HSBC is leading a new trend of providing streamlined services tailored toward Chinese outbound investment. Zhang Chunyan / China Daily

 

HSBC bets big on products for Chinese companies planning overseas ventures

HSBC Corp, Europe's largest bank by market value, plans to offer more personalized solutions for Chinese companies planning overseas ventures, as part of its efforts to diversify revenue streams to push growth.

The global banking giant has already made a beginning in this regard by implementing a yuan cross-border trade settlement solution for a Chinese Fortune 500 company last month. It has also set up 17 dedicated China desks around the world to provide information on the local business and regulatory environments to the subsidiaries of Chinese companies planning overseas ventures.

"We want to be there whenever a company goes overseas," says Oliver Jones, head of HSBC UK's international team for corporate and commercial banking. Jones also supervises HSBC's UK China desk in corporate banking, which is headed by Neo Wang.

"Our China team is already in touch with several Chinese companies. Through the speedy transfer of knowledge across the HSBC network, we can ensure that our overseas China desks have the necessary background information to provide speedy and on-the-ground services for Chinese clients," Jones says.

Citing an example, he says that prior knowledge about a Chinese company's back office systems and internal policy toward foreign exchange hedging often comes in handy for the overseas subsidiaries, when they have to take speedy investment decisions.

He says that though HSBC UK has dedicated desks to help investors from markets such as the US, Canada, France, Germany, Australia and India, it is the China desk that is becoming increasingly important as Chinese investment in the UK is steadily growing.

Cross-border lending is still a challenging task for most of the global lenders as the inflow and outflow of yuan is regulated by the State Administration of Foreign Exchange, China's foreign exchange regulator, Jones says.

Despite these challenges, Jones' team recently worked with HSBC China to set up a cross-border lending structure for a Shenzhen-based manufacturer. "Our efforts helped facilitate the smooth flow of funds to the UK subsidiary from the cash-flush parent in China."

HSBC secured a standby letter of credit in renminbi for the funds in China and later helped set up a revolving credit facility of more than $10 million (7.7 million euros) in the UK for the Chinese company, he says.

Cross-border lending through standby letter of credit became first possible in 2009, after the Chinese government started a pilot program to encourage the renminbi's internationalization. Before this policy change, Chinese companies wanting to invest overseas had to transfer the cash physically out of China to their overseas subsidiaries. In comparison, lending through standby letter of credit allows the parent company to keep the cash within China.

Jones says cross-border lending is often used in situations where the subsidiary needs the cash for operational purposes over a period, rather than using it for a one-off investment.

He says the HSBC deal was the first renminbi standby letter-of-credit-backed revolving facility in the UK, and his team is now working on several other such deals for Chinese clients, involving several millions of dollars.

Jones says his team was fortunate to have an opportunity to learn from the HSBC Hong Kong team on how to structure renminbi standby letter-of-credit deals.

"We have a large international team in Hong Kong, and they have been doing this type of transaction for a long time. It helped a lot to learn from their experiences," Jones says.

His team had its own experience while adjusting the pricing of the deal to suit UK contexts because the cost of capital and the way securities are viewed in the UK are different.

The renminbi deal, however, is just one example that demonstrates how the bank plans to provide several "seamless services" to Chinese clients across different jurisdictions, says Christopher Davies, deputy CEO at HSBC China.

Davies says HSBC China will host a meeting at the end of this year in Shanghai for top executives from the bank's global China desks to exchange ideas and share experiences.