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China CITIC Bank and CITIC Ka Wah Bank Jointly Launch Cross-border RMB Trade Set

2009-07-10 11:52:00

On July 7, 2009, China CITIC Bank Corporation Limited (“CNCB”) and CITIC Ka Wah Bank Limited (“CKWB”) hosted an agreement signing ceremony at the Pearl River Hall of the Guangdong Hotel in Guangzhou to mark the official launch of their collaboration to offer cross-border RMB trade settlement services. Officiating at the ceremony were Mr. Ouyang Qian, Vice President of CNCB, and Mrs. Doreen Chan Hui Dor Lam, President and Chief Executive Officer of CKWB. Under the agreement, CNCB will open an inter-bank RMB fund transfer account for CKWB and will act as an agent for CKWB for the settlement of cross-border RMB trade transactions.

Other guests attending the signing ceremony included Ms. Li Simin, Director General of Guangdong Office of the State Administration of Foreign Exchange; Mr. Lu Qianli, Division Chief of Finance Division of the Financial Services Office of the Guangdong Provincial Government; and Mr. Li Songyu, President of CNCB’s Guangzhou Branch.

Earlier on July 2, 2009, the Administrative Rules on the Pilot Programme of RMB Settlement of Cross-border Trade Transactions were released jointly by six government bodies, including the PBOC. Five designated mainland cities, namely Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan, will be able to settle international trade in RMB with Hong Kong, Macau and countries of the Association of Southeast Asian Nations (“ASEAN”) on a pilot basis. This is the culmination of over six months of preparation and three months of policy development. With the execution details of the pilot programme finalised, RMB cross-border trade settlement is officially launched, marking an important milestone for the internationalisation of the Chinese currency.

RMB cross-border trade settlement will have far-reaching significance. Apart from mitigating exchange rate risks for corporations, it will also improve efficiencies by eliminating foreign currency exchanges. As the economies of China and the rest of the world become increasingly integrated, the demand for international trade settlement in RMB is expected to grow rapidly. It was against this backdrop that the State Council announced its decision on December 24, 2008 to allow Guangdong and Shanghai to settle trade with Hong Kong and Macau in RMB, and similarly to allow Guangxi and Yunnan to settle trade with ASEAN countries in RMB.

On April 8, 2009, Shanghai, along with Guangzhou, Shenzhen, Zhuhai and Dongguan in Guangdong Province were named as the pilot cities in the programme. The move is considered part of the strategic efforts to deepen the strategic collaboration in the financial sectors of Guangdong, Hong Kong and Macau, simplify and foster intra-regional trade, raise financial services standards as well as the risk-taking abilities of foreign trade enterprises, and assure the stable development of trade. In the long run, it will enhance the status of RMB in the international markets and pave the way for RMB to become a regional reserve currency. This will have significant bearings on China’s efforts to internationalise its currency and to realise its goal of full convertibility for the RMB in future. 

CNCB started to prepare for its participation in the programme in early 2009 as soon as it learnt about Guangdong Province’s role to initiate the RMB trade settlement pilot programme. A dedicated task force with representatives from all relevant functional units was formed. Experienced business professionals were sent as delegates to participate in the PBOC work group for cross-border RMB trade settlement, and were actively engaged in supporting the work of the taskforces on business flows and demands, funds settlement and system security.

Meanwhile, CKWB made necessary arrangements to gear up its support for CNCB as its offshore business platform. A project team was formed in March 2009 to focus on facilitating cross-border RMB trade settlement. An RMB settlement account was quickly established with CNCB’s Guangzhou branch and system testings for cross-border RMB trade settlement were completed shortly. Separately, internal documentation for corporate client RMB account opening was drafted, and joint efforts made with CNCB to develop and market appropriate products to address client needs.

CNCB customers have strong business needs for cross-border RMB trade settlement services. After carefully screening and studying its existing corporate clientele for their Guangdong-Hong Kong cross-border RMB trade settlement needs, CNCB has gained a detailed understanding of its customers’ service demands. It has currently identified 56 corporate customers with cross-border RMB trade settlement needs, of which 39 are amongst the first batch of 70 pilot enterprises in Guangzhou approved by PBOC for using RMB to settle trade payments with Hong Kong and Macau. Another 17 customers have expressed their desire to become pilot enterprises for cross-border RMB trade settlement services, and CNCB has signed cross-border RMB trade settlement agreements with these enterprises.

Meanwhile, CKWB has also explored the potential needs of its customers in Hong Kong and has identified their cross-border trade partners which are on the list of pilot enterprises. CKWB has approached these customers in order to understand their needs and to promote its banking services.

Commenting at the signing ceremony, Mr. Ouyang Qian said, “With the official launch of cross-border RMB trade settlement, CNCB’s Guangzhou branch will partner with CKWB to become the first batch of settlement banks in the Guangzhou region to launch such services. The two banks are confident that with our strong servicing capabilities and competitiveness, we will be able to offer excellent cross-border RMB trade settlement services. We are also fully committed to supporting the government in its policy developments and preparing for further expansion of the cross-border settlement business.”

Mrs. Doreen Chan Hui Dor Lam said, “CKWB has traditionally focused on providing one-stop cross-border financing and banking solutions to CNCB’s strategic customers as well as to Hong Kong and overseas enterprises to invest and operate in China through our Global Account Management / Field Account Management (“GAM / FAM”) service framework. The launch of cross-border RMB trade settlement services will further strengthen our cross-border servicing capabilities. CKWB will continue to work closely with CNCB to exemplify our unique competitive advantages and synergies to provide comprehensive financial services to customers, and to contribute to the economic development of the Pearl River Delta region and Mainland China as a whole.”

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