Handelsbanken Shanghai
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Transcript of Handelsbanken Shanghai
www.handelsbanken.com/capitalmarketswww.handelsbanken.com/capitalmarkets
Handelsbanken Shanghai Helping your business succeed in China
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President Hu Jintao shaking hand with Mr. Pär Boman, President and Group Chief Executive of Svenska Handelsbanken, in June 2007 at Handelsbanken’s office in Stockholm
Svenska Handelsbanken opened a representative office in Beijing in 1982 and became the first Swedish and Nordic bank with an office in China
Branch office in Hong Kong opened in 1988, today the only Nordic bank with a branch office in Hong Kong
Representative office opened in Taipei in 1990, until today the only Nordic bank with an office in Taipei
Branch office in Shanghai opened in 2005, once again the first Nordic bank with a branch office in China
In February 2009 Svenska Handelsbanken Shanghai branch became the first Nordic bank to be granted a RMB business licence
Svenska Handelsbanken is also the only Nordic bank with a leasing company in China
Svenska Handelsbanken is also the first Nordic bank to issue an off-shore RMB bond
Your local banking partner in Greater China
330 years experience of banking in Greater ChinaHandelsbanken’s history in China
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Payments
Domestic payments
Cross-border payments
Entrustment loans
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Accounts
Local currency accounts
Foreign currency accounts
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Internet banking
Global Online
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Trade finance
L/C Guarantees Discounting of Bills & BAD
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Treasury
FX spot FX forwards Deposits
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Handelsbanken Shanghai services overview
Shanghai
Financing
Working capital loans
Fixed-asset loans
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Leasing
Finance Lease
Operating Lease
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5Accounts and internet banking
Foreign currency accounts Current account (used for daily transactions)
Pledge deposit (cash collateral as security for guarantees, L/C etc.)
Capital account (used for registered capital injection)
Temporary capital account (pre-operating expenses – can be converted into capital account)
Representative office account
Offshore account (for offshore company’s settlement with China)
Escrow account
Local currency accounts Ordinary account (for daily transactions, loans, call deposit and etc.)
Temporary account (handling of temporary operations)
Special account (used for special business related to governmental projects)
Term deposit account (term deposit of minimum CNY 1m as regulated for individual account)
Accounts
Note: 1) CNAPS is a local currency settlement system in China
1 Internet banking
Global online Communication methods
– Account information (balance/transaction enquires)– Cross-border payments– Domestic payments
Information in real-time for Handelsbanken accounts with internet available at any place in the world
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6Payments/cash management and financing
Foreign currency payments Incoming payments (e-port card needed for customs clearing for trade)
Outgoing payments
Domestic payments (only when payer and payee are the same company)
Payments are subject to documentation requirements according to Chinese foreign exchange regulations
Local currency payments Credit vouchers
Cheques
T/T through CNAPS1
Entrustment loans Only possible between sister companies
Payments and cash management
Note: 1) CNAPS is a local currency settlement system in China
3 Financing
Working capital loans Short-term loans
– Foreign and local currency
Long-term loans– Foreign currency
Fixed-asset loans Short-term loans
– Foreign and local currency
Long-term loans– Foreign currency
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Treasury
Trade finance and treasury
FX Spot Local currency vs. foreign currencies (i.e. SEK, EUR, USD, etc.)
Foreign currencies vs. foreign currencies
FX Forwards Always local currency vs. foreign currencies (i.e. SEK, EUR, USD, etc.)
Deposits Deposit rates fixed by Peoples Bank of China
Trade finance
Letter of Credit (“L/C”) Export business
– L/C advising, L/C confirmation, L/C discounting– Bill discount (Bill includes shipping documents, packing list and etc.)
Import business– L/C issuing– Bill discount
Documentary collection
Guarantee issuance (foreign and local currency) Bid bond guarantee Advanced guarantee Payment guarantee Performance guarantee Warranty/court/customs guarantee Advanced payment guarantee Rental guarantee Shipping guarantee
Discounting of Banker Acceptance Draft “BAD”
Discounting of Receivables
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Leasing
Leasing
Finance lease and operating lease For new fixed assets investment
– Cars, production equipment and machine etc.
For acquiring working capital based on the assets on your book through Sale & Lease Back structure
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9Total investment and shareholder capital
Registered capital Off-shoredebt
The registered capital is a function of the WOFE’s total investment size (see table above)
The remainder between the total investment and the shareholder capital is the company’s Foreign Debt Quota “FDQ”. This quota defines the maximum amount of off-shore debt a company can borrow
A company’s FDQ can be used for short-term and long-term loans
Note that usage of long-term loans will “eat up” the FDQ for good
On-shore debt
Graphic overview
Total investment
Registered capital, %
Minimum RegisteredCapital
USD 3mor less
70% N.A.
USD 3–10m 50% USD 2.1m
USD 10–30m 40% USD 5m
USD 30mor more
30% USD 12mShareholder’s equity at inception
Company Foreign Debt Quota
Additional on-shore external financing from banks in China
Total investment
On-shore debt unlimited
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Process overview Comments
Entrustment loans
In China corporations can distribute and transfer funds within the group by means of entrustment loans
For RMB transfers there is no need to have locally incorporated holding companies
The transaction is based on a three-party lending agreement between the two sister companies and the Agent Bank
How it works Cash rich Company A provide funds of RMB 5m to sister
Company B through the Agent Bank
The Agent Bank collects interest of [x]% p.a. from sister Company B and transfer it back to Company A– The interest rate should be based on the arm’s length principle
If the loan is still needed at the time of repayment a new agreement will be established between the two parties
Company A pays a commission fee to the Agent bank
Agent Bank
Company BCompany A
Loan agreement: RMB 5mTenor: 6 months
Fixed interest rate: [x]% p.a.
RMB
5m
RMB 5m
Retu
rn In
tere
st
Collects Interest
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Process flow overview
Discounting of Banker Acceptance Draft
Buyer and Seller establish a bilateral agreement (stipulating invoice tenor, price etc.)
Buyer uses its local bank to issue a Bankers Acceptance Draft “BAD” based on the two parties bilateral agreement. The BAD tenor cannot exceed 6 months according to PBOC regulation
The Buyer forwards the BAD to the Seller
Delivery of goods takes place
Seller transfer the BAD to Handelsbanken Shanghai
Handelsbanken Shanghai pays Seller discounted purchase price of the BAD
The Local Bank pays invoice to Handelsbanken Shanghai on the maturity date of the BAD
Buyer Seller
Local Bank
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Handelsbanken Shanghai
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12Forward exchange contract
A forward exchange contract or a “FX forward” is a binding contract to buy or sell a certain amount of foreign currency at a pre-agreed rate and on a certain future date
A forward contract is the easiest way of covering exchange risk because it locks in the exchange rate. This strategy mitigates one of the problems that customer experience when importing or exporting in foreign currency
In order to carry out a FX forward the customer need to advise the agent bank the amount, the currencies, the expiry date and whether customer would like to buy or sell the currency
Our minimum transaction amount is USD 10,000
Process flow overview
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Fixing price for buying USD and selling local currency
FX forward01 Apr
Buying USD
A company know that they will pay-out a dividend to its parent company in USD three months from now
By using a forward contract the company can lock in the CNY/USD exchange rate today
3 months
13Global On-line – the link to your international banking transactions
Direct online access to summarized account information for international accounts, both with Handelsbanken and with other banks
Intra-group transfers Make transfers between Handelsbanken
accounts and accounts with other banks
Make same-day transfers between Handelsbanken accounts in different countries with no loss of interest days
Payment orders in other countries Execute local payments and cross-border
payments from accounts in other countries Payments can be made both from a local
account with Handelsbanken or from an account with another bank in the country where you wish to execute the payment
Collaboration with international banks One point of contact for all your international
bank transactions
Graphic overview