HNA ditches vanity purchases for Silk Road commodity deals to vie for Beijing’s support

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By shifting to target commodity and logistics assets in ‘Belt and Road’ nations, HNA says it can benefit from government policies

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CWT Commodities Pte. Ltd in Singapore. Photo: SCMP/Handout

Elaine Chan

Published: 8:00am, 28 Jan 2018Updated: 8:40am, 28 Jan 2018

To mark the completion of its US$1 billion takeover of a Singaporean warehouse and delivery business, HNA Group chose to celebrate at a swanky hotel by the city’s Clifford Pier, the historic landing point for many seafaring immigrants, including those from the buyer’s home base of Hainan.

The January cocktail reception for 300 guests could have been just another event in HNA’s schedule of frantic takeovers and global shopping spree, where it has lavished an estimated US$40 billion of debt-fuelled leverage since 2015 buying assets from an aircraft leasing company in Ireland to 25 per cent of Hilton hotels to land in Hong Kong.

Guo Ke, Chief executive of the HNA Innovation Finance.

Yet CWT marked something else. Along with HNA’s US$775 million purchase of a 51 per cent stake in Glencore’s petroleum storage and logistics assets two weeks earlier, it’s a strategy switch by HNA to ditch its trophy assets for projects that align with the Chinese government’s strategic interests. The private business is now being guided by state policy, the way a state enterprise would.

“HNA is trying to get into the good books of the Chinese government, following increased regulatory scrutiny - not just in China but globally - on its complicated structure, aggressive expansion, leveraged financial position and lack of transparency,” said Corrine Png, the chief executive of independent research firm Crucial Perspective, in Singapore. “It is also much easier for HNA to secure financing and regulatory approvals (if necessary) for investment projects that are aligned with China’s national objectives,” like the Chinese president’s pet project along the old Silk Road, known as the “Belt and Road Initiative”.

The retreat from the fast lane was inevitable, as the Chinese government sought to rein in excessive debt by local authorities and state enterprises. It was only a matter of time before the profligate borrowings by HNA - as well as by fellow shoppers Anbang Group, Dalian Wanda Group and the Fosun Group - would invite the scrutiny of regulators, concerned about the impact of debt on China’s financial system.