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Reflections on the disposal scheme of contractor’s bank’s creditor’s rights-solving negative macro spillover with TLAC

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　　Author of this article

　　Zhang Xu/Wei Weixiao

　　abstract

　　The disposal of creditor’s rights of Baoshang Bank has caused us to think: Can the financial supervision department put forward higher supervision requirements for banks, so that they can reserve enough internal bail-out funds to absorb losses in the process of risk disposal?

　　TLAC is the abbreviation of Total Loss-Absorbing Capacity, which refers to the sum of various capital or debt instruments that can absorb bank losses through write-down or share conversion when G-SIBs enters the disposal procedure, that is, the ability of "internal bail-out".

　　How can we replenish TLAC capital as soon as possible? We believe that regulatory capital can be supplemented and debt instruments that are not included in regulatory capital but meet the requirements of TLAC can be issued.

　　Perpetual bonds of commercial banks can be a breakthrough to supplement tier-one capital. Today (July 26th), ICBC is issuing 80 billion yuan of open-ended bonds.

　　Since the beginning of this year, in order to issue perpetual bonds smoothly, the People’s Bank of China and China Banking and Insurance Regulatory Commission have also provided relevant policies. For example, the People’s Bank of China has created CBS, and primary dealers can use the qualified perpetual bonds they hold to exchange them for central bank bills.

　　In addition to using existing tools to supplement regulatory capital, TLAC can also be supplemented by some innovative capital tools.

　　Most banks in the United States meet the regulatory requirements of TLAC by issuing senior bonds by holding companies, while banks in EU countries tend to use senior non-priority bonds to supplement TLAC capital.

　　1. Thoughts on the disposal scheme of creditor’s rights of contractor bank.

　　The capital of commercial banks plays a role in absorbing losses before ordinary creditors. For example, in the process of disposing the creditor’s rights of contractor banks, the losses are first absorbed by the original shareholders and the holders of secondary capital bonds. Due to the credit crisis of Baoshang Bank, even if the equity is cleared 100%, it still can’t absorb all the losses, so some subsequent losses need to be absorbed by the deposit insurance fund management company and some creditors.

　　How much loss should the deposit insurance fund bear? In order to avoid risks, the Deposit Insurance Fund fully guarantees the principal and interest of all personal savings deposits, corporate deposits of less than 50 million yuan and interbank liabilities through debt acquisition, corresponding to 5.2 million depositors, 25,000 enterprises and interbank institutions respectively. Obviously, the part undertaken by the deposit insurance fund far exceeds the limit of 500,000 yuan stipulated in the Deposit Insurance Ordinance, and its initiative to bear losses is mainly to protect the interests of ordinary creditors as much as possible.

　　However, this has also triggered our new thinking: the failure of commercial banks has negative macro-spillover, and in order to prevent systemic risks, the government has to use public funds to provide assistance. Then, is it possible to put forward higher regulatory requirements for banks, so that they can reserve enough internal bail-out funds to absorb losses during the disposal process, instead of relying on external public funds for assistance?

　　In fact, the problem of "negative macro spillover" is not unique to China, and the more important the bank, the greater its spillover, which is called "too big to fail". During the international financial crisis in 2008, the American and British governments were worried that the bankruptcy of Citibank and Royal Bank of Scotland would lead to systemic risks, so they injected 45 billion dollars and 45.5 billion pounds into the two banks respectively.

　　Such external assistance with public funds will not only increase the burden on taxpayers, but also lead to moral hazard of banks. In order to solve this problem, the FSB (Financial Stability Board) issued the Key Elements of Effective Disposal Mechanism of Financial Institutions at the G20 Cannes Summit in 2011, and put forward the goal of "internal bail-out" instead of "external assistance" of public funds in times of crisis. In November, 2015, FSB issued the Principles and Clauses of Loss Absorption and Capital Reorganization Ability in the Disposal of G-SIBs (referred to as TLAC Clause), which put forward higher requirements for the loss absorption ability of G-SIBs (global systemically important bank) than Basel III.

　　2. What is TLAC?

　　"TLAC" in the above-mentioned TLAC Clause is the abbreviation of Total Loss-Absorbing Capacity, which refers to the sum of various capital or debt instruments that can absorb bank losses through write-down or share conversion when G-SIBs enters the disposal procedure, that is, the ability of "internal bail-out". A higher TLAC ensures that banks have sufficient capacity to absorb losses when they enter the disposal procedure, thus reducing the probability that "too big to fail" banks will "fail" in a crisis and cause systemic risks. In addition, the "internal bail-out" model helps to encourage bank shareholders and management to increase risk management and reduce the possibility of excessive risk taking and falling into crisis.

　　According to the TLAC Clause, qualified TLAC tools need to meet the following criteria at the same time: 1. Paid-in; 2. Unsecured; 3. The ability to absorb losses in the process of disposal will not be weakened by the right of offset and net liquidation; 4. The remaining term of the contract is not less than one year or perpetual (no expiration date); 5. There is no investor’s right to sell back in the coming year; 6. No funds shall be provided directly or indirectly by the disposal entity or its related parties, unless approved by the regulatory authorities of the home country and the host country.

　　At the same time, qualified TLAC instruments cannot be excluded liabilities, that is, they cannot be any of the following liabilities: 1. Deposits protected by deposit insurance; 2. Demand deposits and deposits with an original term of less than one year; 3. Liabilities arising from derivatives; 4. Debt instruments with derivative linkage characteristics, such as capital preservation bills; 5. Liabilities arising outside the contract, such as tax obligations; 6. Liabilities (such as secured liabilities) stipulated in the bankruptcy law that are paid before senior unsecured creditors; 7. Liabilities excluded from internal bail-out by law or unable to be written down or converted into shares by relevant disposal authorities.

　　Qualified TLAC tools must absorb losses before being excluded from liabilities, so as to ensure the disposal ability of G-SIBs. In fact, the other side of loss absorption preposition is the secondary in compensation, and the secondary attribute can be realized in the following three ways:

　　1. contractual subordination: it is agreed in the form of contract that the TLAC instrument is subordinated to the excluded liabilities in the disposal entity table.

　　2. statutory subordination: In the statutory creditor hierarchy, the TLAC instrument is lower than the excluded liabilities in the disposal entity table.

　　3. structural subordination: TLAC instruments are issued by a disposal entity (such as a holding company) with no excluded liabilities on the balance sheet.

　　For example, in the terms of the bond, it is agreed that "the repayment order of the principal of the current bond and the interest payment order are after the depositor and the general creditor", which is the secondary agreement mentioned above, and banks in EU countries tend to use this method. The mode of issuing bonds by non-operating holding companies in the United States is the secondary structure mentioned above. In this mode of secondary structure, the excluded liabilities of subsidiaries are paid off first, and the bonds of holding companies play the role of loss absorption.

　　3. Applicable objects of TLAC

　　Basel III applies to all banks, while TLAC applies to G-SIBs. The list of G-SIBs is published by FSB every November. In November 2018, there were 29 banks in groups 1-4, corresponding to 1%-2.5% additional capital. At present, the Industrial and Commercial Bank of China, Bank of China, Agricultural Bank of China and China Construction Bank are on the list, among which Agricultural Bank of China and China Construction Bank are in the first group, which are applicable to 1.0% additional capital, while Bank of China and ICBC are in the second group, which are applicable to 1.5% additional capital.

　　According to FSB rules and practical experience, those with a total score of 130 are more likely to be selected for G-SIBs. (Among the 29 G-SIBs selected in November, 2018, the lowest total score was BPCE, and its score was 130. The Bank of Communications is very close to the above standards. In the results disclosed in November 2018, the total score of the bank was 118, ranking 31 ST.

　　The results disclosed by FSB in November 18 correspond to 17 years’ data, and the results to be disclosed in November 19 correspond to 18 years’ data. We find that the data of most subjects of Bank of Communications have improved to varying degrees in the past 18 years. Among them, the highest increase rate is the third-tier assets, with the data of 910 million yuan in 17 years and 2.55 billion yuan in 18 years, an increase of 1.8 times. In addition, assets between financial institutions, payments settled through payment systems or correspondent banks, and cross-border liabilities have also increased by more than 15% respectively. Obviously, according to the current growth rate, it is a high probability that Bank of Communications will be included in G-SIBs in the next few years.

　　The score and ranking of Industrial Bank (601166) are not far from those of Bank of Communications, with 96 ranking 36. Next, the rankings of Shanghai Pudong Development Bank (600,000), China CITIC Bank (601,998) and China Merchants Bank (600,036) are relatively close, ranking 40th, 43rd and 44th respectively. The scores of Minsheng Bank (600016), China Everbright Bank (601818), Ping An Bank (00001), Guangfa Bank, Bank of Beijing (601169) and Huaxia Bank (600015) are all below 50% of the threshold of G-SIBs 130, so it is less likely to be recognized as G-SIBs in a short time.

　　The minimum TLAC requirements apply to every disposal entity in every G-SIB. The disposal entity here refers to the entity to which the disposal tool is applied in the G-SIB disposal strategy. According to different disposal strategies, the disposal entity can be the parent company, the intermediate or final holding company and the operating subsidiary. Moreover, a G-SIB can own one or more disposal entities.

　　A disposal entity and all entities owned and controlled by this disposal entity are regarded as a disposal group. It should be noted here that the above-mentioned entity owned or controlled should not be a disposal entity, and each disposal entity and the entity owned or controlled by it can only belong to one disposal group.

　　In addition, within a disposal entity, the direct or indirect subsidiaries that meet the requirements form an important disposal subgroup. In order to facilitate the cooperation between the authorities of the home country and the host country and realize the effective cross-border disposal strategy, FSB requires the appropriate allocation of loss absorption and capital reorganization capabilities within the disposal group. In view of this, FSB puts forward the requirements of internal TLAC for the important sub-groups of G-SIB. The minimum internal TLAC standard is 75%-90% of the minimum external TLAC standard.

　　4. TLAC regulatory requirements

　　FSB formulates the most basic requirements for G-SIBs, including TLAC requirements based on risk-weighted assets and TLAC requirements based on total assets exposed to risk (i.e. leverage ratio). In addition to the requirements of FSB, the regulatory authorities of various countries or regions may put forward additional requirements for banks according to local actual conditions, and the specific standards shall be decided by the local regulatory authorities themselves.

　　The TLAC Clause requires that for banks that become G-SIBs before the end of 2015, the TLAC shall account for no less than 16% of risk-weighted assets and the leverage ratio shall be no less than 6% from January 1, 2019; From January 1, 2022, the above two proportions will be increased to 18% and 6.75% respectively. In addition, G-SIBs also needs to meet the requirements of buffer capital, including reserve capital (2.5%), countercyclical capital (0-2.5%) and additional capital of G-SIBs (1-3.5%). For banks that become G-SIBs between 2016 and the end of 2018, they need to meet the above requirements from January 1, 2022; For banks that become G-SIBs after the end of 2018, they need to meet the requirements within 36 months after becoming G-SIBS.

　　Considering the actual situation of emerging market countries, FSB gives them a grace period of six years, that is, the time to meet the standards is extended from 2019 and 2022 to 2025 and 2028. (Note: In fact, up to now, only China’s banks have been selected as G-SIBs among emerging market countries. However, there is an accelerated condition for this grace period: if the balance of financial and non-financial corporate bonds (excluding policy banks) in emerging market countries accounts for more than 55% of the country’s GDP within five years after the publication of the TLAC Clause, the grace period will be shortened by three years and advanced to 2022 and 2025 respectively.

　　The TLAC clause of FSB was published in November 2015, so the final judgment of the accelerated clause will be in November 2020, and the data at the end of 2019 will be used for this judgment. By the end of 2018, the ratio of the balance of financial bonds and non-financial bonds excluding political bonds to GDP in China was close to 50%. If we extrapolate linearly at the current growth rate, the above ratio was very close to the threshold of 55% at the end of 2019.

　　In addition to the above-mentioned mandatory provisions, FSB also put forward the regulatory expectation in the TLAC Clause, that is, it is expected that the standard TLAC debt instruments will account for no less than 33% of the total capital of TLAC. This regulatory expectation is to ensure that G-SIBs has sufficient capital absorption losses when it enters the disposal procedure. According to the RAW standard of 16%, FSB expects the debt instruments in TLAC capital to account for no less than 5.28% of RAW.

　　At the same time, the TLAC Clause stipulates that if the relevant government departments promise in advance to reorganize the capital, bear the cost of the disposal fund or provide temporary disposal funds during the disposal of G-SIBs, the minimum requirements of TLAC can be reduced to some extent. For example, due to the commitment of deposit insurance system in Japan, the minimum TLAC requirement can be exempted: when the minimum TLAC requirement is 16%, it can be exempted from 2.5% (reduced to 13.5%); When the minimum requirement of TLAC is 18%, 3.5% can be exempted (reduced to 14.5%).

　　In addition, in order to reduce the cross-infection of risks in the banking system, the TLAC Clause also puts forward the deduction requirements for holding TLAC tools. Since then, it has been further clarified in the Basel III framework that the bank’s investment in non-capital TLAC tools issued by G-SIBs should be deducted from its own tier 2 capital.

　　The regulatory authorities in various countries and regions may put forward additional requirements for banks on the basis of FSB requirements according to local actual conditions. At present, there are some differences in the regulatory requirements of the United States, Japan and the European Union, which we will elaborate in the next part.

　　5. Implementation of TLAC in USA, Japan and EU

　　5.1. Implementation of TLAC in the United States

　　In December 2016, the Federal Reserve finalized the American version of the TLAC rules, which are applicable to the global systemically important bank holding companies (covered BHCs) in the United States and the important intermediate holding companies (covered IHCs) of foreign banks in the United States. The US TLAC rules formulated by the Federal Reserve are obviously stricter than the requirements of the FSB. For external TLAC, the difference between the minimum requirements of the Federal Reserve and the FSB is mainly reflected in the following three points: the transition period is cancelled, the leverage ratio is higher, and the hard requirements for long-term debt are increased.

　　1. Cancel the transition period: In the requirements of FSB, the period from 2019 to 2022 is a transition period. From 2022, the ratio of TLAC to risk-weighted assets and total risk exposure is not less than 18% and 6.75%, while only 16% and 6% are required during the transition period. TLAC in the United States canceled the transition period arrangement, requiring that it should not be lower than the final level required by FSB from 2019. (Note: The requirement of the Federal Reserve for leverage ratio is higher than that of the FSB’s TLAC. )

　　2. Increase the leverage ratio: FSB requires the leverage ratio to be greater than 6%, while in the Federal Reserve version of TLAC, it is obviously more stringent to require the leverage ratio to be greater than 7.5% plus 2% capital buffer.

　　3. Put forward the requirements of Ltd.: FSB only puts forward the regulatory expectations for the proportion of debt instruments, while the Federal Reserve puts forward mandatory regulatory requirements for the scale of long-term debt instruments. According to the requirements of the Federal Reserve, from 2019, the ratio of LTD/RWA (that is, the ratio of long-term debt instruments to risk-weighted assets) should be greater than 6% (in addition, G-SIBs has additional capital buffer requirements), and the total assets of LTD/ risk exposure should be greater than 4.5%.

　　For internal TLAC, the Federal Reserve has put forward different requirements according to the nature of intermediate holding companies and different implementation strategies:

　　1. The intermediate holding company is the disposal entity, and the MPOE strategy (multi-point disposal entity strategy) is applicable: the Federal Reserve requires that the ratio of TLAC to risk-weighted assets and total risk exposure should be no less than 18% and 6.75%, which is consistent with the external TLAC of the corresponding banks in the United States (the internal TLAC requires lower leverage ratio), and the ratio of TLAC to average total assets should be no less than 9% (that is, Tier 1 capital leverage ratio). The requirements of the Federal Reserve for LTD are not less than 6%, 2.5% and 3.5% of risk-weighted assets, total risk exposure and average total assets.

　　2. The intermediate holding company is not a disposal entity, and the SPOE strategy (single disposal entity strategy) applies: the Federal Reserve requires that the ratio of TLAC to risk-weighted assets and total risk exposure should be no less than 16% and 6%, and the ratio of TLAC to average total assets should be no less than 8%. The requirements of the Federal Reserve for LTD are not less than 6%, 2.5% and 3.5% of risk-weighted assets, total risk exposure and average total assets.

　　5.2. TLAC implementation in Japan

　　In the TLAC requirements formulated by the Financial Services Agency of Japan (FSA), it is considered to extend the scope of supervision to some D-SIBs, such as Nomura Holdings, Daiwa Securities, Japan Central Agriculture and Forestry Treasury, and Sumitomo Mitsui Trust Holding Company. Other regulated banks are called "Covered SIBs" together with G-SIBs in Japan. At present, there are four Covered SIBs in Japan, namely Mitsubishi UFJ Financial Group, Mizuho Financial Group, Sumitomo Mitsui Financial Group and Nomura Holdings. The first three are G-SIBs recognized as of November 2018, and these three banks need to meet FSB standards from March 1, 2019. Nomura Holdings, as a domestic D-SIB in Japan, needs to meet the corresponding standards in two years (2021 and 2024). In addition, Japan’s TLAC rules have been implemented since March 31, 2019, which is slightly different from January 1, 2019 stipulated by FSB.

　　5.3. Implementation of TLAC in EU

　　Similar to the TLAC of FSB, the European Union has put forward the Minimum Requirements for Self-owned Funds and Qualified Liabilities (MREL), which was implemented on January 1, 2016. The difference between MREL and FSB minimum TLAC requirements is mainly reflected in the following six points:

　　1. Different startup time: MREL requirements were implemented on January 1, 2016; The requirements of TLAC were implemented on January 1, 2019.

　　2. Different coverage: TLAC is only for G-SIBS; MREL covers all credit institutions and investment companies in the EU.

　　3. The denominators of the indicators are different: the denominators of the two indicators in TLAC are risk-weighted assets and total risk exposure assets respectively; MERL contains all liabilities and self-owned funds.

　　4. The criteria for identifying qualified debt instruments are different: when the debt instruments in MREL are converted into shares or written down during self-rescue, they must conform to the principle of "no credit or worse off (NCWO)", so the qualification identification is stricter than the TLAC standard of FSB.

　　5. The uniformity of standards is different: FSB has uniform minimum TLAC requirements for all G-SIBs; MREL determines the specific requirements of each bank on a case-by-case basis.

　　6. Different deductions: under the framework of TLAC, it is necessary to deduct the TLAC qualified tools held by other G-SIIs from Tier 2 capital; The current version of MREL framework does not involve deduction for the time being.

　　6. TLAC gap of G-SIBs

　　6.1. Current global TLAC compliance of G-SIBs.

　　Up to now (note: July 26, 2019), six countries or regions, including the United States, Britain, Japan, Canada, Switzerland and China, have met the external TLAC requirements. Among them, TLAC supervision in Japan began on March 31, 2019, which is slightly different from January 1, 2019 required by FSB. The EU MREL framework has been put into operation, which covers not only G-SIBs, but also D-SIBs and other banks.

　　At present, some G-SIBs have disclosed their TLAC ratio and leverage ratio in their 2018 annual reports, such as JPMorgan Chase, Credit Suisse Group and UBS Group AG. These three banks have met the minimum TLAC requirements stipulated by FSB, while JPMorgan Chase has also met the stricter TLAC rules formulated by the United States.

　　6.2. TLAC gaps of four G-SIBs in China.

　　The TLAC Clause requires G-SIBs to meet the corresponding regulatory requirements from January 1, 2019, but gives emerging market countries a grace period of six years, so China has not yet implemented TLAC regulation. Because China’s G-SIBs has not issued corresponding TLAC debt instruments for TLAC rules, the TLAC ratio is close to the capital adequacy ratio after deducting the capital buffer. By the end of 2018, the average capital adequacy ratio of the four major banks of industry, agriculture, China and construction was 15.67%, and the capital adequacy ratio after deducting the capital buffer was 11.92%, which was still far from the regulatory ratio of 16%.

　　In terms of leverage ratio, by the end of 2018, the leverage ratios of ICBC, Agricultural Bank, Bank of China and China Construction Bank were 7.8%, 6.8%, 6.9% and 8.1% respectively, all of which were higher than 6%, and the leverage ratio pressure was relatively small.

　　Based on the calculation results of leverage ratio and TLAC ratio, the total TLAC financing gap of four G-SIBs in China at the end of 2018 was 2.35 trillion yuan. According to the current capital and operation of the four banks, if we want to meet the minimum TLAC requirements in 2025, we need to increase the TLAC by 392.4 billion yuan annually in the next six years.

　　The regulatory expectation is that TLAC debt instruments that meet the standards account for no less than 33% of the total capital of TLAC. According to the minimum external TLAC requirement of 16%, debt instruments such as convertible bonds, perpetual bonds, subordinated bonds, mixed capital bonds and tier 2 capital instruments are not less than 5.28% of RWA’s. By the end of 2018, the above-mentioned debt instruments issued by the four major banks accounted for an average of 1.75% of RWA, which was significantly lower than the above-mentioned regulatory expectation of 5.28%. It is necessary to continue to promote the issuance of debt instruments.

　　7. Ways to promote TLAC standards

　　There is not much time for the TLAC of four G-SIBs in China to reach the standard. In terms of the time limit for TLAC to reach the standard, although China has been granted a grace period of six years, there is a big TLAC capital gap among the four G-SIBs, so the replenishment pressure of TLAC capital is enormous. How can we supplement TLAC as soon as possible to meet the requirements in the TLAC Clause? We believe that existing capital replenishment tools can be used to supplement regulatory capital, and debt instruments that are not included in regulatory capital but meet the requirements of TLAC can be issued.

　　7.1. Supplementary regulatory capital within the framework of Basel III

　　The TLAC of commercial banks consists of two parts: one part is the regulatory capital of Basel III, and the other part is the TLAC debt instruments that meet the requirements outside the regulatory capital. Obviously, supplementing the regulatory capital of Basel III can not only improve the capital adequacy ratio, but also improve the TLAC, thus killing two birds with one stone.

　　Compared with tier-one capital, tier-two capital is more convenient to replenish. In 2017 and 2018, China’s commercial banks issued 482.4 billion yuan and 493.7 billion yuan of tier-two debt respectively, which effectively supplemented tier-two capital. For Tier-1 capital, the traditional supplementary methods are mainly to issue common shares, preferred shares and convertible bonds into shares. However, the approval process of these options is long, involving many departments, and may disturb the capital market, so they will be restricted by the regulatory authorities in the issuance process.

　　Perhaps, the perpetual bonds of commercial banks can be a breakthrough to supplement tier-one capital. At the end of January this year, China Bank successfully issued 40 billion yuan of write-down bonds with no fixed term, which is the first issuance of perpetual bonds of Chinese commercial banks in the interbank market. Up to now (July 26th), among the four G-SIBs in China, BOC and ICBC have issued 120 billion yuan of write-down perpetual bonds, and a total of 200 billion yuan of perpetual bonds of BOC, ABC and CCB have passed the shareholders’ meeting and can be issued after obtaining the approval from China Banking and Insurance Regulatory Commission and the People’s Bank of China.

　　In order to issue perpetual bonds smoothly, the People’s Bank of China and China Banking and Insurance Regulatory Commission have also formulated relevant policies. On January 24, the People’s Bank of China decided to create CBS, so that primary dealers in the open market can use the perpetual bonds issued by qualified banks held by them to exchange them for central bank bills. Since then, the People’s Bank of China has launched CBS operation three times on February 20th, June 27th and the end of July to support banks to issue perpetual bonds to replenish capital. In addition, the People’s Bank of China will include the perpetual bank bonds with the subject rating of not less than AA into the eligible collateral of MLF, TMLF, SLF and refinancing. In essence, these two policies use the liquidity creation function of the People’s Bank of China to improve the potential financing ability of perpetual bonds investors, provide liquidity support for the issuance of perpetual bonds and reduce the issuance cost of perpetual bonds. It is worth mentioning that the above two policies introduce positive incentives, which are more sustainable than the traditional negative incentives of administrative orders.

　　7.2. Explore the issuance of bonds to improve TLAC.

　　In addition to using existing tools to supplement regulatory capital, TLAC can also be supplemented by some innovative capital tools. On January 18, 2018, the former China Banking Regulatory Commission, the People’s Bank of China, the China Securities Regulatory Commission, the former China Insurance Regulatory Commission and the Foreign Exchange Bureau jointly issued the Opinions on Further Supporting the Innovation of Capital Instruments of Commercial Banks (Y.J.F. [2018] No.5), proposing to "summarize the practical experience of commercial banks in issuing preferred stocks and write-down tier 2 capital bonds, promote the revision of relevant laws and regulations, study and improve supporting rules, and issue open-ended capital bonds and write-down tier 2 capital bonds for commercial banks. On February 28th, 2018, the People’s Bank of China issued Announcement [2018] No.3 of the People’s Bank of China, encouraging banking financial institutions to issue new capital supplementary bonds with innovative loss absorption mechanisms or triggering events, and clarifying that "banking financial institutions can explore issuing bonds to improve their total loss absorption capacity".

　　In the innovation of TLAC qualified tools, other countries have a lot of experience to learn from. Most banks in the United States meet the regulatory requirements of TLAC by issuing senior bonds by holding companies. For example, JPMorgan disclosed in its annual report that the company has a large number of long-term unsecured debts issued by the parent company to provide maximum flexibility to support the financing needs of banks and non-bank subsidiaries. JPMorgan, the mode of supplementing TLAC by issuing bonds from non-operating holding companies, is the secondary structure mentioned above. In this mode of secondary structure, the excluded liabilities of subsidiaries are paid off first, and the bonds of holding companies play the role of loss absorption.

　　Banks in EU countries tend to use "senior non-priority bonds" to supplement TLAC capital. In order to coordinate the EU’s regulations on the hierarchy of bank creditors and promote the formation of a disposal plan for cross-border institutions, the European Commission finally decided to choose the "French model" as the EU standard in November 2017. The "French model" adds the bond varieties of "Non-Preferred Senior Debts" as qualified TLAC tools in the traditional creditor rank sequence by agreeing on the secondary.

　　The repayment order of senior non-priority bonds is between subordinated debt and senior unsecured debt, which is superior to subordinated debt in grade, but inferior to senior unsecured debt, that is, a new interlayer is added on the basis of the existing debt structure. When issuing senior non-priority bonds, banks in the European Union need to meet the following agreements:

　　1) The original contract term is at least one year;

　　2) Bills cannot be derivatives and cannot contain embedded derivatives;

　　3) The relevant contract documents must clearly stipulate that the repayment order of debts is between subordinated debts and senior unsecured debts.

　　8. Summary

　　The disposal of the contractor bank has also triggered our new thinking: the failure of commercial banks has negative macro-spillover, and in order to prevent systemic risks, the government has to use public funds to provide assistance. Then, is it possible to put forward higher regulatory requirements for banks, so that they can reserve enough internal bail-out funds to absorb losses during the disposal process, instead of relying on external public funds for assistance?

　　In fact, in order to solve the problem of "negative macro spillover", the FSB (Financial Stability Board) has released "Key Elements of Effective Disposal Mechanism of Financial Institutions" at the G20 Cannes Summit in 2011, proposing the goal of "internal bail-out" instead of "external assistance" of public funds when in crisis. In November, 2015, FSB issued the Principles and Clauses of Loss Absorption and Capital Reorganization Ability in the Disposal of G-SIBs (referred to as TLAC Clause), which put forward higher requirements for the loss absorption ability of G-SIBs (global systemically important bank) than Basel III.

　　The above-mentioned "TLAC" is the abbreviation of Total Loss-Absorbing Capacity, which refers to the sum of various capital or debt instruments that can absorb bank losses through write-down or share conversion when G-SIBs enters the disposal procedure, that is, the ability of "internal bail-out". A higher TLAC ensures that banks have sufficient capacity to absorb losses when they enter the disposal procedure, thus reducing the probability that "too big to fail" banks will "fail" in a crisis and cause systemic risks. In addition, the "internal bail-out" model helps to encourage bank shareholders and management to increase risk management and reduce the possibility of excessive risk taking and falling into crisis.

　　Basel III applies to all banks, while the minimum TLAC requirements of FSB apply to G-SIBs. The minimum TLAC requirements include TLAC requirements based on risk-weighted assets and TLAC requirements based on risk-exposed total assets (i.e. leverage ratio). In addition to the above-mentioned mandatory provisions, FSB also put forward the regulatory expectation in the TLAC Clause, that is, it is expected that the standard TLAC debt instruments will account for no less than 33% of the total capital of TLAC. In addition to the requirements of FSB, the regulatory authorities of various countries or regions may put forward additional requirements for banks according to local actual conditions, and the specific standards shall be decided by the local regulatory authorities themselves.

　　The TLAC Clause requires that for banks that become G-SIBs before the end of 2015, the TLAC shall account for no less than 16% of risk-weighted assets and the leverage ratio shall be no less than 6% from January 1, 2019; From January 1, 2022, the above two proportions will be increased to 18% and 6.75% respectively. Considering the actual situation of emerging market countries, FSB gives them a grace period of six years, that is, the time to meet the standards is extended from 2019 and 2022 to 2025 and 2028. However, there is an accelerated condition for this grace period: if the balance of financial and non-financial corporate bonds (excluding policy banks) in emerging market countries accounts for more than 55% of the country’s GDP within five years after the publication of the TLAC Clause, the grace period will be shortened by three years and advanced to 2022 and 2025 respectively.

　　In December 2016, the Federal Reserve finalized the American version of the TLAC rules, which are applicable to the global systemically important bank holding companies (covered BHCs) in the United States and the important intermediate holding companies (covered IHCs) of foreign banks in the United States. The US TLAC rules formulated by the Federal Reserve are obviously stricter than the requirements of the FSB.

　　In the TLAC requirements formulated by the Financial Services Agency of Japan (FSA), it is considered to extend the scope of supervision to some D-SIBs, such as Nomura Holdings, Daiwa Securities, Japan Central Agriculture and Forestry Treasury, and Sumitomo Mitsui Trust Holding Company. In addition, Japan’s TLAC rules have been implemented since March 31, 2019, which is slightly different from January 1, 2019 stipulated by FSB.

　　Similar to the TLAC of FSB, the European Union has put forward the Minimum Requirements for Self-owned Funds and Qualified Liabilities (MREL), which was implemented on January 1, 2016. The difference between MREL and FSB’s minimum TLAC requirements is mainly reflected in the following six points: start-up time, coverage, denominator of indicators, identification standard of qualified debt instruments, unity of standards and deduction items.

　　There is not much time for the TLAC of four G-SIBs in China to reach the standard. In terms of the time limit for TLAC to reach the standard, although China has been granted a grace period of six years, there is a big TLAC capital gap among the four G-SIBs, so the replenishment pressure of TLAC capital is enormous. How can we replenish TLAC capital as soon as possible to meet the requirements in the TLAC Clause? We believe that existing capital replenishment tools can be used to supplement regulatory capital, and innovative debt instruments that are not included in regulatory capital but meet the requirements of TLAC can be issued.

　　The TLAC of commercial banks consists of two parts: one part is the regulatory capital of Basel III, and the other part is the TLAC debt instruments that meet the requirements outside the regulatory capital. Obviously, supplementing the regulatory capital of Basel III can not only improve the capital adequacy ratio, but also improve the TLAC, thus killing two birds with one stone. Perhaps, the perpetual bonds of commercial banks can be a breakthrough to supplement tier-one capital. At the end of January this year, China Bank successfully issued 40 billion yuan of write-down open-ended bonds, and Industrial and Commercial Bank of China also issued 80 billion yuan of open-ended bonds. In order to issue perpetual bonds smoothly, the People’s Bank of China and China Banking and Insurance Regulatory Commission have also formulated relevant policies. For example, the People’s Bank of China has created CBS, and primary dealers can use the perpetual bonds issued by qualified banks held by them to exchange them for central bank bills.

　　In addition to using existing tools to supplement regulatory capital, TLAC can also be supplemented by some innovative capital tools. In the innovation of TLAC qualified tools, other countries have a lot of experience to learn from. Most banks in the United States meet the regulatory requirements of TLAC by issuing senior bonds by holding companies, while banks in EU countries tend to use "senior non-priority bonds" to supplement TLAC capital.

　　9. Risk warning

　　If the standard of qualified TLAC debt instruments applicable to China is not clear for a long time, it will not be conducive to the four G-SIBs to supplement TLAC, and ultimately have a negative impact on the ability of finance to support the real economy. In addition, the centralized issuance of TLAC tools will also test the affordability of the bond market to some extent.

This article first appeared on WeChat WeChat official account: EBS fixed income research. The content of the article belongs to the author’s personal opinion and does not represent Hexun.com’s position. Investors should operate accordingly, at their own risk.

(Editor: Li Jiajia HN153)

QQ Music X Pepsi Campus’s strongest voice sings the desire to witness the birth of the next music star!

On July 14th, Pepsi-Cola and QQ Music, the head music platform of the young trend, successfully held the strongest sound on the 2024 Pepsi campus. With the blessing and influence of QQ music of the leading young audience, the strongest sound on the 2024 Pepsi campus is also regarded as a new starting point for the next ten-year journey of the Pepsi campus brand IP.

There is no limit to music, but desire is possible! The strongest voice of this year’s Pepsi campus is composed of 20 groups of campus singers from 26 competition areas across the country, which successfully entered the finals stage. Among them, powerful artists Ronghao Li, Dylan, Wan Nida, Shan Yichun and Che Che Che presented wonderful interactions and performances for the audience. QQ Music, as the joint producer of the strongest sound in this year’s Pepsi campus, provides all-round resource support and fully empowers young campus musicians to provide a stage to realize their dreams.

When you are young, you must sing your desire loudly, and 20 groups of players will compete at the peak to witness the birth of the strongest voice champion on campus!

The strongest voice of Pepsi campus has been committed to providing a multicultural youth stage for young people, tapping the creativity and possibility of music, and bringing courage and strength to the new generation to challenge themselves. This competition is divided into three parts: releasing the desire for new voices, singing the desire attitude, and dreaming for the peak. The contestants on the scene also showed their wonderful performances. On-site judges gave wonderful comments through the comprehensive performance of the contestants’ stage and typhoon. This time, the top three contestants with the strongest voice in Pepsi campus in 2024 were finally decided, namely champion Zhao Binbin, runner-up Yu Peishan and runner-up Zhang Mai.

Always love, always keep longing! The strongest sound of Pepsi Campus, which has arrived on schedule every year for eleven years, not only creates a stage with different energy and value for young musicians, but also enables countless musical talents to be realized. QQ Music and Pepsi have been working hard to find, excavate, respect and encourage young musicians, release their aspirations, and strive for their own high-light stage in life and realize their own dreams!

Release the young and eager attitude, and the annual music carnival is at this moment!

After the national finals of the strongest sound on Pepsi campus, the music carnival officially started! The singers present this time: Ronghao Li, Wan Nida, Shan Yichun, all made the top charts of QQ music for many times with their hit singles. More importantly, Dylan, the spokesperson of Pepsi, came to the scene to share his eager attitude, and brought surprise interaction with Che Che, the content partner of Pepsi’s strongest original club and one of the judges of this finals.

Shan Yichun set off a chorus with a song "When I miss you, the wind rises" and ignited the atmosphere. Wan Nida’s "MoJiaDai Mogadai" was sung in his hometown Fuzhou dialect, and the unique melody brought everyone to the free world that belongs only to her. Ronghao Li not only sang The Composer this time, but also performed a new song "One Hundred" specially created for Pepsi-Cola brand. He said that he not only wanted to do his best, but also wrote it in the summer, which was a good blessing to all graduates. He hoped that the new generation of musicians could keep their love for music in Do not forget your initiative mind forever.

As a spokesperson for Pepsi, Dylan also came to the scene wearing his own brand D.desirable and Pepsi’s co-branded money. His understanding of "Desire is possible" is that you should be bold when you are young, play bravely, desire comes from love, and as long as you are eager for the future, you can create infinite possibilities. The strongest sound of QQ Music X Pepsi Campus links young people with music, and pours music genes into Pepsi brand culture. The strongest sound of this year’s Pepsi Campus combines the cultural attributes of the young trend of QQ music to jointly help young people release their musical talents and young blood creativity, and resonate with the times.

With music as the carrier, we can ignite our dreams, so that every eager young person can draw a blueprint of their dreams and let their love and creativity continue. Just like the spirit conveyed by Pepsi brand, young people are encouraged to express themselves bravely and find the real meaning and value in their lives.

As the domestic head music platform, QQ Music represents the choice and authority of the music market. Apart from this cooperation with Pepsi, QQ Music also has deep interaction with many partners such as Heineken, Watsons, JD.COM, Mentholatum and Super IP. QQ Music links to more audiences through innovative content experience, conveys more profound cultural connotation and higher social value in music, and helps young people to grow up from growth to fame. At the same time, in the future, QQ Music will join hands with more brands to create more innovative marketing cases.

Disclaimer:


China Entertainment reprints this article for the purpose of transmitting more information, and does not represent the views and positions of this website.


The content of the article is for reference only and does not constitute investment advice. Investors operate accordingly at their own risk.

Putin fully promotes Russian revival

　　


　　　　On December 2, Russian President Vladimir Putin (second from right) came to a polling station in Moscow to prepare for the fifth Russian State Duma election. Xinhua News Agency reporter Shen Bohan photo


　　　　Under the leadership of President Putin, the United Russia Party won the Russian State Duma (lower house of parliament) general election on the 2nd without any doubt, and its vote rate soared from 37% in the last election to over 60% this time. The complete victory of the United Russia Party not only affirmed the "report card" of Putin’s administration, but also laid a solid foundation for continuing the "Putin Plan".


　　Rectify oligarchs and stabilize domestic order


　　　　In Yeltsin’s era, the practices of "oligarchy ruling the country", "shock therapy" and transplanting western democracy plunged Russian society into turmoil. The core of "Putin Plan" is to eliminate unstable factors, restore social order and create favorable conditions for Russia’s development.


　　　　Under Putin’s rectification, the oligarchs who used to control the political and economic lifeline of the country either fled, went to prison, retired or surrendered. Most of their ill-gotten gains were nationalized or redistributed to state-controlled enterprises.


　　　　Economically, Russia entered the world’s trillion-dollar GDP club last year, and its gold foreign exchange reserves jumped to the third place in the world, basically paying off the foreign debts of the Soviet Union. The strong ruble has not only achieved free convertibility, but also embarked on the road of internationalization.


　　　　In addition, in order to reverse the situation that the western democracy introduced by Yeltsin caused disputes between the ruling and opposition parties and conflicts of local interests at home, Putin promoted "controllable democracy". Although this practice displeases the west, it has built a framework for ensuring the stability of the Russian political situation. After gathering the power to appoint the local chief executive, Putin signed a series of laws and regulations aimed at preventing the "color revolution", such as the Law on Non-Governmental Organizations.


　　Attach importance to people’s livelihood and win high support rate


　　　　Another key point of "Putin Plan" is to attach importance to people’s livelihood. Different from the implementation of "shock therapy" and radical privatization in Yeltsin’s era, Putin’s gradual reform is not simply to pursue economic growth figures, but ultimately to benefit the people.


　　　　The data shows that since 2000, the real income of Russians has more than tripled, and the number of poor people has been reduced by half in recent years. Putin also promised to increase the average pension in Russia by 65% in the past two years.


　　　　It is worth mentioning that during Putin’s reign, he had the idea of "doing everything in one battle", and hastily launched the welfare monetization reform plan in January 2005, but it set off a wave of protests that swept the country, and Putin’s support rate fell below 50% for the first time.


　　　　However, in the autumn of the same year, Putin timely put forward four "national priority projects" to develop medical care, education, housing and agriculture, which stabilized the people’s hearts. Putin not only personally supervised, but also made the first deputy prime minister Medvedev specifically responsible for implementation. Last year, the budget of the Russian Federation spent more than 130 billion rubles on "national priority projects". These funds are mainly used to raise teachers’ salaries, purchase teaching equipment for primary and secondary schools, support agricultural production, improve the treatment of medical personnel and speed up the construction of affordable housing. Paying attention to people’s livelihood has also won Putin a return: his support rate has remained at a high level of 60%-70% for a long time.


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"Putin era": everything has just begun
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Procuratorial organs play public interest litigation and administrative procuratorial functions to serve the construction of beautiful China.

Build a harmonious beautiful homeland.

-Procuratorial organs play public interest litigation and administrative procuratorial functions to serve the construction of beautiful China.

"Everything has its own harmony and life, and each has its own cultivation."

In Liaodong Bay, 23 spotted seals were rushed home after being rescued in time by procuratorial organs and multi-departments. On the Qinghai-Tibet Plateau, the procuratorial organs of Qinghai Province continued to carry out special activities to strengthen the public welfare judicial protection of wild yak; From Wanfeng Lake to the Yangtze River, cross-regional law enforcement and judicial linkage along the great rivers and lakes guards the blue waves; New environmental pollution problems such as urban light pollution and air pollution have entered the field of public interest litigation.……

The Opinions of the State Council City, the Central Committee of the Communist Party of China on Promoting the Construction of Beautiful China in an All-round Way recently demanded that "public interest litigation should be improved and judicial protection in the field of ecological environment should be strengthened". In recent years, the procuratorial organs have been guided by the supreme leader’s thought of ecological civilization and the supreme leader’s thought of rule of law, fully performing the functions of public interest litigation and administrative procuratorial work, and have further thought and practice in exploring and better handling the most basic relationship between man and nature.

Focus on solving major cross-regional ecological and environmental problems

On September 22, 2022, some media reporters and prosecutors patrolled the lake together to check the water quality of Wanfeng Lake after treatment.

Over the years, the problem of aquaculture pollution in Wanfeng Lake basin has been puzzling the people along the lake, and it has also been listed as a key issue by the Central Environmental Protection Inspector Group. However, due to the inconsistent law enforcement in three provinces and five counties (districts), it has not been solved from the root for a long time.

The protection of ecological environment and resources has the characteristics of systematicness, integrity and coordination across departments, fields and regions. How to solve cross-regional ecological and environmental problems? In particular, there is insufficient linkage in joint law enforcement and justice in the tributaries, upstream and downstream, and left and right banks of major rivers and lakes, and it is difficult to handle cross-regional cases, which is difficult to trace and has a long cycle. For procuratorial organs, coordinating and solving major cross-regional ecological and environmental problems is a major problem in handling cases.

In view of the fact that the local procuratorial organs can’t solve the basin problems alone, the Supreme People’s Procuratorate chose to face the difficulties and file a case directly, which not only solved the problem of aquaculture pollution, but also led to the rise of ecological fisheries. This is the first public interest litigation case directly filed by the Supreme People’s Procuratorate.

After that, the Supreme People’s Procuratorate also directly filed a case for the ecological damage project in Nansihu Basin and the pollution control project of ships in the Yangtze River. The procuratorates of 11 provinces and cities in the Yangtze River Economic Belt participated in the special case handling in groups, and conducted investigation visits to ports and docks in the Yangtze River Basin, effectively promoting the improvement of facilities for receiving, transshipment and disposal of pollutants from ships in the Yangtze River, improving the closed-loop supervision process for receiving, transshipment and disposal, optimizing charging items and prices, standardizing ship construction, repair and dismantling, and promoting multi-sectoral coordination and basin-wide linkage management.

On August 10th, 2023, the Procuratorate of Qinghai Province and the Procuratorate of Sanjiangyuan Region formed a public interest litigation patrol inspection team, and together with the prosecutor of Maqin County Procuratorate, they came to Animaqing District of the county to carry out the patrol inspection of ecological environment public interest litigation. (data picture)

At the same time, local procuratorial organs have also begun regional cooperation and linkage, giving full play to the advantages of integrated handling of cases by procuratorial organs in the basin. The Qinghai Provincial Procuratorate and the Xizang Autonomous Region Procuratorate signed the Opinions on Establishing a Cross-regional Procuratorial Cooperation Mechanism for the Judicial Protection of Ecological Public Welfare in the Qinghai-Tibet Plateau, actively promoting the high-level protection of the ecological environment and the high-quality economic and social development in the Qinghai-Tibet Plateau; Procuratorial organs in Beijing, Tianjin, Hebei and Shanxi have clearly defined the working objectives of cross-regional procuratorial cooperation and Daqing River basin management, established mechanisms such as clue transfer and collaborative investigation, and built a large collaborative pattern of water ecological environment protection in key river basins.

Actively perform their duties and investigate the liability for compensation for ecological environment damage according to law.

A good ecological environment is the fairest public product and the most inclusive people’s livelihood. Article 1232 of the Civil Code stipulates that if the infringer intentionally pollutes the environment and destroys the ecology in violation of the law, causing serious consequences, the infringed has the right to request corresponding punitive damages.

In handling cases, the procuratorial organs conscientiously implemented the Civil Code and the punitive compensation system for ecological environment damage, leading to the establishment of the concept of "malicious destruction of the environment should be severely punished". In June 2023, the Supreme People’s Procuratorate issued a typical case of peak carbon dioxide emissions’s carbon neutrality in the service guarantee of procuratorial organs. The Procuratorate of Shuyang County, Jiangsu Province supervised and supported the eco-environmental department to carry out a civil public interest lawsuit against a new material company for eco-environmental damage compensation, and promoted the conclusion of an eco-environmental damage compensation agreement: the company paid 2.92 million yuan for eco-environmental restoration and invested no less than 2.91 million yuan to implement three alternative restoration projects.

The handling of such cases will guide the enterprises involved to adopt alternative repair methods, carry out energy-saving and carbon-reducing technological transformation in an orderly manner, realize the synergy of pollution reduction and carbon reduction, promote the green transformation of enterprises in economic development and achieve greater development in the green transformation.

According to the characteristics of different types of cases, the procuratorial organs have adopted the methods of compensation for damages, proliferation and release, replanting and greening, restoration in different places, and labor compensation to urge the ecological restoration work to be done well. Naked carp, commonly known as Huangyu, has almost no scales all over its body. It is a unique aquatic animal in the Qinghai-Tibet Plateau. It is praised by local people as an "elf" in the water and one of the endangered species. In handling related cases, the procuratorial organs in Qinghai adopted the way of proliferation and release to restore the ecology, and explored and promoted the formation of a "low-cost, high-efficiency, diversified" public interest litigation claim mechanism.

The administrative prosecution "supports two companies with one hand", which bears an important responsibility in the service guarantee of ecological environment and resource protection. On June 11, 2023, the Supreme People’s Procuratorate issued a number of typical cases of administrative procuratorial work around the theme of "administrative procuratorial assistance for ecological environment and resource protection". According to reports, in the process of handling these typical cases, the procuratorial organs focused on the problems in ecological environment management and resource protection, such as failing to fulfill the responsibility of mine restoration and management, illegal sewage discharge, illegal occupation and destruction of forest land, idle land and irregular management of land storage and storage, and supervised the fair administration of the court according to law, and promoted the administration of the administrative organs according to law.

Among them, the Henan procuratorate handled the case of a sewage treatment company’s administrative non-litigation execution of procuratorial supervision for excessive discharge of sewage, and the case-handling personnel played the role of "supporting two companies with one hand" in administrative procuratorial work. On the one hand, they supervised the administrative organs to make administrative punishment decisions according to law to prevent enterprises from falling into operational difficulties due to unreasonable fines; On the other hand, it urges sewage treatment enterprises to strictly perform relevant responsibilities, bear the legal consequences of excessive discharge according to law, and realize the organic unity of protecting the ecological environment, optimizing the business environment and ensuring people’s livelihood and interests.

Leverage big data to do a good job in ecological environmental protection procuratorial work

"I can only be’ Lao Lai’, and all the illegal income is used for the reclamation project around Dajieyu Wharf." When the procuratorate of Pingtan Comprehensive Experimental Zone in Fujian Province handled a case of illegally occupying agricultural land and refusing to execute a judgment or ruling, a sentence from the party concerned caught the attention of the prosecutor.

Starting from this clue, the procuratorate combed out a number of clues about illegally occupying the coastline. However, in the face of the long coastline and the severe illegal situation, it is far from enough for prosecutors to find it manually. The Procuratorate of Pingtan Comprehensive Experimental Zone explores the development of supervision model with the help of "big data+artificial intelligence technology", and uses satellite remote sensing geographic information data, government affairs data, etc. to discover the illegal acts of illegal occupation of coastline across regions and the clues of legal supervision problems of administrative organs’ illegal performance or inaction in batches, so as to enlarge and strengthen the "data pool" of legal supervision. Under the authorization of the Fujian Provincial Procuratorate, the Procuratorate of Pingtan Comprehensive Experimental Zone initiated the establishment of an ecological procuratorial cooperation mechanism for Fujian procuratorial organs to protect the coastline, and established a big data application platform for marine public interest litigation centered on Pingtan Comprehensive Experimental Zone and radiating other six coastal cities.

Using big data screening, comparison and collision, all kinds of information have intersection and series connection, and the problem clues can be clearly revealed. Digital prosecution has played an important role in handling more and more public interest litigation cases. In the Nansihu project handled by the Supreme People’s Procuratorate, the task force visited and sorted out 237 clues, and 84 important clues were highly confirmed by the clues quickly identified by the Aerospace Information Innovation Institute of China Academy of Sciences through satellite remote sensing technology.

Ying Yong, Party Secretary and Procurator-General of the Supreme People’s Procuratorate, stressed that the digital procuratorial strategy should be implemented in depth, legal supervision in the new era should be empowered, fairness and justice should be promoted and maintained, and Chinese modernization should be better served by the modernization of procuratorial work. Consciously and effectively use modern scientific and technological means, mobilize the joint efforts of all parties with the power of the rule of law, and promote the modernization of the national governance system and governance capacity. The procuratorial organs implement the requirements of the CPC Central Committee with practical actions, and move forward towards the goal of beautiful environment, rich people and green development.

(Reporter Yan Jingjing)

Porsche Taycan debuts with new battery life and upgraded configuration

Since its inception, with its unique identity, it has undertaken the heavy task of brand electrification transformation. As a fusion of classic and innovative, it not only continues the classic elements of the brand, but also deeply integrates the pure electric platform for positive research and development, becoming the representative of pure electric in the new era.

In 2023, Porsche sold more than 320,000 new cars worldwide, of which the Taycan sold more than 40,000 units, which is enough to prove the important position of the Taycan in the Porsche series and its recognition in the hearts of consumers.

Recently, the new Porsche Taycan with a new upgrade and configuration again, released a total of 7 models, including sports cars and Cross Turismo two body forms, all standard high-performance batteries. The starting price of the new Taycan is more than one million yuan, and the price of the whole series is 100.8-199 8,000 yuan.

The new Taycan has been adjusted in detail in the front face, and the optimization of the air inlet shape has improved the effect, up to a minimum of 0.22. The new style of lamp group design is matched with high definition matrix (HD) technology, and the interior of the headlight is composed of 32,000 LED light sources, which further enhances the lighting effect and safety.

Externally, the new Taycan’s front fenders and flatter headlights visually widen the car’s width, and the Porsche logo in the strip taillights features a three-dimensional glass exterior design and supports lighting, adding a unique welcome/departure animation effect.

In terms of performance, the new Taycan is equipped with new 21-inch tires with lower rolling resistance, which helps to improve battery life. The battery capacity has been increased from 93kWh to 105kWh, and the WLTP range has been increased to a maximum of 693km. At the 800V DC charging station, the maximum charging power of the new car can reach 320kW, which is 145kW higher than before, and the fast charging time is greatly shortened.

In terms of configuration, the new Taycan has been fully upgraded, including sound system, front seat heating, wireless charging + smartphone tray, etc., to improve convenience and comfort. In addition, the configuration of electric charging port cover, adaptive air suspension, rearview mirror rim light has also been upgraded.

In terms of power performance, the new Taycan also spares no effort. Take the Taycan Turbo S as an example, the system can reach a maximum power of 700kW, and the 0-100km/h acceleration time is only 2.4 seconds. The Push-to-Pass (one-click acceleration) function in the Sport Chrono component can output up to 70kW of additional power in 10 seconds.

On the track, the new Taycan also showed its outstanding performance. Equipped with Weissach components, the Taycan Turbo GT with Weissach Package achieved the fastest lap time of 1:27.87 at Laguna Seca Circuit in the United States, becoming the fastest pure electric production car on the track.

Since its launch in 2019, the Porsche Taycan has become a model of performance in the electric sports car industry with its outstanding performance and continuous innovation. The comprehensive upgrade of the new Taycan in terms of performance, battery life and configuration will undoubtedly further consolidate its leading position in the ultra-luxury brand electric sports car. For Taycan owners, "this is still a Porsche" is not only a recognition of its performance, but also a legacy of its brand spirit.

Pangdonglai will spend 4 billion yuan to build super-large commercial assets that will belong to all employees in the future.

On the evening of November 17th, Yu Donglai, the founder of Fat Donglai, gave a live broadcast, which lasted about 2.5 hours and was watched by more than 4 million people. In the live broadcast, Yu Donglai shared the management concept of Fat Donglai, the experience of adjusting Yonghui and BBK, and the attitude of learning from Sam instead of competition.

Wandering stars

When talking about the "City of Freedom" project of Pangdonglai, Yu Donglai introduced that the planned project is a super-large commercial body with a scale of 420,000 square meters, and the investment of the commercial body is estimated to be about 4 billion yuan (excluding supporting hotels). At present, Pangdonglai has 2 billion yuan in hand, and it will start construction when it reaches about 3 billion yuan by the end of next year, so it is a very relaxed investment state.

When talking about the goal of "the city of freedom", Yu Donglai said that he wanted to set an example, as long as the operation was reasonable, if it was done successfully, it would be an asset for all employees from the fat east, if it was not done well, it would be gone, and he had a good attitude.

Wandering stars

Or are you greedy for the car market？ Gree once again made a high-profile car. Can Dong Mingzhu’s dream of making a car succeed？

The domestic automobile market is no longer new for cross-border car-making. In the early years, most of the new power brands started in the Internet industry. In recent years, all walks of life hope to get a share in the automobile market. Not only do people who make mobile phones and color TVs keep pouring into the car circle, but even those who make sweeping robots and engage in real estate development are building cars.

Then, will the brand that makes air conditioners be absent? Of course not. Gree is the representative. Recently, Shanghai Gree Automobile Technology Co., Ltd. was established with a registered capital of 20 million RMB, and its business scope includes automobile parts research and development, automobile parts and accessories manufacturing, industrial robot manufacturing, industrial robot sales, intelligent robot research and development, etc. Obviously, Gree is already paving the way for building a car.

Has Dong Mingzhu learned a lesson from Gree’s second-hand car?

On the surface, Shanghai Gree Automobile Technology Co., Ltd. was established only recently, but in fact this is not the first time Gree has built a car. As early as 2016, Gree Electric was prepared to acquire 100% shares of Zhuhai Yinlong for 13 billion yuan. Although the acquisition was stalled due to the opposition of Gree shareholders, it also opened the prelude to Dong Mingzhu’s intention to build a car.

In desperation, Dong Mingzhu invested 1 billion yuan in his own name to acquire the shares of Zhuhai Yinlong, and after repeated capital increase, Dong Mingzhu’s shareholding ratio increased to 17.46%, which made Dong Mingzhu realize his dream of building a car. But after all, investment acquisition is only the beginning of the dream of building a car. If you want to survive in the automobile market, you must come up with satisfactory products.

From the product point of view, Guangtong, the first model after Dong Mingzhu’s shareholding in Zhuhai Yinlong, has been listed in 2017, and the voice of doubt is not small, not only the longest battery life is only 200km, but even the top speed is only 120km/h, so it is naturally difficult to measure the product strength without bright spots. Although the second model, Yinlong Effie, has increased its battery life to 450km, the price of over 400,000 yuan has also been directly taught by the market.

In the days to come, Yinlong Automobile was also in constant trouble. Even in 2018, it was exposed to negative news such as arrears in supplier payment and arrears in employee wages. In 2019, Gree intended to cooperate with Weimar to change the status quo of Yinlong Automobile, but soon Weimar went bankrupt and there was no following. In the end, Yinlong Automobile was renamed as "Gree Titanium" in 2021. In 2023, Gree Electric increased its shareholding in Gree Titanium to 72.47%, which was managed by Dong Mingzhu himself.

All of the above shows that Dong Mingzhu doesn’t know much about the automobile market, and building a car is far from as simple as Dong Mingzhu imagined. With the establishment of Shanghai Gree Automobile Technology Co., Ltd., the second car-making in Dong Mingzhu started. Behind this is not only Dong Mingzhu’s obsession with the dream of making cars, but also the huge profits in the automobile market, otherwise there would not be so many people trying to squeeze into the automobile market. However, has Dong Mingzhu learned the lesson of Yinlong’s failure?

It is not easy to build a car, and Dong Mingzhu’s dream of building a car will fail again

There is no denying that Gree is a leading enterprise in the air-conditioning industry, and its sales volume and influence are hard to match with those of its friends. Dong Mingzhu, who pushed Gree to the top with one hand, is naturally proud of making cars. He once bombarded domestic cars in public, but when he built them himself, he found that making cars was far from as simple as he thought.

Why did Yinlong fail? In fact, the technology is still too bad, and at the same time, Dong Mingzhu himself is arrogant, pulling the pricing of Yinlong’s products to a height that does not belong to it. What’s more, the models of Yinlong Automobile are "knockoffs" from any angle, but they are higher than the genuine ones in price. Is it because the Logo of Yinlong Automobile uses five rings more than the four rings of Audi?

If Dong Mingzhu paid attention to product building and technology research and development when it first built a car in 2016, perhaps the dream of building a car had already come true. But now it’s 2024. Can dreams that were not realized eight years ago be realized now? Compared with eight years ago, the involution of the current automobile market is completely out of one dimension. Except Xiaomi, the new power brands established in the past two years have failed to make waves without exception.

For the new power brands, there are actually only two ways to go, either relying on traditional automobile manufacturers, such as Deep Blue Automobile, Extreme Krypton Automobile and Intimate Automobile, and relying on traditional manufacturers such as Chang ‘an, Geely and SAIC respectively. There is neither a lack of technology nor a lack of R&D funds, and at the same time, brand awareness can be established. The other way is to become popular by marketing, just like Xiaomi Automobile, but the premise behind marketing is that the competitiveness of the product itself is not bad, and the quality cannot be too flawed. The most important thing is that the founder must be as influential as Lei Jun.

It’s a pity that there seems to be some gap between Dong Mingzhu and Lei Jun now, and Dong Mingzhu is not satisfactory in both personality charm and rigor in making cars. In addition, although Dong Mingzhu and Gree have 8 years of experience in building cars, they can hardly come up with the core technology. The only advantage may be car air conditioning. After all, this is Gree’s housekeeping skill.

Write at the end:

In the field of air-conditioning, Dong Mingzhu is undoubtedly successful, but the profit and development potential of the air-conditioning market are limited after all, so Dong Mingzhu hopes to enter more industries. However, judging from the results, almost all cross-border ventures in Dong Mingzhu have ended in failure, and both the former Gree mobile phone and the current Gree Titanium car have become jokes in the circle. So, do you think Dong Mingzhu’s dream of building a second car can come true?

Oil leakage from the valve cover is harmful, so don’t ignore it.

As we all know, the valve cover is usually located at the top of the engine, and the oil filler, ignition coil and other components are installed with it. With the increasing integration of the engine, the responsibilities of the valve cover are increasing.

Therefore, if the valve cover fails, it will seriously affect the running state of the engine.

01

Fault case: air conditioning odor caused by aging of valve cover

A limousine entered the repair shop, and the owner complained that the air from the air conditioner smelled burnt. Maintenance personnel try air conditioning, and they can smell obvious odor during external circulation, but there is almost no odor during internal circulation. Open the engine compartment and look carefully. It is found that the oil drips on the high-temperature engine parts, releasing the burnt smell, and then being sucked into the car from the air inlet of the air conditioner.

Air conditioning outlet smells bad.

Following the trace of oil leakage, the source of oil leakage was found, which was that the valve cover was aging and cracked, resulting in oil leakage. Replace the valve cover assembly, clean up the leaked oil, and after replacing the air conditioner filter, the air conditioner odor disappears and the fault is eliminated.

Aging valve cover

The source of the above faults is the aging of valve cover and oil leakage. However, the consequence of aging of this part is not only the phenomenon of air conditioning odor.

02

The valve cover is abnormal, and there are various problems.

The engine is developing in the direction of light weight and miniaturization, and many independent components in the past have begun to merge with each other and integrate into one. For this reason, in the valve cover of today’s mainstream models, seals, valves, oil mist separators, etc. are generally integrated to form an assembly.

Obviously, when the valve cover fails, its impact will be various. The following are some common phenomena:

Seal failure: Oil leaks out of the engine, resulting in oil consumption.

Increase of sludge: oil leaks into the cylinder head, camshaft and valve contact with too much oil, and sludge increases, which affects the action.

Carbon deposit in the cylinder: the oil enters the spark plug hole, which affects the spark plug flashover and forms carbon deposit in the cylinder.

Harness damage: oozing oil will flow along the harness and cause poor contact of the connector.

03

Possible causes of valve cover damage

Natural aging is one of the reasons, and the failure of some other systems on the engine will also lead to the damage or performance degradation of the valve cover.

The first is the temperature. There are many engineering plastics and rubber products in the valve cover. If the engine runs at high temperature for a long time, these parts will age rapidly.

Seal on valve cover

The second is stress. If the crankcase is not well ventilated, the internal pressure of the engine will increase, which will bring additional load to the seal and make it more prone to fatigue.

In addition, human factors can not be ignored. When installing the valve cover, the bolts must be tightened in strict accordance with the order indicated by the technical data of the main engine factory, otherwise the sealing may be lax and repair may be brought.

Article source: Mahler after-sales

Nirvana Rebirth, Ten-year Memorabilia of Buick Excelle

　　3G Guide: The new Excelle will inherit the elements and concepts of Buick’s new family design, and will bring more humanized, comfortable and convenient technology configuration.

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　　The brand-new Buick Excelle is scheduled to go on sale on February 1st, 2013. Since its listing in 2003, this evergreen tree has been setting new records in the mid-level car market, not only setting a new standard in the mid-level car market with its outstanding styling design and comfortable space, leading efficient power and chassis technology, and caring Buick service, but also becoming a reliable partner in the career and life of 1.8 million car owners within 10 years. Success is definitely not accidental, especially in the most competitive mid-level car market. It can be said that the road to the king of Buick Excelle comes from the continuous accumulation and lasting breakthrough. Now let’s review the important course of the king of mid-level cars in the past ten years!

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　　April 2003

　　The first "global car" in the mid-level car market — — Buick Excelle released. It shocked the whole market segment with its outstanding advantages such as fashionable appearance, comfortable and spacious space, luxurious human configuration and high efficiency and strong power, and at the same time completely refreshed the value benchmark and technical standard of mid-level cars, and prompted the family car market to start a far-reaching reshuffle.

　　In the first month of listing, the sales volume of Buick Excelle exceeded 7,500 units, and in November of the same year, the monthly sales volume of new cars broke 10,000 records, winning the title of "model of the year" in that year, and it stood out in the same market, and was hailed as the "new three" leader in the mid-level car market.

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　　September 2004

　　On the occasion of Buick Excelle’s sales reaching 100,000 vehicles a year, in order to better carry forward Excelle’s spirit of "all-out and enterprising" and express its concern and support for China’s sports cause, Shanghai General Motors, as a partner of the Chinese Olympic Committee, presented Excelle with a 1.6L luxury sedan to five athletes who made a major and historic breakthrough in the traditional strengths of China and China in the 2004 Olympic Games.

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　　October 2004

　　The intermediate hatchback Buick Excelle HRV was released, advocating a Healthy, Recreational and energetic lifestyle. It defines the new hatchback with five-door hatchback dynamic modeling, ample flexibility, fashionable interior and efficient power, creating a new pattern of hatchback market segments in China, and it is also an important step in the process of completeness and diversification of Excelle and Buick cars.

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　　November 2004

　　One year after Excelle went on the market, according to the feedback from consumers, the shift mechanism of manual gearbox equipped with 1.6L engine was refined and improved, which made the driver feel more accurate and smooth in shifting. At the same time, the management module of the 1.8L engine was re-adjusted, which reduced the fuel consumption by 10% and improved the acceleration performance by 0.3 seconds. In addition, two humanized and convenient functions are added: the warning display of trunk opening at the back of dashboard and the luminous lighting display of electric lifting window button.

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　　May 2005

　　The Excelle automatic transmission model is replaced with the AF20 automatic gearbox with the advanced function of "intelligent switching neutral", which not only reduces the fuel consumption of the vehicle under comprehensive working conditions by 6%, improves the fuel economy, but also shortens the acceleration time from 0 to 100 km/h by one second and prolongs the service life of the gearbox. In September of the same year, Excelle’s engine control module was re-optimized, further improving fuel economy. In the same year, Excelle also added a shock absorber to the drive shaft to reduce vehicle vibration and noise.

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　　November 2005

　　At the Guangzhou International Auto Show in 2005, Excelle Station wagon appeared, creating a brand-new "modern family station wagon" market segment, filling a gap in the domestic mainstream intermediate family car market, and bringing consumers more comprehensive and personalized choices. Excelle station wagon is another important measure in the process of completeness and diversification of Buick car series after the introduction of hatchback HRV, so Buick Excelle became the most complete car sub-brand under the single car series in China at that time.

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　　December 2005

　　Buick Excelle was awarded the "Best Intermediate Car of the Year in China in 2005" award. In the mid-level car market where there are many new cars and fierce competition, Buick Excelle once again shows its strong comprehensive competitiveness with its excellent cost performance, fashionable design, abundant interior space, rich interior configuration and high-level "Buick Care" after-sales service.

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　　In 2006

　　Buick Excelle launched a new model in 2006, and installed a reversing radar, which provided great convenience for parking berths. Excelle 1.8LS-AT automatic transmission top version has added a fixed speed cruise device. At the same time, in order to meet the needs of users who pursue strong power and manual control, a comfortable version of the sedan Excelle 1.8MT-LE manual transmission is newly launched. In addition, Excelle put on "green running shoes" and equipped with new "green tires" with environmental protection and low pollution. The new formula can reduce the rolling resistance of green tire, and enhance the wet grip, tear strength and tread impact resistance. After testing, green tires can reduce the braking distance on wet ice surface by 15%, improve the driving performance in winter by 10% to 15%, and reduce fuel consumption by 5%. This alone makes Excelle take a big step towards giving consideration to excellent performance and environmental protection.

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　　In 2007

　　Buick Excelle has once again completed important overall technical improvements, including improving the braking system and strengthening the body structure, thus enhancing safety; Improve the air conditioning performance of vehicles, so that the air output is larger, the refrigeration performance is better, and the comfort of vehicles is improved; At the end of the year, all the engines that have been newly adjusted have achieved Euro 4 emission ahead of schedule, which is more environmentally friendly. In many other configuration details, Excelle is also constantly moving. For example, adding the instrument that car owners are accustomed to now shows the warning of trunk opening, the luminous lighting shows the lifting button of electric window, and the comfortable version comes standard with skylight, etc. Even as small as the door handle, according to the feedback from the market, it is changed from the pull-up type to the grip type. In the same year, the Buick Excelle station wagon was launched in version 1.6L. The new model is equipped with the same 1.6L Twin-Tec high-efficiency and energy-saving engine as the Excelle sedan. With rich and complete humanized comfort configuration and safety equipment, it provides more affordable choices for consumers who like to travel and pursue free fashion.

　　April 2008

　　08 New Excelle goes on the market. The 2008 new Excelle not only updated the exterior interior and configuration, but also recalibrated the engine and completely adjusted the chassis, which not only maintained the advantages of Excelle, but also highlighted the high-tech, modern and international product design DNA of Buick family. 08 New Excelle has begun to reflect the genetic characteristics of Buick’s future products from the exterior to the interior, and its luxurious configuration and readjusted chassis have also brought about the improvement of grade and quality.

　　October 2008

　　Buick, as the main sponsor brand of China National Gymnastics Team, wholeheartedly encourages China Gymnastics Team to achieve good results in this Beijing Olympic Games. At that time, Yang Wei and Zou Kai, Olympic champions of the national gymnastics team, were awarded honorary owner certificates of Buick New Excelle Champion Edition and new car keys, and they became honorary owners of the "Champion Edition" New Excelle.

　　October 2009

　　Buick Excelle has accumulated more than 1,000,000 vehicles, and officially entered the "Million Club" in China, becoming the youngest honorary member of the models with accumulated sales exceeding one million in the domestic automobile market. It took only six years to reach this height, which once again set a new record in the domestic car market and perfectly interpreted the legend of the classic "king of intermediate family cars".

　　May 2010

　　In the selection of "China mainstream family car reliability survey", Buick Excelle ranked first in the reliability of joint venture products with the lowest failure rate, which not only confirmed Buick Excelle’s consistently excellent product quality and quality, but also reflected Excelle’s confidence as the "king of intermediate family cars" and an evergreen tree in the market.

　　October 2010

　　The 2011 Excelle with built-in double-layer electric sunroof went on the market, becoming the only joint venture brand model with sunroof below 100,000 yuan. At the same time, the engine power of the 2011 Excelle has been re-calibrated, achieving the maximum power of 81 kW/6000rpm and the maximum torque of 146 Nm /3600rpm. While improving the power, the fuel consumption of all Excelle models has also been reduced by nearly 4% through the optimization of the variable speed shifting mechanism.

　　In 2011

　　Buick Excelle sold 253,514 vehicles throughout the year, up 14% year-on-year, and won the annual single-vehicle sales ranking, and set a new record for the annual single-vehicle sales in China.

　　In 2012

　　Excelle’s total sales in 10 years exceeded 1.8 million vehicles, and its annual sales in 2012 exceeded 277,000 vehicles, ranking first in domestic sales of single vehicle.

　　February 2013

　　The new Buick Excelle will be launched on February 1st. The new Excelle will be equipped with the latest small-displacement high-tech engine of Shanghai General Motors — — 1.5L DVVT inline four-cylinder engine, with a new generation of 6-speed automatic manual transmission and 5-speed manual transmission, has achieved comprehensive improvement in fuel consumption, power performance and silence. In addition, the new Excelle will inherit the elements and concepts of Buick’s new generation family design, and will bring more humanized, comfortable and convenient technology configuration.

New Hatred and Old Hatred： A Historical Review of the Conflict between Georgia and Russia


　　On August 9, 2008, the conflict in Georgia escalated. This TV photo taken on August 8 shows that Russian troops are heading for Tskhinvali, the capital of South Ossetia, Georgia. From the evening of the 7th to the morning of the 8th, there was another armed conflict between Georgian army and armed personnel of South Ossetia Autonomous Prefecture near Tskhinvali. Russian TV reported earlier on the 8th that Russian troops and tanks entered South Ossetia on the same day. On the evening of the 8th, Georgian President Saakashvili delivered a televised speech to the people, saying that Georgian troops had completely controlled Tskhinvali, the capital of South Ossetia. Xinhua News Agency/AFP


　　For more than a decade, the tense crisis between the two countries has occurred from time to time. However, every time I saw "dark clouds gathering", "rain" did not come down.


　　Since the disintegration of the Soviet Union, the contradictions, conflicts and confrontations between Russia and Georgia, two newly born countries, have almost never stopped, and there is an increasingly tense trend. From April to May, 2008, because the Georgian unmanned reconnaissance plane was shot down by the Abkhaz military in China, the government became furious and began to station a large number of troops in areas adjacent to Abkhazia, while Russia increased its peacekeeping forces to Abkhazia, claiming to severely respond to the possible aggression by Georgia. The two sides are so tense that some people describe the crisis situation of Russia-Georgia relations as "near the state of war" For more than a decade, similar situations have often occurred between the two countries. However, every time I saw "dark clouds gathering", "rain" did not come down.


　　The basic background of the relationship between the two countries


　　The Caucasus Mountains straddle the Black Sea and Caspian Sea from northwest to southeast, forming a part of the dividing line between Europe and Asia. The relationship between nations and countries on the north and south sides of the mountain range is complex and special. The northern part of the Caucasus Mountains is called the Inner Caucasus or the North Caucasus, and now it belongs to the southern region of Russia. There are North Ossetia-Alain Autonomous Republic and Ingushetia Republic, which have good relations with the Russian central government, Chechen Republic, which once had bad relations with the Russian central government, and Caraccia I-Celka Republic, Kabardino-Balkar Republic and Dagestan Republic. The south of the Caucasus is called Transcaucasia, also called South Caucasus, and there are three countries-Georgia with Orthodox Christianity as the main belief, Armenia with traditional Christianity as the main belief, and Azerbaijan with Islam and close ties with Iran. The Caucasus Mountains divide Eurasia into two parts, and it is also divided into two parts by different nationalities and countries, torn by different civilizations, different nationalities and different powers.


　　One is Abkhazia, which has close ties with Russia.


　　Among the three countries in Transcaucasia, Georgia has the most tense relationship with Russia. Georgia is a small country, with a land area of 0.41% of that of Russia. At the beginning of 2006, the total population was 3.1% of that of Russia. Why is the relationship between two countries with such a huge difference in size tense? There are undoubtedly many reasons, among which the most direct one is that Abkhazia and South Ossetia in Georgia are too close to Russia.


　　Abkhazia is an autonomous Republic of Georgia, located on the Black Sea in northwest Georgia. Its capital is the coastal city of Sukhumi, which is very close to Sochi, a health resort in southern Russia. During the Soviet period, Stalin and other leaders built villas in Sochi. Economically, Sukhumi was the main producing area of tea and citrus in czarist Russia and Soviet Union. Abkhazia and the Black Sea coastal areas in southwestern Russia belong to a regional economic circle. In addition, Abkhazians converted to Christianity as early as the 6th century A.D., and were influenced by Islam after the rise of the Ottoman Empire in the 11th century, which made them closer to the North Caucasians in history, language and culture. Abkhazia’s economic and cultural exchanges with Russia are far closer than those with Tbilisi, the center of Georgia in the mountains. Because Abkhazians have a long-term pro-Russian tendency, Georgia often adopts repressive policies against them in language, culture and ethnic policies. Shortly after the disintegration of the Soviet Union and the independence of Georgia, Abkhazia also declared its independence in July 1992, and the Georgian central authorities sent troops to station, which triggered an armed conflict that lasted for more than a year, causing tens of thousands of casualties and half of the residents fleeing their hometowns. Under the mediation of Russia and the international community, the two parties to the conflict signed a ceasefire agreement in Moscow in May 1994. According to this agreement, Russian troops entered Abkhazia in the name of the CIS peacekeeping force. Since then, Russia has strengthened its ties with Abkhazia in various ways, such as simplifying the procedures for Abkhazians to join Russian nationality and reopening the railway to Sukhumi.Georgia imposed an economic blockade and embargo on Abkhazia. To this day, it is still the arena between Russia and Georgia.


　　One is South Ossetia, which has a love affair with Russia.


　　The close relationship between Ossetia and Russia is different from that in Abkhazia. Ossetia is divided into north and south. During the Soviet period, North Ossetia was originally only a district belonging to the Gore Autonomous Republic, but its status continued to improve, and it was upgraded to an autonomous prefecture and an autonomous Republic in 1924 and 1936. After the disintegration of the Soviet Union, North Ossetia was upgraded to a republic of the Russian Federation.


　　South Ossetia is far behind its northern brothers in status. During the Soviet Union, although South Ossetia had autonomous status, it was only an autonomous prefecture of Georgia in administrative division. After Georgia’s independence, it is still an autonomous prefecture. Therefore, South Ossetia has always sought an independent status on an equal footing with Georgia and is not subject to the jurisdiction of the Georgian central government. As early as 1989, South Ossetia had an open conflict with the Georgian government, which lasted until the summer of 1992, causing a large number of casualties. In the meantime, South Ossetia not only declared its independence by referendum in January 1990, but also proposed to merge with the Russian Republic of North Ossetia. In June 1992, Russia, Georgia, South Ossetia and North Ossetia held talks on the peaceful settlement of armed conflicts and reached an agreement on a ceasefire, the establishment of a peacekeeping force and a supervisory committee. In July, a 1,500-member peacekeeping force composed of Russia, Georgia and South Ossetia established a security corridor on the border between South Ossetia and Georgia, which actually separated South Ossetia from Georgia. Considering the complicated international relations, Russia has neither recognized the independence of South Ossetia nor supported its merger with North Ossetia, but it has maintained close ties with it in secret. For example, most South Ossetians hold Russian passports, and rubles are widely circulated in the local area. In recent ten years, due to South Ossetia’s secret love for Russia, Russia and Georgia have not only quarreled, but sometimes even threatened each other with force.


　　There are also historical grievances.


　　In addition to the conflict of interests between Abkhazia and South Ossetia, there are historical reasons why the relationship between Russia and Georgia is difficult to straighten out. The relationship between them is extraordinary, and some scholars use the term "once brothers" and today’s "enemies" to describe them. Georgians established their own country earlier than Russia. However, in the first half of the 19th century, the Georgian country was annexed by Tsarist Russia. After the October Revolution, Georgia once declared its independence, but it was soon occupied by the Soviet Red Army. In February 1921, Georgia established the Soviet Socialist Republic, joined the Transcaucasian Soviet Socialist Federal Republic in March 1922, and joined the Soviet Union as a federal member at the end of the same year. In December 1936, Georgia was upgraded to a republic directly under the Soviet Union. Many important Soviet leaders, including Stalin, came from Georgia. Georgia was conquered in czarist Russia and subordinate in Soviet Union, but Georgians always have a lingering feeling of independence. Therefore, before the disintegration of the Soviet Union, Georgia issued a declaration of independence on November 4, 1990 and changed its name to "Republic of Georgia", and officially declared its independence on April 9, 1991. In order to erase the shadow of the past, the new constitution adopted by Georgia in August 1995 named the country "Georgia". After independence, Georgia actively approached the west.


　　Another big country’s gambling table.


　　There are also broader national factors that affect Russia-Georgia relations, that is, Georgia is actually a "gambling disk" for the game between western powers and Russia. Georgia is a small country, but geopolitics is very important. Western countries regard it as a base to squeeze and contain Russia’s strategic space from the south, while Russia, which has lost its traditional spheres of influence such as Central and Eastern Europe, the Balkans and the Baltic Sea, will certainly not easily let the wishful thinking of the West succeed. The great power struggle is reflected in Georgia, that is, the endless political struggle between pro-Russian and pro-Western factions. Behind the so-called "color revolution" in 2003 and the large-scale anti-government demonstrations in 2007, we can see the shadow of western countries and Russia. In order to squeeze out Russia, after two rounds of eastward expansion in 1997 and 2002, NATO began to brew a third round of eastward expansion this year. One of its main targets is Georgia, and nearly 73% of the people in Georgia want to join NATO. If Georgia and Ukraine join in again, NATO will push its forward position to the southwest and south of Russia, and form an encirclement trend in the southwest. Russia is deeply affected by the crisis, and its reaction is relatively strong, and it is considered as a "dangerous signal". Therefore, it not only shows its strength by resuming the routine combat duty flights of long-range strategic bombers over the Atlantic Ocean, the Arctic Ocean, the Pacific Ocean, the Black Sea and the Arctic region, but also threatens NATO and Georgia by increasing peacekeeping troops to Abkhazia and supporting the independence of South Ossetia. Now it seems that,Neither NATO nor Russia will give in, the game will continue, and Georgia’s relations with Russia will be even more difficult to get along with in the situation of internal and external troubles.


　　At present, it seems that it is difficult for Russia-Georgia relations to be fundamentally improved for a while, but it is unlikely that they will completely break down and all-out war will break out. Georgia has close economic ties with Russia, especially in the supply of basic energy such as electricity, oil and natural gas. Russia is now seeking to join the WTO, and Georgia is already a member of the organization. Russia can’t help but care. The situation in Transcaucasia is more complicated, and the relationship between major powers reflected here is also very complicated. For their own security and interests, Russia, western powers and Georgia will not act simply, and the disharmony between Russia and Georgia will continue.

Editor: Bo Du

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