(Bloomberg) -- In the past 18 months, no group has issued more of the controversial additional Tier 1 bonds than Chinese banks. 

State-owned lenders sold about $42 billion worth of AT1 notes, the riskiest type of bank debt, to onshore investors, Bloomberg Intelligence analysts Pri de Silva and Adrian Sim said in a recent note. Crucially, the funding has been used to reduce exposure to dollar debt and refinance at cheaper rates, redeeming almost $9 billion offshore AT1s at the same time.

As investors fret over the future of this kind of debt after the complete wipeout of Credit Suisse Group AG’s AT1 notes, the world’s busiest market for the securities is drawing little scrutiny. A rally in Chinese bank stocks and subdued moves in the country’s credit market point to Beijing’s relative success in ring fencing its financial system.

Tensions with the US and waning foreign demand for Chinese assets have accelerated the shift toward self-reliance and a retreat to domestic markets. Companies are choosing to fund themselves by selling equity and debt onshore, where the government exerts more control. That’s helped shield Chinese markets from intensifying global volatility, as I wrote here. 

State dominance aligns regulators, shareholders and banks while increasing the likelihood of government intervention to fix problems early. It would take a worst-case scenario — like a sovereign debt crisis — to trigger a complete writedown of AT1 notes in emerging markets such as China, Citigroup Inc. analysts wrote in a March 23 note.

Here’s my roundup of the week’s key developments for China markets. 

Evergrande’s fate

What will happen to China Evergrande Group’s pile of debt? We may soon get a resolution. The developer at the center of China’s property crisis laid out details of a multi-billion dollar restructuring plan to avoid liquidation. The proposal is “better than nothing” but far from perfect, said one analyst.

  • Evergrande Creditors Still Face ‘Big Process’ on Restructuring
  • China Evergrande Will Swap Defaulted Debt in Court Restructuring

A long wait

Beijing finally approved its first homegrown messenger RNA vaccine for Covid-19, years after the technology became commonplace all over the world. President Xi Jinping’s government, which has long touted its self-reliance in defeating Covid, preferred to wait for a domestic shot over importing foreign vaccines.

  • China Approves First mRNA Vaccine After Covid Wave Ebbs

Tencent endorsement

Tencent Holdings Ltd.’s shares surged when the company welcomed a local party chief to its offices — a sign of official endorsement. Traders also cited unsubstantiated talk that newly installed Premier Li Qiang toured the Chinese social media leader’s headquarters.

  • Tencent Soars as Traders Cite Unfounded Talk of Official’s Visit
  • Tencent Resumes Slim Growth as China’s Internet Sector Stirs

‘Malicious’ apps

Google suspended a popular Chinese shopping app after discovering malware in unsanctioned versions of the software. Pinduoduo is more commonly downloaded via domestic platforms as Google isn’t available in China. It is used by more than 700 million shoppers every month.

  • Google Halts PDD App After Finding Malware in Some Versions

Xi and Putin

Xi touted the close relationship between China and Russia in his visit to Moscow while agreeing that “responsible dialog” is the solution to the war in Ukraine. He invited his Russian counterpart Vladimir Putin to make a return visit to China later this year, something Kremlin officials said was a possibility.

  • After Talks With Xi, Putin Hails China’s Proposals for Ukraine
  • Xi Aligns With Putin Against US, But Hesitates on Gas Deal

Washington’s hawks

TikTok CEO Shou Chew faced a distrustful US Congress, where lawmakers remain convinced that the Chinese-owned video app is vulnerable to interference from Beijing. At stake is the company’s presence in the US — an incredibly lucrative market.

  • TikTok CEO’s Careful Testimony Got Him No Closer to a Resolution
  • China Hawks Dine on Seared Branzino and Lament Threat to US

... and three things to watch for next week

  • A slew of earnings released from state-controlled firms, with the so-called Big Four banks and oil giants set to report. BYD Co. and Kuaishou Technology are also up.
  • This month’s services and manufacturing PMIs are due March 31. A better-than-expected February reading triggered a significant rally in Chinese stocks earlier this month.
  • The MSCI China Index is outperforming the S&P 500 this quarter — just about. If this happens, it will be the first time in two years that Chinese stocks are a better bet that their US counterparts for back-to-back quarters.

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