Slide 1: China Reforms: Are you prepared for the new opportunities?
Transaction Services May 2013 China Reforms: Are you prepared for the new opportunities? Deborah Mur, Head of Sales, Treasury & Trade Solutions, China Camille Liao, Treasury & Trade Solutions, Liquidity and Investments
Slide 2: Table of Contents
Table of Contents 1. China Macro Economic Update 3 2. Leveraging Regulations and Reforms for Enhanced Centralization 6 3. Citi offshore RMB service offerings 17
Slide 3: 1. China Macro Economic Update
1. China Macro Economic Update
Slide 4: Economic Data to Watch
Economic Data to Watch 1 Money Supply 2 Import and Export Target Import and Target M2 Export growth of growth of 13% 10% 3 Industry Product / Retail Sales / GDP / CPI 4 USD/CNY trend 6.9743 on May 21, 2008 6.1393 at May 20, 2013 Forecast Target CPI of 3.5 Data Source: PBOC Data Source: Bloomberg and
Slide 5: Prevailing RMB Deposit and Loan Rate
Prevailing RMB Deposit and Loan Rate • The pace of interest rate liberalization has accelerated: PBOC announced two rate cuts in July, 2012. The second rate cut in 2012 also came with further liberalization on the loan and deposit rates. In our view, the government has shown its commitment to intere
Slide 6: 2. Leveraging Regulations and Reforms for Enhanced Centralization
2. Leveraging Regulations and Reforms for Enhanced Centralization
Slide 7: Deregulation Milestones- Recent Developments
Deregulation Milestones- Recent Developments To encourage the internationalization of the RMB and to support Shanghai & Beijing to become international financial centers, both PBOC (Central Bank) and SAFE (the core regulator for FCY) each began a series of deregulation reform projects. New regulat
Slide 8: What is your top priority in response to the recent regulation developments in China?
What is your top priority in response to the recent regulation developments in China? Poll Choices Results Mobilise surplus cash from China by cross border lending 46% Re-invoice inter-company and third party flows with China into RMB Establish SSC to further centralise the payments and collections
Slide 9: Simplification of Cross-border Trade Settlement in FCY
Simplification of Cross-border Trade Settlement in FCY Scope: applicable to goods transactions only country-wide Before After Payment for Trade Transaction Supporting Documents Supporting Documents Customs Customs Slip & Contract/ PO & Invoice Slip or Contract/ PO or Invoice Collection for Trade Tra
Slide 10: Simplification of Cross-border Trade Settlement in RMB
Simplification of Cross-border Trade Settlement in RMB Scope: The pilot began in Shanghai and Guangzhou and gradually expanded to more area in China Key Features Transaction Province/City Remarks Type All companies in good standing with PBOC are eligible Shanghai All Pilot clients need to be filed
Slide 11: SAFE Reform Project: FCY Cross-border Cash Pooling (Physical)
SAFE Reform Project: FCY Cross-border Cash Pooling (Physical) Who Qualifies? Global LM Overseas Header Account Funding • Multinational corporations with a treasury center in Concentration Beijing or Shanghai, or that have a treasury center in China with a functional treasury entity in Shanghai Overs
Slide 12: PBOC Reform Project: RMB Cross-border Intercompany Loans
PBOC Reform Project: RMB Cross-border Intercompany Loans Key Features RMB Account • One account with a designated Entity A Entity B Maintenance bank should be used for cross-border RMB loan, including drawdown, repayment China Overseas Lending • The quota (Q =ａ*E*P) will be approved on a The pilot p
Slide 13: RMB Financial Guarantee
RMB Financial Guarantee Before After Pain Points No quota limitation on RMB financial guarantee, but foreign currency financial guarantee is Both FCY still subject to bank’s Guarantee quota and RMB Who qualifies financial All companies registered in China guarantee is subject to Purpose of off
Slide 14: RMB Cross Border Cash Pooling Structure (Future)
RMB Cross Border Cash Pooling Structure (Future) • Cross-border RMB Pooling will be one of the next developments in the RMB Internationalization strategy (subject to PBOC approval) • MNCs have two options to include China entities into regional/global liquidity management structures • RMB offshore p
Slide 15: Cross-Border Intercompany Netting Solution I – RMB
Cross-Border Intercompany Netting Solution I – RMB In 2010, Citi filed with PBOC Shanghai allowing on-shore company settle directly with off-shore netting center under gross in and gross out model. Key Points Overseas Overseas Overseas Entity D Entity E Entity F Currency RMB Qualification Accoun
Slide 16: Cross-border Intercompany Netting Solution II – RMB
Cross-border Intercompany Netting Solution II – RMB On shore leading company settles with off-shore Netting Center via a “pass through” Citi China internal account. Key Points Overseas Overseas Overseas Currency RMB Entity D Entity E Entity F Qualification All companies in China Scope Trade in
Slide 17: 3. Citi Offshore RMB Services
3. Citi Offshore RMB Services
Slide 18: RMB Internationalization Still in Early Stage
RMB Internationalization Still in Early Stage A currency is considered “international” when it is used as a unit of account (e.g., corporate invoices), a medium of exchange (to settle cross-border trade) and store of value (deposits and as reserve currency) Three practical measures : Trade Currency?
Slide 19: Offshore RMB Developments
Offshore RMB Developments • RMB ranked No.13 as a world payment currency, overtakes Russian Rouble in Jan 2013, accounting for 0.74% in March 2013. • UK has become an important offshore RMB centre: UK has surpassed Singapore since June 2012 and become the No. 1 in RMB payments with China and Hong Ko
Slide 20: What is your status in using RMB?
What is your status in using RMB? Poll Choices Results Have started re-invoicing RMB for intercompany and third party flows with China 6% Have started re-invoicing RMB for intercompany flows with China 6% Plan to change the invoice for intercompany flows and third party flows with China into RMB in
Slide 21: Your needs and our solutions
Your needs and our solutions • Corporate adopt RMB in cross border settlements • Citi is dedicated to support our customers in RMB can achieve treasury efficiencies by: business. Our current services include: – Centralising FX into treasury centre and take – RMB Business Current Accounts and Term FX
Slide 22: RMB Flows into London
RMB Flows into London China Entities European/US Entities MASTER A/C Company A Multi-Currency Trade and Citi London Notional Pool other USD flows Company A Company A Company A Company A Citi London Citi London Citi London Citi London AUD GBP CNH EUR AU Sub Hong Kong Sub China HQ co. Singapore Sub Si
Slide 23: RMB, CNY and CNH
RMB, CNY and CNH RMB: Short form of Renminbi, the name of the Chinese Currency CNY: Generally refers to RMB onshore. However, it is the only currency code recognized by SWIFT CNH: Generally refers to RMB offshore • Before RMB internationalization, RMB can only be used within China (onshore), and the
Slide 24: efficiency, renewable energy and mitigation
IRS Circular 230 Disclosure: Citigroup Inc. and its affiliates do not provide tax or legal advice. Any discussion of tax matters in these materials (i) is not intended or written to be used, and cannot be used or relied upon, by you for the purpose of avoiding any tax penalties and (ii) may have bee