THURSDAY, MARCH 26, 2015 ANALYSIS

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Issues Cheap eurozone takeaway fuels Chinese appetites

By Kelly Olsen

he inexorable decline of the single currency offers ambi- tious Chinese firms a bargain buffet of eurozone busi- Tness, analysts say, with this weekend’s multibillion deal for Italian tyremaker Pirelli only the latest course in an acquisi- tion binge. Less than a year ago the euro was worth nearly $1.40 on international markets. Earlier this month it stood at less than $1.05, down by a quarter as the European Central Bank embarks on a massive stimulus program while the US Federal Reserve is widely expected to start raising interest rates. By the standards of first-world forex markets it ranks as a collapse. It has recorded a similar performance against China’s yuan currency, falling from almost 8.7 yuan in May to bottom at less than 6.6 yuan. The yuan trades in a tight range against the dollar. As the unit weakens it makes eurozone acquisitions cheaper for outside buyers and its biggest headline impact Donor channelled millions through company may come in terms of Chinese overseas investment, which surged past $100 billion for the first time last year. “For Chinese going into Europe it can’t get better than this,” By Tom Bergin Research, the spokesman initially said the payments were for research A Family Dispute said Joerg Wuttke, president of the European Union Chamber work. He later said some of the payments were for management servic- Joseph Cyril Bamford, father of Anthony and Mark, started the JCB of Commerce in China (EUCCC). “Chinese companies are eager leading British industrialist and political donor has channelled es, including fees to directors. The directors include Bamford and his empire in a rented lock-up garage in 1945. In 1956 he established J.C. to go outside China as its own domestic economy is slowing more than half a billion pounds through an obscure company wife, Carole. The spokesman for JCB declined to say how much money Bamford Excavators Ltd, which became famous for making bright yellow down,” he told AFP, adding that profit margins in the rest of the Athat isn’t required to file financial accounts, a Reuters analysis of JCB Research paid its directors. backhoe loaders. It remains the group’s main operating company. As the world are higher than in China, according to EUCCC member corporate filings shows. Much of the money allegedly ended up being There is no suggestion that JCB or Bamford used the arrangements business grew, Joseph Bamford set up JCB Research in 1961 as a limited surveys. “So I can only expect a major push from Chinese com- paid to the industrialist himself, according to claims in court documents. to minimise tax liabilities. Indeed, tax experts said Bamford may in fact company. But in 1974 the whole group was restructured shortly before panies to buy into the European company landscape.” Lord made the payments as head of the family- have incurred more tax by paying himself partly via JCB Research than if Anthony Bamford took over running the firm. Joseph Bamford moved to The latest deal came with state-owned chemical giant owned JCB group, which is one of the world’s top makers of construc- he had received the money as dividends from JCB group. In return, how- Switzerland and ownership of the business was shifted offshore. JCB ChemChina agreeing to buy out the largest shareholder in tion machinery. It has annual sales of sales of nearly £3 billion ($4.5 bil- ever, he gained secrecy. Limited companies, even if family-owned like Research was re-incorporated as an unlimited company outside the main Pirelli, valuing the purveyor of Formula One accessories and lion). JCB group, are required to disclose the total remuneration paid to their JCB group, with Joseph Bamford and his wife Marjorie owning the com- racy calendars at just over seven billion euros - now about 48 Bamford is one of Britain’s best-known business leaders and a mem- directors. Independent unlimited companies do not have to do so. pany’s two shares, filings show. Independent unlimited companies are billion yuan, or 13 billion yuan less than in May. ber of parliament. In the past five years he has given £2.6 million to the However, Bamford’s brother Mark, a director of JCB Research until rare, in part because the owners accept complete liability for the compa- Conservatives, the dominant party in Britain’s ruling coalition, and in 2011, voluntarily opened a window into the company when he brought ny’s debts. Only 0.15 percent of companies incorporated in Britain are ‘Itching to Invest’ 2013 he became a Conservative member of the House of Lords, the a legal action in 2010. He disputed ownership of the company and how unlimited, a spokeswoman for Companies House said. An even smaller The euro has flirted with parity against the dollar in recent upper chamber of the British parliament. The peer has urged politicians JCB Research had distributed millions of pounds to directors. In publicly number are, like JCB Research, unlimited and not owned or controlled by weeks - for the first time since 2002 - and while the euro rose to to provide more incentives for companies to invest in manufacturing, available but previously unreported court papers, Mark Bamford alleged limited companies. They benefit from minimal reporting requirements. $1.0964 on Tuesday it remained within striking distance of and JCB group has a reputation for reinvesting more of its profits in that his brother had transferred more than £300 million from JCB group Prem Sikka, professor of accounting at Essex University, described JCB more-than-dozen-year lows. China’s overseas direct invest- developing new products than do listed companies with dividend-hun- to JCB Research between 2001 and 2008. Mark alleged that JCB Research as a “black box” because of its lack of transparency. In court fil- ment pushed sharply higher in February, the commerce min- gry shareholders. “JCB may be a global company, but first and foremost Research had then paid more than £130 million to Anthony Bamford ings, Anthony Bamford said that the purpose of registering JCB Research istry said, driven by oil giant China National Petroleum Corp we’re British and we invest heavily in Britain,” Bamford was quoted as and his wife between 2001 and 2008. Mark Bamford also alleged that as an unlimited company was “to preserve the confidentiality of pay- putting nearly $3 billion into a Dutch transaction. “The contin- saying in 2013. JCB Research provided a loan account to an unidentified director that at ments made by JCB Research and in particular to shield details of the JCB ued slumps in the euro’s value against the dollar have led the A Reuters study of JCB group accounts found that between 2001 times exceeded 40 million pounds, according to the documents. It has group’s research programme and outlay from competitors.” price of eurozone assets to fall, creating an opportunity for and 2013, the group paid 577 million pounds to a separate company not been publicly disclosed how much money JCB Research paid or When the dispute between Anthony and Mark Bamford erupted in Chinese companies to invest and carry out mergers and acqui- sitions there,” said commerce ministry spokesman Shen called JCB Research, which conducts research and development for JCB may have lent to directors after 2008. JCB Research was “a conduit for 2010, the media paid little attention. In an interview with ’s Danyang. Beijing has accrued the world’s biggest foreign group. However, much of that money did not go to fund research, certain members of the Bamford family to extract value” from JCB group, Evening Standard newspaper at the time, Anthony Bamford down- exchange reserves and has been running record monthly trade according to allegations in previously unpublished court documents. according to Mark Bamford’s legal claim. played the case, saying: “It is essentially a dispute about jigger all.” But surpluses, with the state-run China Daily newspaper saying in Instead, according to a legal claim by Bamford’s brother, large sums In court documents, Anthony Bamford responded that JCB Research court documents obtained by Reuters portray a family drama involving an editorial the country “is itching to invest overseas”. Private went to directors of JCB Research - including at least £130 million to had paid senior executives of JCB group and members of the Bamford millions. By then, Joseph and Marjorie Bamford were dead, and Anthony companies are also taking a seat at the table, with billionaire Bamford and his wife. family. But he denied that JCB Research was used to extract value from Bamford owned both shares in JCB Research. Mark Bamford claimed Wang Jianlin buying 20 percent of Spanish league champions Until now JCB Research, based in , central , was JCB group. Lawyers for Bamford said that details of Bamford’s earnings that he should have had the share that had been owned by his mother Atletico Madrid in January, the first mainland Chinese invest- widely seen as a business of modest size, best known for being the vehi- from JCB were private and should remain so. The dispute between the and that he had been deprived of it by Anthony. ment in a top European football club. cle for Bamford’s political donations. Its other finances have remained brothers was settled privately before it came to a full court hearing, and Mark Bamford alleged that in 1997 Anthony had persuaded their Conglomerate Fosun declared victory in February in its mysterious to outsiders. The firm has only two shares, both owned by the allegations made by Mark Bamford were not proven or disproven. A mother, then aged nearly 80, to sign a “stock transfer” form, effectively long takeover battle for French holiday resorts group Club Bamford. Unlike JCB group, JCB Research is an independent unlimited spokesman for JCB and Anthony Bamford said the legal case “arose from giving up her stake in JCB Research. Mark Bamford alleged that after Med, having repeatedly raised its offer to Ä939 million. Klaus E company, which means it does not have to file accounts available for a fraternal misunderstanding and has long since been amicably their mother died in 2003, Anthony Bamford transferred her share of JCB Meyer, a professor at the China Europe International Business public scrutiny. resolved.” Research into his own name. That transfer gave Anthony Bamford com- School in Shanghai, said Chinese investing abroad generally A spokesman for JCB group said: “Intellectual property has always Mark Bamford also said the dispute had been settled amicably. He plete ownership of the firm. Anthony Bamford rejected the allegations. take a long-term view and are driven by acquiring technology been of the greatest importance to JCB group.” He said JCB Research declined to comment further. A spokesman for the Conservative Party In documents outlining his defence, he said that he had put no pressure or brands they can exploit domestically. “The fact that assets in was structured as an unlimited company “to keep detailed information had no comment on JCB Research but said: “All donations to the on his mother, and that she had signed away the right to her share in Europe are now cheaper because of the weaker euro means on the company’s trade secrets as private as possible.” When Reuters Conservative Party are properly and transparently declared to the JCB Research because she wanted to “tidy up her financial affairs before that this sort of asset-seeking foreign investment is likely to asked why JCB group had paid hundreds of millions of pounds to JCB Electoral Commission.” she died.” —Reuters increase,” he said. The Pirelli deal was met with dismay but res- ignation in Italy, and Derek Scissors of the Washington-based American Enterprise Institute said that given its economic tra- vails, the eurozone will not look askance on inflows from Glimmers of hope in CAR but peace elusive China. “Most Chinese companies are now sophisticated enough to back off of outright acquisitions when there is polit- By Crispin Dembassa-Kette tion talks, we have found a sense of peace pulling out, saying the worst is over. France The presence of hundreds of former ical sensitivity, buying smaller stakes in high-profile compa- and Daniel Flynn between the Christians and ourselves.” is scaling down its 2,000-strong mission and Seleka fighters in barracks in Bangui, await- nies,” he added. Chinese firms may also already be taking Central African Republic remains one of the European Union’s 750-strong EUFOR ing demobilisation, is fuelling tensions. advantage of the weaker euro to raise cheaper capital over- unted through the bush of Central ’s biggest, and most forgotten, human- force pulled out this month, handing Some 20,000 residents languish in the seas. Four China-based non-financial companies issued the African Republic by Christian militia- itarian crises. About 440,000 people are dis- responsibility for security in the capital to M’poko camp beside the airport runway, too equivalent of $2.8 billion in euro-dominated bonds in January Hmen, hundreds of half-starved placed inside the country and a further UN peacekeepers. “The massacres have afraid to return to their homes. But the and February, according to Dealogic data, more than the $1.9 Muslim herders found sanctuary with UN 450,000 refugees have fled its borders. Slow ceased, the level of security is growing,” 10,000-strong UN mission says it has no billion raised in the whole of 2014. peacekeepers in the town of Yaloke. For progress is being made. In the southern cap- EUFOR commander General Philippe mandate to disarm the rival factions by force months they dared not set foot outside the ital Bangui, where Muslims were lynched by Ponties told a news conference. Yet in the and Central African Republic’s armed forces - Trade Imbalance camp. Now, after months of talks with local crowds last year after Seleka retreated days after EUFOR’s departure, violence flared tarnished by support for the ‘anti-balaka’ - Nonetheless the consequences of the euro’s decline are not leaders, the frightened Fulani herders have northward, Christians now venture to the in Bangui’s PK5 and PK3 neighbourhoods have yet to be reformed and rearmed. “We all one-way. The 28-member EU is China’s biggest trade part- finally ventured outside their small com- market in the Muslim enclave of PK5. Some following a wave of armed robberies. In their need political talks, like the Bangui forum, ner while China is the EU’s second-largest, and China ran a sur- pound into the half-empty town, once Muslims have returned since the start of the stronghold of Boy-Rabe, the ‘anti-balaka’ - but we also need to strengthen our security plus of $126.63 billion last year with the full group, nine of home to an estimated 10,000 Muslims. year and a few mosques reopened. “Social increasingly a criminal outfit - clashed with forces,” said Martin Ziguele, a former prime whose members do not use the single currency. But the euro’s It is two years since the Central African cohesion is gradually rebuilding,” said French forces. minister and presidential candidate. decline makes eurozone goods cheaper elsewhere and Republic descended into chaos when the Ousmane Abakar, a spokesman for the After visiting Bangui this month, US Chinese products comparatively dearer. “When it comes to Muslim Seleka rebels seized power. Their Muslim community, though he said many Ambassador to the United Nations Police Return trade certainly European exporters are going to be very happy wave of killing brought reprisals by the ‘anti- parts of the city remained out of bounds. Samantha Power voiced concern at the Two years after it was abandoned when as their products are going to be more competitive,” Wuttke balaka’ Christian militia, which drove tens of In Seleka’s former northern strongholds European withdrawal. She said that Muslims Seleka stormed the capital, the police sta- said, while Chinese exporters will face tougher times. “And so I thousands of Muslims from the south and of Bria and Ndele, officials from a UN-backed in enclaves remained scared and vulnerable. tion in PK5 was reopened this month. It expect actually that this trade imbalance that we have will nar- prompted former colonial power France to transitional government have returned to For Thierry Vircoulon, ICG project director for musters 35 officers from both communities. row significantly as we go forward,” he said. —AFP intervene. Dozens of Fulani died during the work after French forces drove out the central Africa, the pullout risks undermining “If a Christian commits a crime, the Christian ordeal and those who survived still bear the rebels. But, with weapons everywhere, vio- peace talks in Bangui next month meant to policeman intervenes,” said Mamadou wounds. One man has a deep scar cutting lent crime remains rife. Even in Yaloke, the pave the way to elections in July. “If they feel Zenadine Khalil, a Muslim student who took deep into his nose and across both cheeks tiny gains are fragile. The Fulani camp was a easing up of pressure from international part in a UN-backed program to rebuild the All articles appearing on these where he was struck with a machete, anoth- raided last weekend by locals who looted forces on the ground, armed groups will try station. “If it’s a Muslim, a Muslim policeman er has two bullet holes in his back. the humanitarian supplies. Separated from to retake the initiative and reimpose their can find a peaceful solution.” pages are the personal opinion of The slight easing of tensions in towns like their families, robbed of their cattle and views,” he said. He doubted elections could Outside the capital, the state’s presence is the writers. Kuwait Times takes no Yaloke offers a glimmer of hope for an end deprived of their nomadic lifestyle, many of take place this year. tenuous. In the central region that divides responsibility for views expressed to the violence that still lurks despite the the Fulani have fallen sick and died. All are A series of truces have failed to stop the the rebel-controlled north from the south, therein. Kuwait Times invites read- presence of French and UN peacekeepers. desperate to leave. “In Yaloke, the situation is violence. Local commanders say they are Christian militia and former Seleka fighters Their women, with their distinctive long worrying,” said Thibaud Lesuer of waiting for a demobilisation package before clash. In the former Seleka headquarters of ers to voice their opinions. Please braided hair and patterned robes, wash International Crisis Group. “It’s very likely abandoning their arms but the cash- Bambari, violence has descended into send submissions via email to: opin- clothes in the river. The men go to the mar- that if the pastoralists restarted their herd- strapped government -hit by an embargo reprisals between the Christian and Muslim [email protected] or via snail ket to buy food and pray in a makeshift ing in the bush a few kilometres from town, on diamond exports - has little to offer communities despite the presence of peace- mosque at a hospital. “We were persecuted they would once again be targeted by mili- them. Donor interest in Central Africa keepers. The crisis fed on deep-rooted griev- mail to PO Box 1301 Safat, Kuwait. by the locals. We could not move freely. Our tia and bandits.” Republic has also waned, eclipsed by other ances, including Christian resentment of The editor reserves the right to edit women were threatened and attacked, crises. The United Nations says it has Muslim traders’ commercial success, as well any submission as necessary. robbed and raped,” said the herders’ leader, Violence Flares received only 11 percent of the $613 million as long-running clashes between Muslim Al Haj Lahidou. “Following these reconcilia- Despite the violence, Western forces are needed for humanitarian aid this year. herders, bandits and farmers. —Reuters