Fair, it is attempting to pull it off in the real rather than virtual world, with a 20 per cent year-on-year increase in floor space to meet demand from exhibitors. Attendees will be subject to a sophisticated array of health checks and monitoring as organisers hope to keep the event Covid-19 free.

Charted waters

China has emerged as the biggest bilateral lender to Africa over the past two decades, transferring nearly $150bn to governments and state-owned companies. But as FT reporters on the continent note, the pandemic has revealed the fragmented nature of Chinese lending as well as Beijing’s reluctance to fully align with global debt relief plans. China’s share of bilateral debt owed by the world’s poorest countries to members of the G20 has risen from 45 per cent in 2015 to 63 per cent last year, according to the World Bank.

Bar chart of Repayments on bilateral debt due this year ($bn) showing China is the dominant bilateral lender in sub-Saharan Africa

Policy watch

EU investors will still be able to trade dual-listed companies such as IAG, the parent of British Airways
EU investors will still be able to trade dual-listed companies such as IAG, the parent of British Airways © Andy Rain/EPA-EFE/Shutterstock

The EU markets regulator has taken steps to partly assuage investor concerns about trading after Brexit by indicating EU investors will be able to trade sterling-quoted shares of European companies listed in London, Phil Stafford and Jim Brunsden write.

The Paris-based European Securities and Markets Authority on Monday made the policy change because of concerns among businesses and some EU governments that the bloc’s regulations could fragment the share market and cut European companies out of deep pools of capital in London.

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Esma said that trading of EU shares on a UK exchange in pounds will be exempt from an EU rule, known as the share trading obligation, which determines which venues investors can use to trade. That means EU investors will still be able to trade dual-listed companies like AstraZeneca, Relx, Tui, British Airways parent IAG and G4S in London as those companies are listed in sterling.

However, many Irish companies, like Ryanair, Kingspan and Bank of Ireland will remain vulnerable as they trade in euros. One industry lobbyist in Brussels said it was “the narrowest of accommodations”, adding that it “does not solve what Ireland needs”.

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