In the News: Alibaba's Hong Kong Listing; China Lifts US Chicken Ban; Australia Approves Mengniu Takeover; and Jingye Rescues British Steel

Hong Kong is Alibaba's natural "first choice" for raising funds, the company's co-founder Joseph Tsai said in 2013. As the company's operation is predominantly in Asia, a Hong Kong listing will allow Alibaba's customers in the region to own its shares. The announcement of the listing plan came soon after Alibaba once again made record sales on its "Singles' Day"  shopping festival, which takes place every year on Nov. 11. The Chinese e-commerce giant sold $38.3 billion worth of goods in this year's festival, up 26% from its previous record set last year. Earlier this month, Alibaba reported a quarterly revenue increase of 40% and is now worth almost half a trillion dollars.

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China lifts U.S. chicken ban

China has lifted its ban on U.S. poultry imports which had been in place since 2015. Both governments announced the lifting of the ban, which could lead to poultry sales of around $2 billion, the Wall Street Journal reported. The ban was introduced due to an outbreak of highly pathogenic avian influenza in the U.S., and the lifting of the ban has come amidst ongoing negotiations in the trade war between the two countries. The shares of major U.S. chicken producers, including Pilgrim's Pride and Sanderson Farms, rose on the back of the news.

Effective immediately, the lifting of the ban comes as the two sides have signaled that a "phase one" partial trade deal might soon be agreed, although there are reports that China is reluctant to commit to a specific dollar-target for purchases of U.S. agricultural goods—a central demand of the U.S. Earlier this month, the U.S. amended the Federal Register to remove curbs on Chinese imports of poultry products. China has long been the largest global market for chicken feet, which has low demand in the U.S. but are ubiquitous in Chinese restaurants and street food stalls. According to U.S. poultry industry groups, the annual value of U.S. chicken exports to China at its peak was $722 million.

China is currently battling an outbreak of African swine fever, which has depleted the country's swine herds and pushed up food prices. Government data for October show that China's consumer prices rose at their fastest pace in almost eight years, largely driven by surging pork prices. China is the world's biggest pork consumer as it is a mainstay of the diet. In recent months, China has stepped up its imports of pork and alternatives such as beef and poultry to meet demand as millions of pigs have been killed over the past year. Total imports of chicken into China surged almost 50% to $1.3 billion in the first nine months of 2019. Earlier this month, the Chinese authorities approved 13 new meatpacking plants in Brazil to export to China.

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Australia approves baby formula maker's Chinese takeover

Australia has approved a Chinese company's $1 billion takeover of infant formula group Bellamy's, but with conditions. Australia's Treasurer Josh Frydenberg said the approval was granted on the back of a unanimous recommendation by the Foreign Investment Review Board, which found that the takeover by China's dairy giant Mengniu is "not contrary to the national interest." The takeover's conditions include having a majority of the company's directors be Australian resident citizens, and that the company's headquarters must remain in Australia for at least another decade.

Bellamy's is one of Australia's biggest manufacturers of baby formula. The takeover bid was launched in September as Chinese demand for imported baby products has soared in recent years due to a string of high-profile food safety scandals, including contaminated milk. The Australian company, which began as a family business, has long tried to sell its products in China but has been beset by regulatory hurdles. Mengniu meanwhile is one of China's biggest dairy manufacturers and is partially owned by the Chinese government. It has said that Bellamy's reputation for quality and established supply chain in Australia are the reasons behind the takeover.

Bellamy's has seen its profits halve in the first half of 2019 due to the tightening of rules in China on the informal "daigou" market where shoppers buy products overseas for Chinese customers. This takeover will be welcome news for the Australian company at a time when tensions between Australia and China have been strained due to accusations of political interference by Beijing. Australia has stepped up its scrutiny of inbound Chinese investment in recent years. In 2016, the government vetoed the attempted $7.7 billion sale of AusGrid, the country's largest energy grid, to Chinese bidders. In 2018, it blocked another proposal by the Hong Kong-based CK Hutchison Group to acquire a major Australian pipeline operator. Both those deals were vetoed for national security reasons. The same year, Australia banned the Chinese telecoms giant Huawei from participating in its 5G mobile networks, again due to national security reasons.

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Jingye Group rescues British Steel

A Chinese industrial conglomerate has rescued British Steel, the U.K.'s second-largest steelmaker, from the brink after it collapsed into liquidation in May. Jingye Group plans to invest $1.5 billion in the steelmaker over the next decade, which it bought for around $64 million, according to the Financial Times. The deal is expected to save up to 4,000 jobs and is subject to regulatory approval. However, there have been questions raised by U.K. politicians and trade unions about how the Chinese conglomerate plans to make the steelmaker profitable again as well as the acquisition's implications for national security.

Previous attempts to save the steelmaker had failed, including talks with Turkey's military pension fund. The U.K. government has also refused to bail out the company, which was formed in 2016 and produces a third of all steel in the U.K. The company has blamed the uncertainty surrounding Brexit and a weakened pound for its collapse. Its potential savior, Jingye Group, is a conglomerate with businesses in the steelmaking, chemical, property, and tourism industries. It made around $13 billion in revenue in 2018. In recent years, the conglomerate has grown its international presence on the back of calls from the Chinese government for steelmakers to reduce their production in China's industrial heartlands.

China is the world's largest steelmaker, but the government has targeted the nation's steelmakers in recent years due to environmental concerns and worries over excess capacity. In 2018, China set a target of cutting 30 million tonnes of steelmaking capacity that year after 170 million tonnes had been slashed in the preceding five years. BaoWu Steel Group, China's largest steelmaker and the world's second-largest, saw its profits plunge almost by half in Q1 2019 from the same period the previous year, deepening fears of oversupply in the Chinese steel market. There have long been complaints that China is exporting its overcapacity by dumping cheap steel overseas including in the U.K. market, especially in recent years as the Chinese economy has slowed.

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