For­eign banks will need niche to pros­per in FTZ

Lib­er­al­iza­tion poli­cies are cre­at­ing op­por­tu­ni­ties for over­seas fi­nan­cial in­sti­tu­tions and their clients, re­ports Wu Yiyao from Shang­hai

China Daily (Canada) - - BUSINESS -

Since the China (Shang­hai) Pi­lot Free Trade Zone was launched in Septem­ber, there’s been an in­creas­ing num­ber of bank open­ing cer­e­monies, and ex­ec­u­tives of for­eign banks said that as more de­tailed guide­lines are re­leased, busi­ness has been pick­ing up.

Since March 1, there’s been no in­ter­est rate ceil­ing on for­eign cur­rency de­posits of up to $500,000, whether held by com­pa­nies or in­di­vid­u­als.

And ac­cord­ing to the People’s Bank of China, com­pa­nies based in the zone may bor­row off­shore yuan.

There’s cer­tainly plenty of com­pe­ti­tion, bankers said, but with the vast de­mand in the zone, lenders should be able to find a mar­ket niche.

“I think there’s am­ple mar­ket de­mand in the zone, and each player may have its own strengths. Com­pe­ti­tion is good for clients, and we are look­ing for a win-win-win sit­u­a­tion for lenders, clients and themar­ket,” said Andrew Au, chief ex­ec­u­tive of­fi­cer of Citi China and chair­man of Citibank (China) Co Ltd.

Un­like branches ofChi­nese lenders in the FTZ, for­eign banks’ fa­cil­i­ties are less crowded. In­deed, some are es­sen­tially de­serted.

“It’s not that we have less busi­ness than Chi­nese lenders; it’s sim­ply be­cause for­eign banks may at­tach more im­por­tance to cor­po­rate fi­nance, a busi­ness that clients can­doover­theIn­ter­net. There is less on-site, face-to-face con­tact,” saidanem­ployee at a for­eign bank out­let in the FTZ.

For­eign banks are prob­a­bly eye­ing the ex­pand­ing trade that will be con­ducted through the FTZ. Those trans­ac­tions will in­crease de­mand for cross-bor­der fi­nanc­ing, said Jimmy Le­ung, a bank­ing specialist at Price­wa­ter­house­Coop­ers.

Ac­cess to global net­works will help for­eign banks lever­age their FTZ pres­ence to forge links be­tween the zone and for­eign mar­kets, help­ing clients cap­ture new growth op­por­tu­ni­ties, bankers said.

The FTZ is a mile­stone in China’s ef­forts to build an in­ter­na­tional fi­nan­cial cen­ter in Shang­hai and re­form the econ­omy for longer-term vi­a­bil­ity, said Neil Ge, DBS Bank (China) Ltd’s chief ex­ec­u­tive of­fi­cer.

“As a leading bank in Asia, DBS is com­mit­ted to lev­er­ag­ing our strong Asian con­nec­tiv­ity and in­sights from Sin­ga­pore and Hong Kong to fully sup­port the de­vel­op­ment of the zone,” said Ge.

In­no­va­tive cross-bor­der yuan businesses have been cre­ated, in­clud­ing cross-bor­der yuan cash pool­ing and cen­tral­ized cross-bor­der trans­ac­tions in the yuan.

These so­lu­tions mark an­other mile­stone in the de­vel­op­ment of the zone’s fi­nan­cial ser­vices in­dus­try. Banks in­clud­ing Citibank and HSBC Hold­ings Plc are of­fer­ing such ser­vices.

En­ter­prises within the zone have ben­e­fited from these fi­nan­cial in­no­va­tions. Saint-Gobain SA is among the first group of multi­na­tional cor­po­ra­tions to im­ple­ment some of these so­lu­tions in the FTZ, ac­cord­ing to HSBC.

Saint-Gobain makes and dis­trib­utes build­ing ma­te­ri­als. It also has op­er­a­tions in en­ergy con­ser­va­tion and en­vi­ron­men­tal pro­tec­tion.

Since en­ter­ing China in 1985, Sain­tGobain has in­vested more than 2 bil­lion eu­ros ($2.79 bil­lion) in the mar­ket.

Us­ing a sub­sidiary in the FTZ, the com­pany can cen­tral­ize pay­ments and col­lec­tions for mer­chan­dise and ser­vices trade set­tle­ment, along with other cur­rent ac­count items, thus im­prov­ing the use of ren­minbi set­tle­ments within the group.

It’s also been able man­age­ment more Asia.

Cen­tral­ized pay­ments and col­lec­tions are ef­fi­cient cash man­age­ment so­lu­tions for multi­na­tional com­pa­nies, which need to man­age ac­counts payable and re­ceiv­able among­many sub­sidiaries, bankers noted.

Reg­u­la­tions in the FTZ en­able such com­pa­nies to con­sol­i­date and off­set ac­counts payable and re­ceiv­able in a sin­gle transatrans­ac­tion. to make its cash ef­fi­cient within

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