Supporting International Trade Rob Keller Head of UK Region, Trade Finance July 2012
Supporting International Trade 1. Hong Kong gateway to China 2. Trading considerations: risk, funding, visibility & control 3. Offshore Renmembi - CNH 4. CNH capabilities 5. RBS Corporate Global Account 6. UK Government Support Schemes for Exporters 7. Value added services for UK businesses 8. Further Help 2
Hong Kong a gateway to China World s 2 nd Largest Trading Nation 167 264 14 1 1 16 Central Asia 42 42 177 121 102 283 29 37 Western Europe 9 3 1 36 Eastern Europe 154 138 Japan 22 52 US 22 17 2000 China s Imports 2010 China s Exports (In US$ bn) ASEAN 91 92 5 7 Latin America 3 Source: HKMA Website
Trading Considerations: Risk, Funding, Visibility & Control 1) Risk Guaranteeing payment & performance (Letters of Credit, Collections, Bonds) 2) Funding Covering contract costs (Pre and post shipment finance) Funding goods purchase for sale (Import Loans) 3) Visibility & Control Initiating, tracking, executing trade online (Maxtrad) 4
Growth of the offshore CNH Market Through trade and investments Trade settlement: Y1.7trn (Sep 11) 78% of total China-HK bilateral trade 6.3% of total China trade 1,800 1,600 1,400 1,200 Deposits: Y622bn (Sep 11) 10.4% of HK s total deposits 20% of HK s total foreign$ depos 0.8% of China s total deposits Bonds: Y191bn (Sep 11) 30% of HK s total debt market (excl. EFN issues) 1,000 5 800 600 400 200 0 Jul 09 Sep 09 Nov 09 Jan 10 Mar 10 May 10 Jul 10 Sep 10 Nov 10 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Deposits Bonds CNY trade settled
Scope of CNH Services offered by RBS Hong Kong (1) Account Service Any eligible enterprise located in Hong Kong and other regions outside PRC can open CNH account Current and Saving accounts are available (3) Currency Exchange Two ways conversion for trade settlement and non trade settlement Available in Spot or Deliverable Forward (4) Remittance (2) Trade Finance General trade services including Documentary Collections, Letter of Credits, Guarantees and etc. Both Import and Export loans are feasible Interest rate to be determined by banks on a commercial basis Outward and inward CNH remittances in and out of PRC subject to PRC regulations and guidelines (5) Investment CNH fixed deposits Investment in CNH bonds issued in Hong Kong 6
Global Account EMEA Belgium, France, Germany, Ireland (Ulster Bank), Italy, Spain, Switzerland, Netherlands Asia India, UAE, Hong Kong & Singapore USA (Citizens) Any size of business can now take advantage of our global banking network In-country account in up to Hong Kong and 13 other countries all from the UK. One bank, One relationship contact Access Online allows account visibility across the globe Cash management and trade finance products available locally 7
Government Schemes for Exporters Objective: Help UK businesses to obtain funding for an export contract Risk sharing between the government and the banks Govt will take up to 90% of the risk Most popular schemes: Bonds and Guarantees Support Scheme Working Capital Support Scheme Letter of Credit Guarantee Scheme 8
Value Added Services Buying machinery from abroad? Capital Import Finance : Asset financing with the protection of trade finance in one package. Need help collecting monies owed to you, from around the world? Debt Collection Minimise risk and spend less time completing documentation Document Preparation 9
Further help Online: www.rbs.co.uk/international www.natwest.com/international Incl. Cashflow Calculator Offline: Guide to International Trade 10
Appendix 11
RMB Settlement Infrastructure Overseas imports from PRC Enterprise Overseas Enterprise 1. Goods PRC Enterprise / Approved Mainland Designated Enterprise (MDE) 2. RMB Payments If necessary, HKD / USD RMB 5. RMB Receivable Hong Kong Beneficiary Bank in PRC 3. Remittance 4. CNAPS Our RMB Corresponding Bank (China RTGS) 12
RMB Settlement Infrastructure Overseas exports to PRC Enterprise Overseas Enterprise 1. Goods PRC Eligible Enterprise 5. RMB Receivable 2. RMB Payments Trading considerations: risk, funding, visibility & control Hong Kong Remitting Bank in PRC 4. Remittance 3. CNAPS Our RMB Corresponding Bank (China RTGS) 13
Potential Benefits to PRC Suppliers/Customers Risk Management To match both payables and receivables in CNY to eliminate the risk of FX fluctuation and associated costs To avoid the risk of CNY appreciation against foreign currencies Efficiency improvement leading to quicker application of funds Improvement and Greater Transparency in Cost Structure No FX verification required Quicker settlement of funds Faster Export Tax Rebate (provided the suppliers are approved Mainland Designated Enterprises) To manage both production and sales in a single currency to eliminate the need for FX management To improve the overall cost structure and profit margin Funding Efficiency CNY L/C issued with tenor over 90 days will not consume any foreign debt quota 14
Potential Benefits to Overseas Buyers/Sellers Liquidity Management and Investment Diversification To hold and manage CNY liquidity outside of China under various funding and investment options To add CNY as an alternative currency to their portfolio Risk Management To hold CNY to hedge for two-way import and export flows with China Increase Control To proactively and effectively manage FX transactions Increase Pricing Transparency To reduce potential markup from suppliers due to cost of FX Access to a wider buyer / supplier base Flexibility to settle trades in CNY will become a competitive advantage To access suppliers, who might have FX constraints 15