Our firm's China Outbound Investments product was launched in 2008 with a view of providing (to the extent possible) "primary source reconciled data" related to Chinese outbound investments. We did so after hearing so many corporate and institutional investors question the transparency or sources of such data appearing in numerous public sources.
We monitor all Chinese outbound investment across continents, industries and by type/component of investment – both equity and debt. Since the data pre-dates the BRI, this data covers the globe, not just the original 65 OBOR counties, or any expanded list which has subsequently evolved (we do not include bank loans by Chinese commercial banks, unless linked to a policy bank).
Based on our firm's employees/Board experience of over 20 years operating in China, and over the past few years, on average being physically present between 4-8 weeks/year in China, we remain convinced that all outbound investment is ultimately driven from the Central Government. As such, we track all G2G agreements, Chinese Government related loans/policy bank loans and all M&A/equity amounts (when disclosed).
As regards G2G, we start tracking all G2G pledges at the time of the initial G2G meeting (which is trackable via Chinese official websites). Our tracking process continues throughout discussions on funding for the projects. Verification for this data can be found from the policy loan recipients, which are most foreign Governments; hence, a member of the Government/MoF/Cabinet must countersign the loan.
We have published quarterly Policy Bank loan commitments, at the aggregate levels, for the past 10 years. We monitor but do not publish, Government related loans under discussion, which have been averaging over $50 billion for the past year.
Beginning in 2016, we also track all AIIB and NDB commitments, although disclosure regarding interest rates/maturities have proven to be less transparent than policy bank loans.
Once the loan is signed an construction begins, we attempt to update each project file quarterly, when possible, mostly with data from official and/or trade websites.
It is from this information, gained over the past 10 years of data collection, that we have been able to calculate investor returns on some of the over 350 loans/projects we track globally, many of which are within the original OBOR list.
Since many of these projects take years to become operational and indeed produce revenues, our investment/investor fund calculations involve project pre the official Q4 2013 launch date – although we believe that China has been contemplating this unique project for years/decades in advance of President Xi's official announcement.
As regards M&A data, we track upon announcement and reverse if the deal does not close. While we greatly respect Ministry of Commerce method of tracking as the cash leaves China, an announced transaction is legally binding and thus we include at announcement.
Research Product Evolution
From 2008-2013, we continued to focus on our historical emerging markets advisory business, thus content to publish our Chinese data without subscription fees, but also only disclosing aggregate information by component. The goal was to build awareness gradually of this unique product funded by our Advisory business.
Since our professional training was in investment banking/M&A, we made a strategic decision to incorporate enterprise value, which is a fundamental concept in Corporate Finance 101 but not included by major financial premium data providers. Enterprise value is especially important in BRI projects as they typically have long-term debt to total capitalisation ratios at least 60%.
In 2014, we began developing relationships with the global financial press, which began to include our data and insights in their publications, both in Europe and Asia.
In 2015, we began building maps plotting Chinese loans/projects by country, many of which were outside the original 65 Belt and Road countries, releasing these discreetly to clients. During 2015 screenshots of our maps began appearing on the internet. Several of these maps were shown to Government planning/strategy in a number of G7 countries prior to their release on the internet.
In 2016, we became even more focused on this research component within our organisation. We also began focussing on themes; in 2016, Chinese investment in ports was a key theme. That year two G7 Governments and their agencies/departments began using our research relative to our focus on Ports and related policy bank loans.
In 2017, investments in logistics, frequently around ports already secured, became the main theme. We also began performing bespoke Chinese investment driven research projects for some of our large international corporate advisory clients. This trend has accelerated throughout 2017 and 2018.
Throughout 2017 and 2018, our China Investment Research brand has become much more recognised with an increasing amount of publicity, via international television, podcasts, print media, academic journals, university lectures and corporate /professional education. We have also written a script for a 4 segment television series on the Polar Silk Road which we hope to fund and narrate.
We have also created a new product, updating clients on a regular basis on G2G pledges/projects, future economic corridors and silk roads, which we have labelled: BRI Pulse. The information is this product is similarly drawn from Chinese websites and interpreted by our firm.
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