HSBC has assisted a Chinese corporate in using the free trade account (FTA) in the Shanghai Free Trade Zone (Shanghai FTZ) to conduct foreign currency borrowing from offshore markets.
The bank added that the client was a subsidiary of Baoxin Automobile Group and HSBC had become the first foreign bank to complete such a deal after China further relaxed the rules governing offshore borrowing activities via FTAs in the zone.
China’s central bank, the People’s Bank of China (PBOC) recently unveiled a new policy easing several requirements on offshore borrowing activities in the Shanghai FTZ, including removing pre-approvals, increasing the borrowing quota and expanding the transaction types.
Following the policy rollout, HSBC conducted the first transaction among foreign banks by borrowing in US dollars (USD) from an offshore market via the FTA and lending it at the offshore rate to the Baoxin subsidiary in the Shanghai FTZ, in a trade financing deal worth approximately US$10m.
This transaction lowered funding costs for Baoxin by around 2% compared to its traditional borrowing from onshore banks. Baoxin is among the first auto dealers participating in an auto import pilot programme launched earlier this year in the Shanghai FTZ, which aims to lower the prices of imported cars in China. Transactions of this type through the FTA will strongly support Baoxin’s car imports under the pilot scheme, while ultimately benefiting car buyers.
“The new policy in the Shanghai FTZ has largely expanded the size of and channels for offshore borrowing activities for financial institutions and corporates in the zone, thereby enabling them to improve funding structures and lower funding costs,” said Terence Chiu, executive vice president (EVP) and head of commercial banking for China at HSBC.
“This further demonstrates the zone’s leadership in piloting financial reforms in China. As one of the first foreign banks to set up FTAs in the zone, HSBC will continue to leverage our global connectivity to advance our efforts in supporting corporates’ business growth in the Shanghai FTZ.”
The US money market fund reforms came into effect in 2016 and are already dramatically shaping US fund industry with investors flooding out of prime funds and into government securities. While the reforms are similar, they are not the same. GTNews interviews Yeng Bulter, global head of the cash business at State Street Global Advisors on the differences.
There are various ways for financial institutions to benefit from advanced technologies and business models provided by FinTech's. Whether a business' approach is radical or incremental, data management can help a company to increase their return on investment, argues André Casterman, INTIX.
Due to the low interest rate environment and Basel III regulation many corporate treasurers, who may have in the past been very reliant on the banking sector to provide them with cash management solutions, have been forced to explore alternative options as banks have been refusing short dated cash deposits.
Apps are a critical part of treasury's shift into mobile banking as 67% of treasury and corporate finance professionals said mobile banking services are of particular interest to them in a recent survey.