IslamicFinance.de

Asia Pacific Investment Bank (APIB) aims to cooperate with domestic financial institutions to promote the internationalisation of the Islamic finance industry. APIB CEO Chris Wang is confident that APIB could be the bridge that connects Malaysia and China. In light of the US-China trade war and the Covid-19 pandemic, the government is facing a critical challenge in leveraging the country’s position. Wang said APIB could help the government achieve the goal by making the country’s Islamic finance industry more dynamic. APIB is an offshore Islamic investment bank, established in January 2015 with the approval of the Labuan Financial Services Authority, headquartered in Labuan and its main operating office based in Kuala Lumpur, with representative offices in Shanghai and Nanjing, China.

As this year’s GDP growth of China is forecast to reach a 44-year low of just 2.5%, there is enough ongoing in the background to prepare for a post-coronavirus rebound. One such sector bustling with activity is Islamic finance which has grown in importance since China embarked on the program of the New Silk Road, officially known as Belt and Road Initiative (BRI). Expanding across Central and Western Asia and eventually the Middle East, the BRI leads through many Islamic economies and jurisdictions, so it is obviously advantageous for Islamic finance and halal trade to join and contribute to the BRI. There is also development of the sector within China itself. Malaysia’s Affin Islamic Bank together with Hong Kong-based Bank of East Asia has been looking into the opportunity of launching Islamic banking services in Urumqi, the capital of Xinjiang. China’s Ningxia and Xinjiang autonomous regions are home to a Muslim population of about 25mn.

According to UNICEF, investing in children is the fundamental solution to end child poverty and inequality and set the foundation for sustainable and inclusive economic growth. The statement was made during the Africa-China Poverty Reduction and Development Conference at the 10th Forum on China-Africa Cooperation (FOCAC). The 10th FOCAC Africa-China Poverty Reduction and Development Conference, co-hosted by China’s State Council Leading Group Office of Poverty Alleviation and Development (LGOP) and the Uganda Ministry of Agriculture, Animal Industry and Fisheries, had the theme of "Partnership for Transformation in Africa". Delegates expressed the urgent need to invest in social policies and infrastructures which combat child poverty in Africa, where around three out of every four children are affected by multi-dimensional poverty.

China’s MSA Capital and Al Salam Bank-Bahrain launched a $50 million venture capital fund to invest in sectors such as e-commerce and financial technology in the Middle East. The fund also plans to target big data, artificial intelligence, cloud computing, and logistics and networking systems. The $50 million MEC Ventures was raised from seed money, Chinese entrepreneurs and institutional investors and family offices from Gulf Cooperation Council countries. MSA Capital has existing investments in Chinese entrepreneurs who have taken the Chinese model into the MENA region.

Chinese Premier Li Keqiang suggested that China needs to divert more water to its arid north. He said that local government bonds should be tilted towards water infrastructure to increase per capita water supplies, which are about a quarter of the global average. Li stated that China needs to research water conservation methods to reduce water consumption. He also claimed that the South-North Water Diversion Project had improved Chinese water security. That project, however, has not been as successful as he claims.

Noor Bank has partnered with UnionPay International to inaugurate the bank’s EMVCo QR-based mobile payment service that allows consumers in the UAE to make instant and secure payments on the go. Customers and merchants across the country can now leverage UnionPay QR code scanning for all their payments. The launch ceremony was attended by Han Wang, General Manager-Middle East of UnionPay International, and John Iossifidis, CEO of Noor Bank. In the UAE, UnionPay is accepted nationwide both on POS terminals and ATM machines, acceptance rate is 100% and more than 60% on POS terminals for the UnionPay card and QuickPass. The new solution is expected to create wider acceptance and increase the number of current QR-code-enabled merchants in the country by end-2019.

China’s Belt and Road Initiative is expected to spur further development in Islamic finance around the world. Many of the countries along the infrastructure belt are home to predominantly Muslim populations, including Central Asian countries such as Kazakhstan and Uzbekistan. The China-headquartered Asian Infrastructure Investment Bank had already signed a memorandum of understanding with the Islamic Development Bank to collaborate on various areas including Islamic finance development. Sukuk issuance had grown strongly in 2017, but Chinese issuers have actually pulled away since then. That’s been attributed to the complexities involved, particularly as standards differ across regulatory regimes with varying interpretations of Sharia compliance. Still, financial links between China and the Middle East continue to grow. The relationships have increasingly moved from just trade partnerships to joint ventures.

The crucial role of Islamic finance in financing China’s Belt and Road Initiative (BRI) pays homage to the Silk Road and symbiotic relationship between China and the Islamic world prior the 15th Century. Rightfully so, as BRI is the 21st Century’s New Silk Road. Introduced in 2013 by Chinese President Xi Jinping, BRI consists of overland roads and railway systems – The Belt – and maritime highways – The Road. It allows the seamless and efficient transportation of people, natural resources, products, and capital to flow to and from mainland China. The sheer magnitude of BRI finds itself in its financing. A crucial role exists for Islamic financial institutions due to the emerging market of the Middle East, Africa, and South-Asia (MEASA). Jiang Xiheng, Vice President at the China Center for International Knowledge on Development (CIKD), stated the importance of having the United Arab Emirates as a partner in BRI.

The Hong Kong Financial Services and Treasury (FSTB) released a report on the status of money laundering and terrorism financing. The report concluded that virtual currencies, like Bitcoin, are not particularly involved in either type of financial crime. Hong Kong's financial regulators and law enforcement agencies are working together to look into risks associated with Initial Coin Offerings (ICO) and cryptocurrencies. In March this year, Hong Kong’s Securities and Futures Commission (SFC) halted an ICO in Hong Kong and made the company return the money raised. More recently, in mid-April, the SFC said that the type of fundraising done through ICOs is better suited to venture capital funds.

Bandar Hajjar, president of the Islamic Development Bank (IDB), announced that the bank would soon issue its largest sized Sukuk for $2.5 billion. IDB is a regular issuer of Sukuk having last issued in September 2017 with a $1.25 billion issuance which was priced at 2.261%. The bank has recently partnered with China-led Asian Infrastructure Investment Bank (AIIB) and plans to co-finance many projects in Africa. Africa has witnessed a growing share of mostly sovereign Sukuk issuances. Sudan, Gambia, Senegal, South Africa have all issued sovereign sukuk, the latest issuer is Cote d’Ivoire with its inaugural debut in 2015 of USD 260 million.

The Islamic Development Bank (IDB) is set to form a partnership with the China-led Asian Infrastructure Investment Bank (AIIB) to address the large infrastructure gap in developing countries. IDB president Bandar Hajjar said the bank would co-finance many projects with AIIB in the future in Africa to finance infrastructure projects. Co-operation between the AIIB and the IDB is set to create a new force in development finance for several developing countries. Many of the IDB’s 57 member countries overlap with the AIIB’s approved membership of some 80 nations.

According to Luo Nan, China country head at The Principles for Responsible Investment (PRI), the country faces immense challenges in pushing the environmental, social and governance (ESG) programme. Still, ESG is fast becoming a well-known concept. 2016 was a big turning point, when China released the "Guidelines for Establishing the Green Financial System". The China Securities Regulatory Commission has set out a timetable which will require all listed companies to mandatorily disclose environmental information by 2020. There is increased awareness and interest from investors in relation to the Principles for Responsible Investment. There is also an increasing volume of jobs available in China relating to ESG. Luo Nan believes that communication to the public and broader education among investors are key to developing the broad ESG programme in China. Evidence on risk and consequent implications for investors need to be much better developed and communicated.

The World’s oldest Islamic bank has strengthened its leadership to provide sharia-compliant products and services to an even broader market. Simpler, better, faster. These three key words form the cornerstone of a strategy that is seen to propel Kuwait Finance House Malaysia from its present level to a stronger position in the region. Thanks to fundamental adjustments that demonstrate efforts of Kuwait Finance House to grow its Malaysian subsidiary, the outlook for KFH Malaysia has never been better. “After making changes to the management structure in Kuwait, we came to bring the Malaysia arm in line with the group and to make sure that we drive forward to become the dominant player in Southeast Asia,” CEO David Power said.
Groomed as the regional hub for KFH in the Far East, KFH Malaysia had 18 vacant management positions when Power took over. Within a short period, he took steps to make sure that the bank had the right people on board who could assess the problems and come up with short-, medium- and long-term solutions.

Chinese state-owned bank the Industrial and Commercial Bank of China (ICBC) has become the first Chinese bank to help arrange a dollar based sukuk. ICBC helped arrange Pakistan’s recent $1 billion 5 year Sukuk. Pakistan raised over $8 billion for its dual issuance of sukuk and a conventional Eurobond of $1.5 billion. China is building stronger trade ties with Asian countries under its "One Belt, One Road" strategy to rebuild Silk Road trade links with Asia and Europe. Additionally, the China–Pakistan Economic Corridor (CPEC) is a collection of infrastructure projects that are currently under construction throughout Pakistan. The value of CPEC projects is worth $62 billion and provides China with a vital route to the Arabian Sea for trade routes to the Middle East, Africa and Europe.

The Dubai Center for Islamic Banking and Finance in Hamdan Bin Mohammed Smart University (HBMSU) concluded the 2nd China-UAE Conference on Islamic Banking and Finance. The two-day event focused on the objectives of the One Belt, One Road (OBOR) initiative, which aims to revitalize the Silk Road connecting Asia and Europe. The event was organized in cooperation with China Islamic Finance Club, ZhiShang Intercultural Communication, and Knowledge Partner Thomson Reuters. Talks focused on challenges and prospects for Islamic finance in achieving the goals of the ambitious Chinese initiative. The agenda comprised a series of panel discussions moderated by key international figures such as Prof. Baydoun; Mr. Gao Lin, Vice Director, Shenzhen Municipal Commission of Economy, Trade and Information Technology, and Dr. Adnan Chilwan, CEO of Dubai Islamic Bank.

As a China state-owned enterprise (SOE) issued its first ringgit sukuk in the domestic bond market, many are wondering if other China companies would be doing the same. Beijing Enterprises Water Group (BEWG) issued RM400mil worth of medium-term notes on July 19 to finance its water treatment project in Kemaman, Terengganu. The sukuk issuance also marks the first ringgit-denominated sukuk by a China state-owned company for water infrastructure funding in Malaysia. According to analysts, China-based entities do not prefer to tap into the domestic sukuk market, as they are backed by strong financing sources from their home country. BEWG chief executive officer Datuk Vence Ong Kian Min noted that this was BEWG’s first-ever debt capital market instrument and the issuance has enabled the group to diversify its funding sources. The RM687mil project is expected to be completed in 2018.

Kuwait Finance House (KFH) is considering expanding into China and Egypt as the region’s banking sector nears saturation. According to bank's CEO, Mazin Saad al-Nahedh, there are opportunities for a Kuwaiti bank to operate in China. He added that the bank was looking at options to buy a license to operate in Egypt as well. KFH is cautiously optimistic about its operations in Turkey. Its subsidiary Kuveyt Turk contributes 22% to the group’s bottom line as of the end of June. The bank expects credit growth of no less than 20% to 25% over the next three to four years as long as base rates remain where they are. As KFH continues its restructuring and sale of non-core assets, the bank is studying offers for its stake in Aref Investment Group, which it aims to sell by the end of the year. KFH is also planning to buy Bahrain’s Ahli United Bank, but hasn't started negotiations yet.

China has become a major financier to the world. Last year its outward direct investment (ODI) totaled $170 billion and the overseas lending from its two policy banks added another $100 billion. One aspect of the overseas financing is China’s "One Belt, One Road" (OBOR) initiative. This is President Xi Jinping’s idea of supporting infrastructure development in countries west and south of China. Beijing is hosting a belt-and-road summit on May 14 and 15, which 28 heads of state will attend. There are two main types of capital outflow that are relevant for OBOR: ODI, and lending by China’s policy banks, China Development Bank (CDB) and the Export-Import Bank of China (EXIM). The top 10 destinations of ODI were: the Cayman Islands, the Virgin Islands, the United States, Singapore, Australia, the Netherlands, the United Kingdom, Russia, Canada, and Indonesia. Of these, only Russia and Indonesia are along the belt and road. China is a very significant funder of infrastructure in the developing world, but it is happening everywhere, not just along the belt and road.

The #Malaysian government is encouraging investors from China to tap into the estimated USD3 trillion global demand for halal products by exploring business opportunities in Tanjung Manis Halal Hub (TMHH) in Bintulu, Sarawak. According to Second Minister of Resource Planning and Environment Datuk Amar Awang Tengah Ali Hassan, Malaysia is a pioneer in halal certification ensuring the integrity of halal products and services through strict compliance with Syariah requirements. Awang Tengah added that the Sarawak Government had established the TMHH which covers an area of 124,517 hectares making it the largest among all the other halal hubs in the region. Among the investment potentials in TMHH he revealed is the cultivation of food crops, aquaculture, poultry and livestock, food processing, cosmetics, and health products. On another note, Awang Tengah revealed that China has remained an important trading partner as well as a major source of Foreign Direct Investment (FDI) for Sarawak.

The Centre for Excellence in Islamic Finance (CEIF) IBA held an International Forum on 'Unlocking Islamic Finance Potential in CPEC and Beyond'. The China-Pakistan Economic Corridor (CPEC) consists of $45 billion worth of domestic infrastructure projects planned by the government of Pakistan. The Forum analyzed the effects and impact of CPEC on the Islamic Finance industry in Pakistan. In his keynote address Irfan Siddiqui, President & CEO Meezan Bank, highlighted that CPEC is not just a need of China but also of Pakistan. From the government Chief Economist Nadeem Javaid stated that there are four main components of CPEC: Energy, Infrastructure Development, Economic Incentives and Industrial Cooperation. He said that CPEC will greatly lower the per unit cost of energy, incentives such as exemption from local duties and materials, whereas suspension of trade union activities will give opportunities to investors. Therefore, designing cost-effective, Shariah compliant finance options is the need of the hour.