BC government dim sum bonds a success in Hong Kong, but give indigestion to many here in British Columbia

As Harper’s old fishing buddy Rob Ford paddled up Denial earlier this week-  and continues to, very slowly of course,the ongoing gong show is like watching a train wreck in slow motion – his theatrics have provided ample cover for a variety of stories out west that barely registered on the radar.

Lets start with a serving of Dim Sum .. bonds that is.

In a news release issued 6pm Monday evening, the BC government announced they had successfully issued Chinese currency (Renminbi) bonds.

http://www.newsroom.gov.bc.ca/2013/11/successful-renminbi-bond-signals-new-level-of-china-canada-relations.html

In doing so, the BC government effectively made financial history, since they are the first foreign government to issue Chinese currency bonds in the Chinese market. From Reuters:

“British Columbia’s dim sum bond will be listed in Luxembourg. HSBC is the sole bookrunner of the transaction. Bank of China and Industrial and Commercial Bank of China are co-managers.”

Ok, let’s just stop for a moment right there.

First, what is a dim sum bond?

“A bond denominated in Chinese yuan and issued in Hong Kong. Dim sum bonds are attractive to foreign investors who desire exposure to yuan-denominated assets, but are restricted by China’s capital controls from investing in domestic Chinese debt. The issuers of dim sum bonds are largely entities based in China or Hong Kong, and occasionally foreign companies. The term is derived from the Chinese cuisine that involves serving a variety of small delicacies and is especially popular in Hong Kong.”

China is hoping the dim sum bond market will help internationalize the Chinese dollar, but until the BC government jumped into the fray, they had  generally only been issued by corporations that have future inflows of Chinese currency that could offset any losses from changes in currency prices.

For a provincial government, it’s without a doubt, a bit of a risky venture. HSBC assumes some of the risk as the bookrunner and the BC government has also reinvested the proceeds into a secure investment – a term deposit, according the Finance Ministry staff, in the same market. More on that in a moment.

However, HSBC who is the sole bookrunner on this deal, not only faced money-laundering accusations last year, but now finds itself dragged into the spreading investigation into allegations of foreign currency rigging. 

Furthermore, the Bank of China  and the Industrial and Commercial Bank of China are two of “The Big 4” banks owned by the Chinese government.

They are the co-managers of this bond.

In a time when many governments are concerned about Chinese state-owned investment in particular, it’s remarkable that the BC government would make this bold move, which has not been undertaken by any foreign government to date, not even to woo Chinese investment and trade. They are effectively allowing the Chinese government direct access to the management of this bond!

Sources indicate that there is a very good reason foreign governments haven’t ventured into this area yet, and it has a lot to do with the fact that China is still a one party country where the government closely controls the flow of its currency in and out of the government. Dealing with the Chinese government is not the same as dealing with Japan, or the US or any other trade country -period. That alone entails a degree of risk that can’t be hedged – or offset – by investing bond proceeds in any term deposit.

Of course, this immediately caught my eye since talk of the possibility of these bonds being issued made news late last year and again in January – at the time Assistant Deputy Minister Jim Hopkins told Chinese media that ‘The issuance of the bonds will be used to fund BC’s schools, hospitals and highway infrastructure.’

According to the government’s new release however, the government: ” immediately reinvested the proceeds in a matching and secure CNH investment, resulting in a positive return and protecting against foreign exchange risk.”

Curious as to the nature of this secure investment – a valid question I’ve yet to see asked – I called the Ministry of Finance to ask what specifically the government reinvested in, and was told: “Something like a term deposit.”

When pressed for the specific name or investment vehicle that the proceeds were put into, the communications contact had to investigate further and confirmed late Wednesday that it was a renminbi term deposit.

However, it was reported today in the China Daily, that:

“Michael de Jong, British Columbia’s finance minister, said in Beijing that the province immediately reinvested the funds in secure investment projects, including education, healthcare, transportation and energy resources.”

Hmmm. Which is it – a safe and secure Renminbi term deposit…. or education, healthcare, transportation and energy resource projects?

Did the province of BC actually invest all of the proceeds from the bond issue, or only part of it? Did the BC government borrow against this transaction with another lender for instant access to funds, or are they playing a game of public relations that counts on many British Columbians not reading Chinese dailies? Because one thing is certain – these bonds mature in one year at which time they would be paid out with interest. That means whatever investment the government placed the proceeds from the bond sale into, would have to give a good enough return to pay the bonds out at the maturity date, AND make a profit for the government that could then be placed into schools, etc… otherwise it would all have been done for the sake of relationships and would cost taxpayers in the end.

So which is it?

At least the BC government has been somewhat honest in stating what this foray in the dim sum bond market is all about :”It reflects the provincial government’s desire to promote stronger relations between China, the Province of BC and Canada.”

This history making bond issue by the Clark government comes on the heels of the also first of its kind pact between the Chinese government and another Canadian province – Alberta.

In late October the province of Alberta signed a non-binding energy pact with the government of China deemed to increase trade and collaboration.

“Alberta Energy Minister Ken Hughes says the framework on sustainable energy development gives Alberta direct access to decision-makers and strategists at the highest levels in China.

Hughes, who spoke to reporters from Beijing, said the deal’s importance was highlighted by the presence of Chinese President Xi Jinping and Canadian Gov. Gen. David Johnston.

He says the deal is a critical step toward increasing trade with China.

“It is the single most important market Alberta will have for the next 50 years.”

The minister says what he is hearing from leaders in China makes it even more imperative to get a direct line for Alberta crude oil to the Pacific coast.”

Now, here’s where we get to the irony of it all.

While Rich Coleman and Gwyn Morgan are busy pretending to be columnists and that BC is the best fracking place on earth, and Christy is bragging how we now have quadrillions of LNG reserves rather than trillions… the rosy glow is fading on LNG as reality starts showing it’s not so rosy future.

(How is it that Rich Coleman can state that fracking is safe when the industry already acknowledges a lack of transparency in violations? )http://www.vancouversun.com/technology/Commission+lacks+transparency+fracking+violations/7982077/story.html

A report from an Alberta think tank states that the expectations of the BC government a year ago may be tough to deliver considering BC is very late to the table and our supply costs to bring LNG to market are much higher: http://northcoastreview.blogspot.ca/2013/10/alberta-research-foundation-puts-bc-on.html

That full report can be read here http://cwf.ca/pdf-docs/publications/Managing_Expectations_October2013.pdf

This was followed by the news that the Haisla nation LNG project in Kitimat is facing hurdles as one of its partners fends off insolvency, following the default on a loan obtained from a Chinese partner. The case is now in BC courts. http://www.vancouversun.com/business/Loan+default+threatens+solvency+partner+project+proposed+Kitimat/9124652/story.html

And of course, the truth about the many hurdles PETRONAS faces with regards to their LNG investment in B.C. came out yesterday  –  it seems photo ops trumped reason and the PM wasn’t as happy as he pretended to be when the deal was announced… means that it doesn’t matter how much gas we have, if it cant, or wont get to overseas markets because of foreign government ownership issues: http://www.straight.com/news/523771/malaysian-state-owned-energy-company-petronass-liquefied-natural-gas-investment-bc-faces-hurdles

This, all on top of the report issued recently by the International Gas Union, that states ‘LNG project costs in B.C. far exceed those in the U.S., making the demand for a higher price overseas “difficult to financially justify”. ‘

One wonders just how far the Clark government  ( and the Redford, for that matter) will go to make their resource fantasies come true… and how much they will compromise and sell to make sure that happens.

Considering China still has a horrific human rights record  and  while the federal and provincial governments are fine to look the other way, I am not. It’s appalling. Nearly daily, a quick search of ” Human rights+ China” brings forth new stories on appalling worker conditions and person human rights violations.

Not everything in life is black and white and yes, there are 50 shades of grey. But when it comes to what we find acceptable as a civilization, as mothers and parents and human beings, where do we draw the line?

That is the question British Columbians – and Canadians – will have to confront as our elected governments fall over themselves to make deals with a government still ruled by the Communist Party of China. But then again, when it comes to the BC Liberals, ‘Envy is ignorance.”

28 thoughts on “BC government dim sum bonds a success in Hong Kong, but give indigestion to many here in British Columbia

  1. More of same on so many fronts. At one time, I was worried about my grandkids’ future, but that moved to fear about my son’s lot in life, and it’s plain that my own declining years will likely be mirrored by the rapid sucking of any semblance of civilization down the crapper of human greed. I learned a new acronym this morning from Erica Strauss over at Northwest Edible (http://www.nwedible.com/2013/11/douche-waffles-who-poop-in-pools.html). I think you would like Erica: strong writer of strong opinions with a good heart and an appreciation of what life can be.

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    1. Laila

      Dan, thank you for leaving a link to Erica’s post. It’s quite on point right now… 🙂

      Not sure who will do the most damage.. but its hard to tell the BC Libs from the Fed Cons right now.

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    1. Laila

      I know, right?!!

      That is what kills me about this bond. Unless they have borrowed against the proceeds which have allegedly been invested in a term deposit overseas… and not put into education etc etc as they told the Chinese press…. OR they have a term deposit paying an interest rate that will give a profit after these bonds mature in a year and are paid out….

      Then the only purpose for issuing the bond is to make stronger relationships with the Chinese government and mainland China investors. Not to raise capital for education or heathcare or anything else, it was simply to forge more trust and open our investor base.

      Here’s the real joke of it all. Issuing a bond like this doesn’t happen on its own, you need qualified and experienced professionals in the banking industry to handle it and that doesn’t come cheap.

      How much did these dim sum bonds cost BC to issue?

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  2. Julie

    What I found, filled me with contempt. The Enbridge pipeline, always was going to come through BC. Christy Clark’s stance against the Enbridge, was nothing other than a scam. Christy, Redford, Black and Harper are building, a floating refinery near Kitimat BC. How is the dirty oil going to get to that refinery? Don’t we all know? The Campbell/Clark BC Liberals, work for Harper.

    Do not people remember? Fadden of CSIS warned of China’s huge invasions into Canada. BC was specifically mentioned as, Campbell had already given much of BC to Communist China.

    Harper’s sell-out of Canada to Communist China, began during Campbell’s reign of terror. Harper rewarded Campbell, for doing his dirty work for him. He was rewarded the post of, High Commissioner to the U.K.

    Herr Harper and his henchmen, all belong in prison as traitors to Canada.

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  3. The sell-out is sickening.

    Of course when you are pilfering the public purse to payout your campaign backers then you need to keep the cash coming in. In that kind of situation you turn to some very desperate measures.

    Both the Harper and the Clark government are at that point of desperation. Despite the human right abuses by Communist China they continue to forge special economic ties with China. Do you know what a “special” economic tie with China is?

    That is where you give them all of your resources for peanuts.

    Do you know what the net royalties to BC for LNG were last year? $6 Million. Nothing. Practically doesn’t even cover the cost of accounting. Why do we even bother charging for our resources?

    Why do we pretend? Wouldn’t we be better off if we were honest and just said, “….here it is, come and get it, bring your own people and don’t be concerned with any of our laws.”

    Wait a minute. That is where we are already. The more I hear about what is happening the more sense secession makes to me.

    At least if we were able to free ourselves of the collusion and corruption at a federal level we would have half a chance of cleaning up BC, which has the potential to be so great.

    Being part of a flawed and corrupt federal system is a distraction from what we need to do in BC.

    I encourage people to please ponder the possibility of secession. Not because we do such a great job in BC but rather because the good people have only so much energy and it would allow us to focus on what is happening in our own backyard rather than worrying about what Harper has done with China, or which government Trudeau most envies or how much have the senators in Ottawa have stolen from the public.

    Think about it. Secession makes sense….ross buchanan

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    1. Mike

      Ross, I was with you right up until you …”encourage people to please ponder the possibility of secession.”
      Please give your head a shake Ross. You would have us all jump out the fry pan and back into the fire?
      As a solution to “any” problem, your suggestion would pair us with a very strange set of players….. none of which would address your concerns about the perceived “sell out” of our natural resources to foreign interests.
      Lets put that aside for the moment. You know better than most, the lessons of history. In the simplest terms, if you cannot move past a conflict based relationship you end up in conflict.
      Canada, to its credit has avoided for the most part this dubious distinction. What bothers me the most is “secessionists” are for lack of a better term, “a bunch of quitters”. Taking up all your toys and leaving the sandbox only ensures you have no friends, no influence, and no voice at the table. All which leaves you with a more uncertain future, not less.
      Really! Your thoughts please?

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      1. You may be right. My thought is that I am looking to eliminate some of the levels of government. Federal, Provincial, Municipal, MV and herd of crown agencies like PMV that have an open license to dictate to the citizens. I am a simple kind of guy and I believe much of the ineffective run around the public is currently exposed to and results in confusion is about who is in charge of what. In my mind, if we are to lighten the load of governments that we carry on our shoulders the feds would be a good place to start as they seem to be the most out of alignment with the BC reality. But you are right in that there does not seem to be an interest in a change of this nature. I have tested the waters and as I look behind me I don’t see a crowd forming. Mike I don’t want the Federal paramilitary force that polices us, I don’t want the pipelines that it appears the feds are prepared to force on us, I don’t want the carcinogenic coal from the states reshaping the communities of White Rock, Crescent Beach and North Surrey and I don’t want the sick and criminal behavior of the senate to be funded from my pocket. I am searching for solutions. My concern is that if nothing changes…then nothing changes. What do you think?

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        1. Mike

          I don’t think any of this discussion is so much about being right or wrong, as it is about how we might get there. You are absolutely correct in that we don’t need three levels of government. Overlap, duplication, and bureaucratic complexity routinely result in expensive, time consuming pursuits that accomplish little if anything.
          Despite all your objections to a “Federal paramilitary police force”, pipelines, coal shipments and a dysfunctional senate….. there are as many or more lined up in support of each.
          The conversation for change must speak to everyone in the room and that’s where compromise and tradeoffs are agreed to. A hot button for many is China, and for good reason we should all be wary. Laila, would appear to rule out any contact with China because they are a Communist regime. However, Canada and other nations have to connect with their global neighbors or we will face an uncertain future. This strange dance or as Laila refers to Playing with Dragons is part of an evolutionary process that will draw nations closer making them more inter dependent, not less. This Dim Sum Bond issue may well be a travesty played upon us or, a triumph of leadership into areas others fear to tread.
          Do you really think China’s communist regime could ever turn back the clock while maintaining the economic successes it has achieved in a very short time. Not likely I would suggest. The human rights abuses are increasingly being shown to the world and are in effect forcing China’s leadership to cope and change at the same time.
          Finely, your …”concern is that if nothing changes… then nothing changes”.
          Change is constantly occurring around all of us…. the real problem is how well (tolerant) we are in accepting change we may not like or support. It is still change. If you are only willing to talk with people who agree with you….. you are never going to achieve the change you seem to want.

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          1. Laila

            For the record I don’t rule out all contact with China – that would be 1) impossible and 2) foolish.

            I do however, have a strong concern with how Canada,and our provincial government deals with the Chinese government specifically. I’m by far,notnearly the only one to express those concerns. As you say, for good reason we should be wary. For example, the threat of Chinese espionage and hacks into Canadian companies has been reported on in the past: http://www.torontosun.com/2013/02/21/harper-not-saying-what-hes-doing-about-possible-chinese-hackers And https://www.google.ca/#q=canada+%2B+chinese+hackers

            Another recent report details how Chinese spies use conferences to find targets, here and overseas. http://www.theepochtimes.com/n3/336240-chinese-spies-use-conferences-to-find-targets/

            Because China, no matter how modern and evolved it currently is, is still run by a one party, communist government that controls nearly everything, Chinese government owned corporations ( otherwise referred to as state owned) must never be regarded in the same light as a privately owned corporation.

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            1. Mike

              Your examples are right of course….. does this mean it is less objectionable (to spy) when the NSA spies on its friends and allies compared to Chinese espionage?
              Recall Canada, under Trudeau had a brief fling with Government owned corporations under the National Energy Program which badly tweaked Alberta and created Petro-Canada.
              Our national health care program is widely regarded by many U.S. as an example of “Socialism” and thus bad for us.
              There are many other examples of contradiction when viewed through “political filters” of convenience.
              Perhaps most difficult for all of us is the question, What amount of privacy are we willing to surrender to the authorities so as to ensure our security, Cyber, Personal, or Corporate?
              The challenge for democracy and our ways of life will be to “walk the talk” while protecting our rights to do so. This I feel is more under threat than ever before.
              Lastly, it would be a cold day in H.. before I ever thought of you being “foolish”.
              Your sharp mind and keen instincts are what we need more of in these discussions.

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          2. Gee whiz Mike, I wonder if you aren’t underestimating the value of an Independence Movement in BC and the impact that it could have to minimize some of the crap that is being driven our way from Ottawa.

            I wonder if an Independence Movement in BC might get some folks in Ottawa thinking about what they are doing and how they are doing it. I am very concerned about the Chinafication of BC.

            How we are not only giving away our resources at ten cents on the dollar but thanks to TILFA we are about to give away the jobs as well.

            Last year the NET royalties to the BC government for NG was $9 Million.

            That is nothing. With a $44 Billion Budget in BC that money is enough to keep the government running for about 24 minutes.

            I don’t know about you, however for me, i expect a much greater return on the sale of our resources. To be giving them as we are for pennies on the dollar is disgusting and in fact in my opinion is criminal.

            Whether or not we even want to be dealing carbon and playing a major role in the melting of the planet as we are is a whole other question.

            In BC Resource Revenue to the Public Purse has fallen to 25% of what they were ten years ago. We are giving this province away and until people wake up to the theft from the Public Purse that the BC Liberals and the CPC are facilitating on behalf of their big money, out of province, corporate sugar daddies it will continue.

            The corporations give the liberals millions and in exchange they transfer billions of dollars of public wealth back to their corporate sponsors all in the spirit of reciprocity.

            The corporations take care of the liberals and the liberals take care of the corporations.

            It is a beautiful thing and since the msm is bought and paid for in this province very few are wise to the truth of what is really happening here.

            We are witness to what is a crime of massive proportions and many are standing on the sidelines enabling the theft and colluding with the criminals. I don’t blame those that are not aware as the msm is very committed to concealing the truth however for those that I would consider “informed” there are no excuses.

            Our only hope? For people to see what is happening. In other cities across Canada there remains some semblance of a press that reveals rather than conceals. In Winnipeg the Winnipeg Free Press keeps the politicians honest and think what Toronto would look like if it weren’t for the Toronto Star being willing to report the truth. We so desperately need an independent, truth telling free press to report on reality and give people the opportunity to fight to save what is left of this province.

            Be Well…ross Buchanan

            Like

            1. Mike

              I think you said it earlier, that you tested the waters and didn’t find much interest for change, Independence or any other kind.
              Any effort to break up a Country will always get attention, probably not the kind you would want or could work with in the case of B.C. Independence. You might remember the notion of “Pacifica” being the west coast states and provinces along the pacific. In accounting terms a powerhouse, but a disaster for nation building in most everybody’s mind.
              “Chinafication of B.C.”, or any other issue you might have with Ottawa’s choices, decisions and reasons are no more or less significant than issues of 50 or 100 years ago. Respectfully Ross, whatever I think of your solution on forming an Independent Movement might achieve, I do believe you would create far more problems. Perhaps better known as the “victim of unintended consequences”.
              I do hear your financial complaints and don’t disagree…. but that is far too convenient a circumstance to wage the kind of change breaking rank with Ottawa and/or the country would cause. No doubt this might well appeal to the young and certainly the less well hinged out there, but it is not the stuff of leadership in my opinion.
              Your revenue example for LNG is correct and makes the same point I stated some time ago that B.C. is too late to the game on LNG to be competitive at the global level….. so yes, it will be given away. That’s the reality, it is worth what it is worth to a buyer. It is truly frightening that we have to remind so many American’s and Canadian’s that you have to compete in an open enterprise driven market. If you don’t, or can’t someone else will.
              I apologize if this offends your sensibility but those of us fortunate to be born into this country probably have had it to easy, to good and for to long.
              I agree with you that an independent media is crucial as is the long lost art of investigative reporting…. and on those I will always support. Even If I don’t always agree with their point of view.
              In closing, as good as Laila’s articles are, if they only attract the converted then we are all missing the other half of the room. Thank you for your response and comments.

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    2. Laila

      Yes, the ‘new’ leader in China who has been leading this anti-corruption charge – which many call nothing but a sham to feign change to foreign governments – is the same that has jailed more than 15 people who have called for anti-corruption measures!! http://www.reuters.com/article/2013/10/28/us-china-corruption-idUSBRE99Q0C920131028

      Imagine that… the Chinese court would not all for a proper defense. And this is the government our premier is courting to the extent she has now allowed government owned banks( yes, owned by the Communist party) to co-manage these BC gov dim sum bonds.

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  4. Kevin Logan

    One thing is certain. They are coming for the gas.

    All the propaganda we are being served right now is for one purpose. To fleece us.

    Anyone who believes LNG is not gonna happen is delusional.

    Its going to happen and the more we accept all the doom and gloom about it, the more sweet the sweetheart deals will be.

    Its simple, if everyone is convinced our gas is too expensive, or that we are priced out of the market, or that other jurisdiction have more on offer and are thus more appealing, then they will accept Colemans deals, with the lowest royalty regimes, the lowest taxes, the highest subsidies the least stringent regulatory regime and much diminished environmental protection.

    Our gas is known to be of superior quality, in fact many of the conditions make it some of the best in North AMerica which is why huge expenditures to pipe it across the province is even being considered.

    This month is KEY as Coleman will announce terms he intends to lock in for a generation. Including a new ministry that will essentially be window dressing for a massive influx of foreign workers (much of it enabled by TILMA) and all of the terms I mention above.

    We are about to hand it all over…and it isn’t pretty.

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  5. nonconfidencevote

    Perhaps we should rename those bonds “Sum Dim” and print off about 100,000 of them with a photo of Christy Clark right next to the Sum Dim title.
    I’d buy one………

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  6. Mike

    I for one would really like to know who in government is pushing this “bonds” initiative.
    As smart as the Premier may think she is, this one is way past her abilities to conceive and deliver on.
    The back room boys and girls need to be identified and have a bit of sunlight cast upon them for us all to see!

    Like

    1. Laila

      So would I. This has been in the works for a long time.

      This was big news worldwide in financial markets. I clearly failed in making it easily understood why this is a big concern and why I have so many unanswered questions, but nevertheless, my concerns remain.

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  7. Stu

    You say …”However, HSBC who is the sole bookrunner on this deal, not only faced money-laundering accusations last year…” – That is incorrect:
    Just accusations you say?! Hardly – as HSBC was fined $2 Billion for money laundering

    Like

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