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

http://www.hsbc.com/1/2/home

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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


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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


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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


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


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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


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”


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4. CASH MANAGEMENT IN CHINA

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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


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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


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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


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?


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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


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


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


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]

nordea bank ab, shanghai branch...

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