IFR Asia RMB Bond Markets Roundtable 2016: Part 2

IFR ASIA: Presumably foreign investors will like these, wouldn’t they?

FREDDY WONG, FIDELITY: That would definitely be a positive for investors. It’s actually part of the financial reform that the Chinese government is implementing. If you think back to about the early 2000s, a lot of credit was being generated from the bank balance sheet. Now China’s going through a disintermediation of the banks, to really move credit into the public market. A lot more issuers are coming to this public market and finding investors to buy these securities, and to an extent it’s to clear up the moral hazard that comes with the government providing implicit or explicit support for the underlying credit.

Back in the early 2000s, the actual recovery value for a lot of those underlying securities was only around 10 cents on the dollar. Over time it’s become around 15–30 cents in 2010 and now the recent recovery value is around 40 cents. So there are certain investor protections that have been implemented underneath these credits to really help to clear up this moral hazard.

But still the influence of government support is still there, just in a different form. For instance, some issuers could come to the market, and they can’t pay you but they can have one of the big four asset managers actually come in to make you whole.

So this kind of event is unpredictable, but at this point we need to have some kind of deep-dive research, just like Ken and Ben highlighted earlier on. We put resources on the ground to really do the credit research to differentiate the good and bad. It’s very important. We have teams in Shanghai who can deep dive into this credit research to help develop the market and develop a proper legal framework, so that when the advisor comes in, when the restructuring agents come in, they know what value that they can gain for the investor when they come to that point in the process.

TONY TANG, DAGONG: Just to echo that, it’s really difficult to assess this concept of government support. You can’t have any tangible or qualitative analysis of these subjective judgements. So in the Chinese political system it really depends on the issuer and the location, which local government we’re talking about. Even for the central SOEs, it doesn’t mean every single SOEs will get the same level of support.

All agencies – I came from S&P before – whether it’s international or domestic agencies, we all struggle a lot to assess to this concept. You probably perceive in the market a lot of uplifts of a notch or so. Whether that implicit or explicit support is still there is dynamic; it’s moving and it’s moving very fast. The ideal scenario would be government wants to have a market-based pricing system and then shake off this support to the market. I think in reality, given the political consideration, it’s probably going to take many, many years. That doesn’t mean the government won’t offload their liabilities to some of the issuers.

IFR ASIA: Do you think offshore investors are any more at risk?

TONY TANG, DAGONG: Actually I think it’s the opposite. Offshore investors are probably more protected than onshore investors. There are reputational risks for the Chinese government, and I would say it’s crucial for China to internationalise the Rmb and to integrate themselves into the global capital markets. At least at the early phase you take care of the international investors’ interests first. There’s no data, no concrete evidence to support that, that’s purely a cultural judgement.

FREDDY WONG, FIDELITY: One thing you have to appreciate is traditionally the issuers in the onshore market are all high quality. We don’t really see Single A high-yield companies in the onshore market. From the offshore angle you only really have high-yield covenant protection for high-yield issuers, but not really for investment-grade issuers. So the same applies onshore because most of the issuers are investment-grade from an onshore point of view.

You will start to see some fallen angels come to the market and investors will start to go through that panic moment when they realise that the bond is not recovering any value. Then they will demand covenants.

It’s a development process for the onshore market to actually price the right credit for investors. If you are a Single A issuer you should offer a higher yield and some protection if you want to come to the market, but that market segment is still relatively small.

IFR ASIA: Is that because of the buyer base, there’s no natural high-yield buyers in China?

FREDDY WONG, FIDELITY: To an extent it’s because the authorities only approve high-quality issuers. There is demand for higher returns but it could be coming in different forms; it could be in equity, it could be in private equity format. But for fixed-income, it’s still just developing. There certainly will be demand if you price this credit at a much higher yield than other investment-grade credits.

JINI LEE, ASHURST: We’ve seen a lot of what we would call high-yield issuers in the offshore world issuing onshore, but there they are rated Triple A. The pricing again means there’s a big differential there, much to the benefit of the issuer. So I think that it’s a process, and as the market develops and as the investor base starts getting more sophisticated and starts asking for more covenants, then you will see that divergence and see risk being priced at appropriate levels.

TONY TANG, DAGONG: It’s also a function of a lot of variables. The liquidity in China’s economic system means the pricing difference as far as we can see is not proper. The pricing differential between Triple A and Double A is not as it is supposed to be, certainly in the global market. People are just grabbing assets. The biggest problem China talks about now is the lack of good assets, so whenever anyone comes to market to issue, investors just grab it. Even at Single A rated investors can’t get a very good yield.

FREDDY WONG, FIDELITY: In contrast the regulators don’t want issuers under their regulation to go into default. It’s similar for investors: they don’t want to see that happen to the bonds in their portfolio. So they are being a bit cautious from that point of view.

IFR ASIA: How is the market infrastructure, with it comes to swaps and liquidity? Dim Sum liquidity obviously has shrunk but is the swap market still there, is that still working?

KEN HU, INVESCO: In the CNH market I would say that currency swaps are quite liquid, up to three years in tenor. Beyond that it would be quite questionable. The FX forward liquidity in the CNH market is very good, I would say, even for big sizes.

Global investors face one issue about basis risk between the CNY and CNH. Some international index vendors are actually questioning this, about CNY derivatives. On one hand the Chinese authorities have opened up the onshore interbank bond market to foreigners, but those foreign investors may still need to do currency hedging or interest rate hedging from time to time. Yes, they may choose to use the derivatives in the offshore market but then international investors would need to deal with the basis risk between the onshore and offshore markets.

That may be one of the concerns why some global bond index vendors still hesitate to include China in the indices, because of this uncertainty. It’s still unknown to a lot of global bond investors and also to the global bond index vendors whether onshore CNY derivatives would be available to international bond investors.

IFR ASIA: Has the short-term volatility in the Hong Kong market been a problem for offshore Rmb securities?

TIMOTHY YIP, HSBC: I think at least from my perspective it has been an issue for other potential issuers, because when you have got a tightening liquidity condition you see a spike in the offshore cross-currency swap. That means if you’re a financial institution or one of the top supra or sovereign issuers you might like to come to the market quickly and price a one-year offshore Rmb at 4.2%, because when you swap it back into euros it’s massively through Euribor. When a Triple A rated SSA is doing one year at 4% and above, what chance have other corporate clients got when they want to do something sensible for three and five years. So at that point the short answer is that it does have a knock-on impact for other categories of issuers.

IFR ASIA: Interesting. If you’re trading this paper then are the short term moves much of a problem?

FREDDY WONG, FIDELITY: The thing to understand is how the liquidity situation changes because of this kind of short-term squeeze. If you have demand for paper from the market, especially high-quality demand, and the dealers are there to make you a market. But if their funding cost is shooting really high that means their book is facing negative carry, so it’s hard for them to actually provide you that kind of liquidity. So as an investor you have to think in this situation should you increase your cash level to prepare for some potential redemptions, or should you take advantage of this kind of mispricing in the market to actually gain some kind of return, because of this kind of short-term squeeze.

From a credit derivative perspective we don’t really have a good derivative market for CDS both onshore or offshore. That will be something worth thinking about more deeply because when the market is on a downward trend people start looking for protection. When there’s no protection, they would naturally not be investing as much as they want.

Even just looking to onshore angle, there are two types of derivatives. They call it credit risk mitigation. They can negotiate the deals directly with the counterparty and then they face that counterparty risk. That’s governed by NAFMII. And from a global standard they’re also accepting international investors using ISDA as the contract to do the derivative onshore. So it’s going through a period when people are deciding whether to use NAFMII or ISDA to actually do your derivative. But it’s a good thing, because people now start to look for that kind of protection, and the regulators are pretty open to actually discuss what the best practice going forward for the market to develop.

IFR ASIA: Are you talking about the new formats that they’re just introducing now?

FREDDY WONG, FIDELITY: No, NAFMII has always been there and ISDA is the global standard. But now they are accepting ISDA as well.

IFR ASIA: I think there’s some more recent developments on the CRM idea, they’re trying to move things a bit more in line with the global CDS standards.

FREDDY WONG, FIDELITY: Yes, but it’s still a Chinese standard from that regard. So you have to have offshore investors adapt to this this kind of Chinese standard. It’s like the accounting issue; you have to have offshore investors adapt to Chinese standards.

IFR ASIA: I’d like to mention the issue of alternative jurisdictions: Formosa bonds, Singapore-listed bonds, London-listed Dim Sum. What’s changing here? What’s the opportunity for issuers and investors?

TIMOTHY YIP, HSBC: If we were to rewind back 12 to 24 months ago there was a material pricing benefit for people to issue Rmb bonds in the Formosa bond format, because that means the Taiwanese lifers would be able to view this asset as a domestic asset. Even though it’s denominated in offshore Rmb, it would count as a domestic asset because it’s listed on the Taipei exchange.

Now fast-forward to 2016 I think the game of Formosa bonds is mostly the territory of US dollar issuers – for example Verizon from North America and others have been issuing multiple billions of dollars in the Formosa market. Whereas for offshore Rmb, I think people are understandably more concerned about the short-term volatility in the currency and do not want to increase the exposure to this asset class. There’s also the geopolitical concerns after the election that happened last year. That’s one point.

The second is the issue of pricing advantage for other, for example, London-listed bonds, Lion City bonds or Tiger Emas bonds in Malaysia. Frankly a lot of the offshore Rmb centres do not impose any capital controls. Investors sitting in Hong Kong or in London or in Singapore can always buy into the same issue. So from the investors’ perspective my view is that they will be agnostic about where the bonds are listed. It will be more about the objectives of the issuer, about what kind of Rmb bond they would issue.

For example, financial institutions with a heavy presence in the Middle East may be more interested in a separate bond to be listed in the Middle East. For people that have massive operations in London, perhaps they will see that as partially a marketing angle as well.

If you were to tell an investor – for example, someone on Ken’s team – that this bond in London might be cheaper than another Dim Sum bond, he would tell you quickly what he thinks about it.

IFR ASIA: So there’s no liquidity premium, there’s no real change, regardless of where these bonds are listed. Is that fair?

KEN HU, INVESCO: I would say so. Actually I would prefer the term offshore renminbi to Dim Sum bonds or Formosa bonds. I like Timothy’s point: this kind of new arbitrage opportunity, I think, is going to be less and less important.

IFR ASIA: So ideally what we want is one standard format for offshore Rmb.

KEN HU, INVESCO: Exactly. Especially for those countries that do not have a capital control. For some countries or some areas like Taiwan, I would understand. But I don’t see any big difference whether the offshore renminbi bond is listed in Hong Kong or London or Malaysia.

MUSHTAQ KAPASI, ICMA: I would have to echo that point as well. I think sometimes people forget in all of the talk about this city bond or that city bond, that fundamentally from a legal point of view once renminbi is offshore it’s offshore, and it can go almost anywhere except back onshore. It’s free to travel.

There are some particularities with Formosa bonds in terms of the potential investor base. There might be some small differences in listing requirements among different jurisdictions. But from what we’ve seen at ICMA there’s very little difference in the actual economics of the trade from one offshore market to another.

Sometimes you do see a certain branding or public relations angle. There is healthy competition among jurisdictions looking to be so-called renminbi centres. It means that renminbi internationalisation is gaining force and that in every jurisdiction that aspires to be a centre for issuance the policymakers and the market participants are that bit more familiar with the asset class.

IFR ASIA: To add to that list of potential overseas alternatives, Tony, I attended a Dagong forum a couple of weeks ago on Silk Road bonds. Just tell us a little bit about how that might work and what difference there would be?

TONY TANG, DAGONG: So the Silk Road bond is a concept, and we’re working very closely with ICMA to try to define what is a real Silk Road bond. We know CCB and BOC have issued multi-currency, multi-tranche bonds also called Silk Road bonds, but so far we don’t really have a uniform definition yet.

For me, the Silk Road bond has many features. So first, of course, we want the proceeds to be invested in Silk Road projects. Having said that, it doesn’t mean the issuer has to be in a Silk Road market or a particular country. In my personal perspective it could be a Singapore company issuing a bond for its investment in a project in Afghanistan or Pakistan. As long as the majority of the proceeds are being invested in Silk Road countries.

Secondly, we have to have a tracking and monitoring system. Once the bonds are issued, how can we follow up and monitor where the proceeds are actually being invested? How will the disclosure work?

Thirdly would be the listing. Ideally through Silk Road bonds we can promote and develop the capital markets in the lesser-developed countries along the way, to educate the local market as to global standards and open up the capital market. So ideally we can list Silk Road bonds in those markets – whether it’s Turkey or Pakistan at this moment maybe it’s too early to say, but that’s the goal. So we want to have liquidity or trading for the Silk Road bonds in those Silk Road countries. Of course it’s not limited to those countries, it can be listed in London, Hong Kong, Singapore too.

The fourth would be that the Silk Road bond has to create a bridge for global investors to diversify into those markets. I would say it’s like the green market. It’s another way for global investors to diversify into those emerging markets which are so far more or less segregated from the global capital market.

IFR ASIA: We are talking predominantly Rmb, though. I mean that’s the idea.

TONY TANG, DAGONG: Our chairman thinks the bonds should be denominated in Rmb. We think it should be mainly denominated in Rmb, because probably at the early stage most funds are going to be coming from China, but I don’t think we should limit that to the Rmb.

IFR ASIA: I do wonder sometimes how much incremental investment these labels generate.

TONY TANG, DAGONG: I think Chinese investors have a huge appetite to diversify – whether they diversify into the developed markets like Europe and the US or into more emerging markets.

China has a long trading history with all the Silk Road countries. Maybe from a western perspective this country may be perceived as very high risk, from a Chinese perspective given the political support and the government backing I would say the Chinese investors’ perceptions are very different. They understand the risk elements and the risk profile are different, but I think they’re more accepting of this kind of market than a typical western investor.

IFR ASIA: The last new emerging format in Rmb is the idea of SDR bonds. Is that something that the broader global market should be interested in?

TIMOTHY YIP, HSBC: We can look at the history of SDR bonds and see there’s been a hiatus for the last 30 years, but now the World Bank has effectively kick started that market with a highly successfully issue. Looking ahead, it’s been reported that people like China Development Bank and ICBC Asia are looking at their own SDR bond issues.

On one hand, one can understand why that could be an attractive proposition for onshore investors, in the sense that they can now get exposure to other currencies including the US dollar. In an environment where the Rmb could depreciate further against the US dollar, having the basket perhaps will enhance your overall return.

At the same time, the majority of onshore investors – no doubt about it – would prefer vanilla credit assets simply denominated in Rmb. That’s been exemplified during the execution process in the way that a lot of the onshore investors were looking at relative value of the World Bank SDR transaction on an Rmb fixed-rate basis. So they will also do their own CCS on the SDR into Rmb fixed-rate terms.

Unless you are from the SSA category – let’s say, you are a financial institution or you’re a corporate – I think the first call is do you really need SDR? If you are a corporate with a need for Rmb then the argument tends to gravitate towards just issuing in the currency that you need. That would make it simpler for the issuer in terms of reporting, accounting, booking and that will also make it simpler for the investors as well.

IFR ASIA: It sounds like a very Chinese solution for a closed capital market.

TIMOTHY YIP, HSBC: At the same time it also brings in the very high-quality investors, because the natural investor issuer base for this SDR bond would be central banks and supranationals and so on. So you’re having high-quality issuers with high-quality buyers coming in as well.

IFR ASIA: Late last year China imposed very tight controls on capital outflows, but this year we still see a lot of onshore bidders for overseas deals. I’m curious how can they bring their money offshore and invest in an offshore Rmb or offshore US dollar bonds?

KEN HU, INVESCO: To be frank, what are the channels for the money to come to the offshore markets, I really don’t know. I would say that if you look at the macro picture, I think it’s quite natural. China has been running a very high domestic savings rate, at more than half of the GDP per annum, and the country has been running current and trade account surpluses, so I would say it is quite natural to see that such a lot of savings will spill over. Maybe these orders have been accumulating because of trade surpluses. The surpluses may not all be remitted back to China, so some of them are still accumulating offshore. So I think it’s quite natural that China will have a lot of demand for overseas investments.

FREDDY WONG, FIDELITY: I can maybe add a point. Just looking at how onshore investors come offshore it’s predominantly through the channel of QDII. That’s not only for fixed-income, it’s also applied for equity and other investments. So there’s an element of quota reallocation, because traditionally maybe if you have Rmb100m to invest overseas, you put 80% into equity and 20% into fixed-income. But you can start to shift that 80% to 70%, 60% so that you increase the fixed-income portions overtime.

The quota itself in equity is quite big. So if you start to shift allocations then you will get a progression of money coming offshore. That will be one channel, but as Ken also highlighted that could be many other different ways that people can channel their money.

BEN YUEN, BOCHK: I think it makes sense for the onshore investor to invest in the offshore Dim Sum bond market from a total return point of view, as mentioned, because offshore Dim Sum bonds come without any capital gains tax, without any withholding tax.

On the other hand, say, look back at last year’s fourth quarter we saw a decent amount of R-QDII quota assigned to different houses and saw the money flow into the Dim Sum bond market. From what we heard from the market, basically some of the funds are still invested in the short-end paper, but they’re still looking for more investment at the long end of the Dim Sum market. If you look back this year to date the new issue size is not that big, as mentioned. So I think right now the demand from onshore investors in the Dim Sum bond market is coming from the old RQDII quota. They haven’t fully invested yet.

IFR ASIA: Talking about connecting the onshore and offshore markets, what’s the view on Bond Connect? Is that going to materially change the Rmb markets?

MUSHTAQ KAPASI, ICMA: It’s been reported that there’s been work done on Hong Kong-Shanghai Bond Connect, which is ostensibly similar to the Hong Kong-Shanghai Stock Connect. There is some potential benefit here.

It’s easy to be cynical about it, because the bond market is fundamentally different from the equity market. It’s not as if you have a large pool of retail investors on either side of the connection keen to immediately pile in into the market. However,

from what I know about the potential work being done, I think there could be some benefit to smoothing over some of the operational difficulties as well as connecting onshore Chinese investors to a wider range of international securities – not just in Hong Kong but around the world – and to connect more international investors to the Chinese bond market.

I think there’s a healthy competition at play amongst the various channels, with R-QFII and QDII and so forth. If you have direct investment via the “PBoC channel” then you might have somewhat indirect investment through some sort of Bond Connect scheme. That can give more choice to investors.

TIMOTHY YIP, HSBC: I think Mushtaq makes a valid point. We also have to examine the investor base that any such Bond Connect might target. For example, we always reference it to Stock Connect, but equities come with full transparency, are listed on the exchanges, and retail investors can buy into it because they have information. When you’re talking about fixed-income instruments, which are traditionally sold to institutional investors, then does that mean for Bond Connect you restrict participants to only institutional investors? Domestic institutional investors already have ways to buy into the offshore market. So does that mean you have to go a step further to open up the fixed-income market to retail investors? Then it becomes extremely complicated in terms of risk assessment for the onshore investors.

TONY TANG, DAGONG: The Stock Connect idea has been in the market for quite some time now. When they started the connection, people perceived that the price differences in dual-listed shares will be eliminated between China and Hong Kong. We’re still seeing today big price differences for the same listings – even though, as Tim mentioned, there’s better disclosure and more participants for the equity market. I imagine it will be much more difficult for the fixed-income market to connect and gain an understanding from both sides.

Also to echo a little bit on the money flow for the cross-border investments, we talk about the official channels, the QDII and so on, but there’s also the unofficial channels. There was a lot of reporting last year about fake trades between China and Hong Kong, where companies set up trading accounts offshore, fabricated invoices and moved a lot of domestic money to offshore markets. Of course the government realised that and they came crashing down on it.

Secondly, China’s shadow banking system has a long history of channelling monies overseas. It’s particularly well developed in Guangdong province and Zhejiang province, and to some extent Fujian too. These three provinces have very big underground banking systems, and the flow could be massive.

IFR ASIA: We won’t tell China about that one!

Before we wrap up, I just want to get your views on what we can expect in 2017.

What kind of volumes, what kind of issuers are we going to see in the Panda market? And on the investor side how long is it going to take before the foreign allocation in China gets up to say 5% plus?

KEN HU, INVESCO: My forecast is that China will be included in one of the major global bond indices within the next 18 months, most probably before the end of next year. So this is my biggest bet.

IFR ASIA: Do you see issuers going back to Dim Sum anytime soon?

KEN HU, INVESCO: It’s hard to say because it’s also subject to a lot of regulations and different dynamics. I would say that the biggest bet is still China to be included in a global index.

TONY TANG, DAGONG: I won’t predict a market movement like that, but we do project the economic conditions in China. We think the economy is probably going to face even more challenges next year. Some sectors may stabilise now, particularly steel, coal; they’ve been a downward trend for quite some time. They should stabilise this year and towards next year.

Of course as the economy stabilises my projection would be that we will see more financial reform coming out from the PBoC towards the end of next year. As the financial reform pushes ahead, of course we can talk about more connections between the onshore and offshore Rmb, and so on.

I think the fundamental concern for all the regulators and the policymakers, is to make sure that the market economy is in good shape before they trigger any kind of reform measures.

IFR ASIA: Ben, what’s your projection?

BEN YUEN, BOCHK: My projection is quite simple. I think Rmb-denominated fixed-income investment demand will definitely increase in 2017 for a few reasons. First, the renminbi is going into the SDR basket in October, no doubt, so more sovereign wealth funds have to buy Rmb assets. That will benefit both Dim Sum bonds and the onshore market.

Secondly, we still think the monetary easing policies will keep going in 2017. So from the global investor point of view it also makes sense to invest into the onshore renminbi bond market, one for the higher yield, second because the interest rate is going down.

So from those two perspectives I think Rmb fixed-income assets are in favour. Finally, we see real government support for the development of the onshore bond market as well. So regulation changes are ongoing and can also help global investors access the onshore bond market as well.

IFR ASIA: Thank you. Mushtaq?

MUSHTAQ KAPASI, ICMA: I’m not qualified to, nor would I want to, predict anything in terms of market volumes, dynamics or macroeconomic policy. However, I can certainly say that 2016 has been a big year for China because of the presidency of the G20. We’ve already seen some major announcements in terms of liberalisation of the domestic markets. While the pace of liberalisation might slow down, I think China is now more integrated into the global financial regulatory system and will continue to at least work with other regulators and with the international markets to encourage cross-border investment.

I do think that’s going to continue in 2017. Two important points have been raised already: changes to the bond indices will drive a lot more investment from foreign investors, and the renminbi’s inclusion in the SDR will also. Finally, from the issuers’ perspective, interest in the Panda bond market will continue to get stronger, and actual issuance in the Panda bond market – and, by extension, in the Dim Sum market – will be a function of the speed and clarity of regulatory reform.

IFR ASIA: Thank you. Jini, what do you see happening?

JINI LEE, ASHURST: I’d echo a lot of the themes that have been mentioned by the panellists, so I won’t go into them again. Two big themes I think we will see in the next year, one is the continued internationalisation in the Rmb, whether it’s onshore or offshore is really just down to pricing.

And I think we’ll see continued innovation in terms of the offshore products, with more sophisticated instruments coming out, like green finance – I think that’s going to be a big theme for next year. Some of the panellists were discussing earlier Silk Road bonds, for example and it will be interesting to see how that plays out. I think we will also continue to see the continued opening up of the onshore markets.

FREDDY WONG, FIDELITY: This year will be interesting. I would say that China will continue to go global as a big theme, especially when the top level of leadership is going to change – that could be sometime late 2017.

You already have a lot of developments on financial reforms that have been happening, so they do have the agenda in their mind to open up the capital market at one point. We don’t know exactly the time, but they do have the agenda in place, which is why so much of the development has been put in place for the Panda bond market, for Stock Connect programmes and so on.

Next year I would see that gain some more pace, and at the same time you have a lot of foreign investors actually going into the onshore market to potentially set up domestic businesses, which will provide better two-way flow. We may hear more on that next year.

TIMOTHY YIP, HSBC: When I was growing up I used to make a lot of predictions about my future career – and look at me now! I have stopped making predictions because they never turn out to be true, so instead I will just provide a few observations.

For one, I think Rmb internationalisation is irreversible. It is going to happen, especially after October puts the Rmb officially in the SDR. Hopefully there’ll be more recognition of the Rmb on a global basis, especially in the Americas and also in Africa as well.

The second point is about China’s issuers becoming increasingly influential and assertive of their actions when they are venturing offshore, to the extent that they might start changing the modus operandi of how capital markets transactions should be conducted. This is part of their going-out strategy, in the way that they are using onshore market practices and bringing them offshore.

Third, regarding the onshore and offshore diversity, I think patience is a virtue. The Chinese authorities are trying to manage the capital flows going into China to the extent that Panda bond rules might be released sometime in 2017 – that is a prediction.

Lastly, I think it’s a very strange feeling, almost a paradox, that we’re talking about reforms bringing beneficial structures into the onshore system. There have been very little to no publicised credit events occurring. Now in order to have reforms, which anybody would think are beneficial for onshore investors, we need bad things to happen in the first place.

So for me it’s a very strange thought, because in order to drive reforms forward you need more bankruptcies and more credit events in the first place.

IFR ASIA: Well I will certainly predict a few more of those next year!

Ladies and gentlemen, thank you very much for your time.