Nordea Bank AB, Shanghai Branch...
Transcript of Nordea Bank AB, Shanghai Branch...
Nordea Bank AB, Shanghai Branch北欧银行瑞典有限公司上海分行
30th August 2010
Corrado Lillelund ForcellatiGeneral Manager
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Agenda
1. Chinese Banking System
2. Nordea in China
3. Financing in China
4. Cash Management
5. Q&A
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The State Council
PBOC SAFE CBRC/FSA CSRC CIRC
Currency Policies
Clearing Houses
Current a/c
Capital a/c
FX Reserve
FX Policies
Banks
Other F.I.s
SecuritiesBrokersFunds
Listed CosStock Exs
Futures Ex.
Insur. Co.s
Re-Insur.
Brokers
The framework
Monitoring outsourced to Banks
Deciding the ‘spread’for CNY interest rates
Capital Reserve Ratio
Lending quotas in accordance to policy
‘Quantitative’ Steering
Regulates all in-and outgoing FX flows
Board Member in Banks
1. CHINESE BANKING SYSTEM
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CBRC
Banks Other F.I.s
Big 4 National JointStock Banks
LicensedForeign
Banks and Branches
Policy Oriented
Banks
Financial Services &Leasing
Commercial banks in cities
Cooperative banks in
rural areas
The structure
Source: CBRC own presentation and own research
Deposit and Lending business account for about 85% of earningsMoney Vehicles
ca. 50% of all new loans
Mainly SMEs SMEsNational focus Mainly SOEs Rural SMEsMainly subsidiaries
1. CHINESE BANKING SYSTEM
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Nordea in China
Long history of doing business with China – Beijing Representative office established 1984
– Shanghai Branch in operation since 1st of April 2008
Good and long-standing relationship with Chinese authorities & local banks
2. NORDEA IN CHINA
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18 people
Foreign Currency license
Focus on:
– Home market companies
– Selected Global industries
Business Areas
– Financing
– Trade Finance
– Deposits
– Cash Management
Nordea Bank AB, Shanghai Branch
2. NORDEA IN CHINA
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3. FINANCING IN CHINA
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Foreign Investment
Limited inflow of foreign capital
Important definitions:
– Total Investment
– Borrowing Gap & Foreign Debt
– Registered Capital
Registered Capital
“Borrowing Gap”
Total Investment
Total Investment (USD) Registered Capital (minimum requirement)
< 3 mil > 70% of TI
> 3 mil < 4.2 mil > 2.1 mil
> 4.2 mil < 10 mil > 50% of TI
> 10 mil < 12.5 mil > 5 mil
> 12.5 mil < 30 mil > 40% of TI
> 30 mil < 36 mil > 12 mil
> 36 mil > 33.3% of TI
3. FINANCING IN CHINA
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Points of attention
Two important things to be taken into account:
NO free cross-border capital transactions
NO free convertibility of RMB (CNY)
Both are strictly regulated, hence:
“the real needs and available sources of funds”
is important to be defined as detailed as possible
3. FINANCING IN CHINA
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Defining the balance sheet -structure
“Real needs”
Defining the balance sheet -structure
“Available sources”Stock
Machinery
Buildings and Constructions
Trade Receivables
Off-shore –loan
On-shore –loan
TradePayables
AdvancePayments
UndistributedProfits
RegisteredCapital
RMB
FCY
Fixed Assets
Current Assets
Cash
Equity
Loans
Trade Credit
3. FINANCING IN CHINA
Use and source of funds
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Stock
Machinery
Buildings and Constructions
Trade Receivables
RMB
FCY
Domestic
TradeCapital
ForeignDomestic
UseImported
TradeTsCapital
It is important to define:
1. What are the real and exact needs?
2. From where the assets are purchased?
3. In which currency the assets are purchased?
4. Who is the supplier?
Fixed Assets
Current Assets
Cash
Use of funds
3. FINANCING IN CHINA
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Off-shore –loan
On-shore –loan
TradePayables
AdvancePayments
UndistributedProfits
RegisteredCapital
ForeignDomestic
Foreign
FCYRMB
FCY
FCYRMB
Source
It is important to define:
1. Onshore or offshore capital
2. Equity or external capital
3. RMB or Foreign Currency
4. Availability of Trade Debt
Equity
Loans
Trade Credit
Source of funds
3. FINANCING IN CHINA
Domestic
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Capital Structure
Early decisions can affect later financing needs
Each financing alternative offers advantages and disadvantages
A mix of alternatives are often used, for example:
Off-shore On-shore Equity
Foreign Invested Enterprise (FIE)
“Borrowing Gap” “Borrowing Gap”or Total Investment
SAFE approval is necessary
SAFE approval is necessary
Trade Credits
Advance & deferred payment ratios
Fulfilled Foreign guarantees included in “Borrowing Gap”
3. FINANCING IN CHINA
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4. CASH MANAGEMENT IN CHINA
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4. CASH MANAGEMENT IN CHINA
Introduction to the CM environment
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Background to Cash Management
Much localized with high level of administration
Strict foreign exchange control– Affects all transactions involving foreign currencies
– No difference between local or foreign banks
– Need approval to use foreign currencies
– Stricter rules for capital conversions
The banking experience in China differs between multinational companies and others, where often the largest companies are prioritized in terms of service level
4. CASH MANAGEMENT IN CHINA
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Compared to local currency payments
– Foreign currency payments are based on physical documents
– Measures to control the foreign currency conversion + in- and outflow
Different requirements for different types of transactions
1. Current items (Trade in goods or services)
2. Capital items
Increased control of payments under trade in goods
– Online verification of proceeds
– Registration of Foreign Debts and Credits
– Advance on sales & deferred receivables under export
– Advance payments & deferred payments under import
Handling Payments
4. CASH MANAGEMENT IN CHINA
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Corporate client
type
CNY Foreign Currency
Non-Resident - Not inside China
- Not outside China
- Exceptions: Pilot, HK
1. Temporary Capital account
2. Offshore account
Resident - At the banks with CNY license
- Not outside China
1. Capital Account
2. Current Account
3. Foreign Debt Account
4. Domestic Loan Account
5. Time Deposit Account
4. CASH MANAGEMENT IN CHINA
Account holder and account types in China
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Type Current item Capital item Currency
Domestic Company to Company – no restrictions
Company to individual – supporting documents needed (e.g. salary)
- Main rule: CNY
- Exception: Free trade zone, certain industries
Cross-border
- Supporting documents
- Trade in goods
- Trade in services
- Approval and/or
- Supporting documents
- Main rule: Foreign currency
- Exception: Pilot programme
What kind of Payments?
4. CASH MANAGEMENT IN CHINA
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Not freely convertible
Strict foreign exchange control– Affects all transactions involving foreign currencies
– No difference between local or foreign banks
– Approval needed to start using foreign currencies
– Supporting documents needed for transfers
– Measures to control the foreign currency in- and outflow
Capital and Current items– Stricter rules for capital conversions
4. CASH MANAGEMENT IN CHINA
RMB Convertibility
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CNY Account
> 50,000 USDDirectly to beneficiary
Approval from SAFE
No limitation
FCY
Foreign Debt
Onshore Loan
Registered Capital
Settlement from Trade
Proof of no FCY
Proof of no FCY
4. CASH MANAGEMENT IN CHINA
RMB Convertibility: Conversion
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Companies may sign trade-related contracts denominated in RMB
Residents may pay and receive trade related RMB payments to and from non-residents
Non-residents may open RMB accounts in outside China
4. CASH MANAGEMENT IN CHINA
RMB Convertibility: Cross-border Trade Settlement in RMB
Geographic Range 5 cities in China (+14 to be published)Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan
Country Range No restriction
Client Range No restrictions for Chinese importers, Chinese exporters should be B class or above according to the rating by the custom
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5. Q&A
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Nordea Bank AB Shanghai BranchR.4806, Raffles City, 268 Xi Zang Middle Road
北欧银行瑞典有限公司上海分行上海市西藏中路268号来福士广场4806室. 200001
Tel: +86 21 6340 5111
Fax: +86 21 6340 5222
Email: [email protected]
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