Hong Kong by pengxuebo

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									Doing business in Hong Kong
 Your privileged connection to China
                                                    Some basics on Hong Kong

                           GDP    GDP/cap             2010 ∆        Population         Area
                         (bn USD) (th USD)           real GDP        (millions)      (th km²)
Hong Kong                    226        32                5.7%                  7            1   Hong Kon
PR China                   5.745         4              10.3%              1.340         9.597   part of PR
US                        14.624        47                2.7%               311         9.629   (SAR stat
EU                        16.107        32                1.8%               501         4.325
Czech Rep.                   260        26                2.3%                10            79




       Hong Kong is part of China since 1997

      It’s status as a Special Administrative Region is laid down in the Basic Law
                        under the principle “1 country 2 systems”
                                                Why do business in Hong Kong ?
                                      Hong Kong as a safe haven for your China investment
                  If you think “going into China” with your business,
                       then also consider “going via Hong Kong”
Hong Kong offers a few advantages that are not necessarily present in case of a direct entry into China

 Hong Kong is
   st in the ranking of
1
                                           Free flow of capital
      free economies                       Fully convertible currency
        (WSJ and Fraser Institute)         No lending restrictions
                                           Full range of financial services
 Hong Kong is                              State of the art business infrastructure
      financial centre in                  Companies can be set up in a few days
3  rd
      the world
        (GFCI-9, March 2011)
                                           English as the general business language



 Hong Kong is
      lowest tax misery                    Easy and low tax regime
3  rd
      country in the world
        (Forbes tax misery index)
                                           Double Tax Agreements (since recently also with CZ)



 Hong Kong is                              Hong Kong as prime offshore Renminbi centre
                                           China’s 12th 5Y Plan reconfirmed Hong Kong’s crucial role in
        part of China                       the development of Mainland China
   “1 country, 2 systems”                  CEPA free trade agreement with Mainland China
           (Basic Law)
                                           Legal system under ‘rule of law’ with higher legal certainty
                                        Why do business in Hong Kong ?
                              Hong Kong as a safe haven for your China investment


Consequently it is common to see the following structure being implemented by
   European companies pursuing business opportunities in Mainland China

                                   European business

                    HQ in Europe


                Trade       100%



                              Hong Kong

                  Holding Co in HK
                                                  Opportunities in China
                Trade      100%
                                           Rep.Office / WFOE in PRC

                                          Suppliers and clients in PRC
                                  What do we offer you in Hong Kong ?
               KBC Hong Kong branch as an enabler for your business in Hong Kong
Getting started

   • Your company setup in Hong Kong
     We maintain good relations with different company secretarial firms and consultants
     that can help you in setting up the right structure for your needs


   • Your account opening at KBC Hong Kong
     For your account opening in Hong Kong, we liaise with your company secretary in
     Hong Kong and with your relationship manager in CSOB

       Physical presence in Hong Kong is not required to open accounts with KBC Hong Kong

       Once your company is constituted with all necessary documents, we open accounts
       within 3 days


Limited but relevant service offer for your Hong Kong business

   •   Cash management and payments
   •   Working capital and investment loans
   •   Trade Finance
   •   Treasury
   •   Corporate Finance advisory

   • NEW!: RMB services
                              What do we offer you in Hong Kong ?
                                             NEW! : KBC offering RMB services

If you were in Hong Kong recently, you cannot have missed the importance of
 Hong Kong as an offshore centre for the internationalisation of the Renminbi
                                            The internationalisation of the RMB - Why?
                       Many good reasons for China to encourage the international use of RMB

If China has the ambition to join                                                               “The dollar trap” refers to
the US and EU as a key player in                                                                the 1.8trn FX reserves in
the governance of the                                                                           USD making China overly
international monetary system,                                                                  dependent on the American
this is a crucial step                                                                          dollar, causing FX and
                                                                                      FX risk   liquidity risks. Encouraging
Also, making Shanghai an                         International                                  the international use of the
international financial centre                     standing             ...                     RMB should reduce the FX
competing with Wall Street and                                                                  inflow
The City by 2020 will be difficult
without this evolution                                                                          “Sharing the RMB risk
                                                                                                with the world” by
                                                                                                progressively translating
                                                                                                the Chinese claims on the
                                                                         Natural                outside world into RMB
Empirical evidence shows the international                              evolution
rise of a currency goes in parallel with the
economic power of a country (£, $, DEM, ...)
It is an anomaly that the worlds largest exporter is
not using its own currency to settle that trade. If the
USD might be “punching above its weight” relative to
the US economy, the opposite is true for the RMB




                                                 Not “If?” but “When?”
                                    The internationalisation of the RMB will happen
                                         and is actually already long overdue

     End 2010, China’s total FX reserves mount to 2.6trn USD. Source: CIA Factbook.
                                                                                                                        6
                                   The internationalisation of the RMB - How?
              There’s a commonly accepted view on how currencies internationalise ...




                                                 Potential roadmap
         The different stages are interdependent. E.g. accumulation of RMB outside the Mainland
          will support demand for RMB denominated investment products, while the availability of
           liquid RMB investment opportunities will encourage a wider adoption of RMB for trade


Source for 2020 volume estimates: Central Policy Unit Chatham House, London.                       7
                                           The internationalisation of the RMB - How?
                                         ... but this case is nevertheless unprecedented in many ways




      This is also why China is using Hong Kong as a “testing ground” for the
internationalisation of the RMB and as “a firewall” against undesired effects on the Mainland


 The terms “testing ground” and “firewall” were coined in relation to Hong Kong’s role at the publication of China’s 12 th 5 Year Plan
                                                                                                                                         8
                                               The internationalisation of the RMB - When?
                                                      It is clearly happening, already today, in Hong Kong ...




                                                      Gross issuance RMB bonds in HK                   Global RMB trade settlement
           RMB deposits in HK
                                                                   (in bn)                                 (in bn, HK part in %)
600             (in bn)                              45                                         800
                                                     40                                         700
500                                                                                                                         Of
                                                     35                                         600                        which
400                                                  30
                                                                                                500                        80%
                                                     25                                                                     HK
300                                                                                             400
                                                     20
                                                                                                300               Of
200                                                  15
                                                                                                                 which
                                                                                                200
                                                     10                                                          73%
100
                                                     5                                          100               HK
 0                                                   0                                             0
      end mid     end     mid   end     mid   end         2007   2008   2009   2010   1H 2011             2009    2010     1H 2011
      2008 2009   2009   2010   2010   2011   2011


        Picture taken at a tram stop in Hong Kong, showing a part of HSBC’s omnipresent RMB marketing campaign
        Source for chart data: HKMA
                                                                                                                                     9
                              The resulting RMB realities you currently face
                                                                 Pick your field, according to your needs
                 OFFSHORE                                                             ONSHORE


               CNH                                       CNT                                       CNY

• Offshore participants only                    • Trade related CNY                 • Onshore participants only
                                                  (max 3 months!)
• Free circulation offshore                                                         • FX rate fixed by PBoC
                                                • FX rate linked to
• FX rate USD/CNH differs from                    CNY (CNT-CNY
  USD/CNY                                         fungible)
   • Currently CNH more                         • RMB agent bank
     expensive than CNY (strong                   needed (onshore
     demand faced with limited                    correspondent bank
     supply)                                      or BOC in HK or MC)
   • Spread will continue to exist
     as long as “flow back” and                          TRADE
     arbitrage opportunities are                     SETTLEMENT
     restricted                                         SCHEME

                         FLOW BACK
                         REGULATED


                                     Limited retail flows between HK and Mainland


                    CNY NDF                                                                        CNY
• Offshore non deliverable forward market                  Some arbitrage                     Forward market
• Linked to CNY FX but settled cash in USD




                                                                                                                  10
         Why would you use the RMB trade settlement scheme
             Access to a larger pool of trading partners at potentially better margins


                               Trade settlement in RMB
                                    What is in it ?
  For you as a corporate                               For your Chinese trade partner


Larger pool of potential
                           +                           +   Lower transaction costs
trading partners in RMB

Partner might agree to                                 +   No FX risk
sell lower / buy higher    +
in RMB
                                                           Increased competitive
Will have to manage the                                +   position
FX risk
                           !
                                                           …




                           Case by case assessment
                      to see whether the advantages of trade
                       settlement in RMB outweigh the costs

                                                                                     11
      What do we offer you to exploit the RMB opportunity?
                      We cover most operational needs of a corporate in HK and SG


                You want to                          We offer this in
                                            KBC Hong Kong    KBC Singapore
Open an RMB current account
          (for CNH and CNT)                                      
Buy and sell RMB forwards for
      Hedging purposes                                          
      Speculation                                               
Settle trade transactions in RMB
      In open account                                           
      Under LC                                                  
Discounting of RMB usance LC
      In RMB
      In FX
                                                 
                                                                
                                                                 
Invest in RMB
      Deposits                                                 
      Bonds and Equities                                       
Borrow in RMB
      Short Term Advance in RMB
                                                                 
      Trade finance products
                                                                 
      Bond and equity issuance
                                                                 
                                                                                12
                                               Opening a RMB account with KBC
                                     You see 1 RMB account, we manage 2 sub-accounts

      What you will see as a
  KBC Hong Kong corporate client

Just another account with one balance in CNY
     (CNY is the only ISO code for RMB)

                                                         Existing KBC Bank Hong Kong clients
 1000 EUR         1000 HKD          1000 CNY             can open CNY accounts by sending us an
                                                       instruction letter and after acceptance of the
                                                                     new account rules
   EUR              HKD               CNY
 account          account           account
                                                           New KBC Bank Hong Kong clients
                                                       can open CNY accounts based on the same
 1000 EUR         1000 HKD            250                documentation process as for any other
                                      CNH             currency. KBC Bank Hong Kong closely liaises
                                                        with the European branches and with local
                                      750
                                      CNT               secretarial firms in Hong Kong to ensure a
                                                      fast process that puts as little documentation
                                                             burden as possible on the client.
                                                         Physical presence in HK is not required.
 Two sub-accounts with each a balance and a
potential use. CNH can be used freely outside
China. CNT can be used for settling trade with
China but CNT nature expires after 3 months

       What we will manage as
        your corporate bank


                                                                                                    13
                               I want to pay my Chinese supplier in RMB
                              Possible with the CNT in your account with KBC Hong Kong


          YOU                                                                         YOUR SUPPLIER
Provide us with
• Payment instructions                                                               • Needs to be an
• Evidence of the trade                   TRADE TRANSACTION                            authorised Mainland
  related nature of the                                                                Designated
  transaction                                                                          Enterprise allowed to
                                                                                       settle exports in RMB
 €$£             CNY


  FX              CNY
account         account                                                               CNY            €$£

                                                                                      CNY             FX
                 CNH                                                                account         account
 €$£
                                            RMB clearing bank
                 CNT                        Bank of China                             CNY            €$£
                                            in Hong Kong
• Either you have CNT
  available (max 3                                                                  • Bank will return the
  months old)                                                                         money if your
• Or you exchange FX                                                                  supplier does not
  into CNT                                                                            meet the conditions

   KBC Bank HK                                                                           Local bank



Similarly, KBC Bank HK can issue import RMB LC’s towards your Chinese supplier. The settlement of
the LC will be done with your available CNT balance or after converting FX into CNT.

                                                                                                               14
                                         I receive RMB from my Chinese buyer
                     Possible to receive it as CNT on your account with KBC Hong Kong


          YOU                                                                              YOUR BUYER
Provide us upfront
with evidence of the
trade related nature, if                    TRADE TRANSACTION
not we must qualify
incoming RMB as CNH
 €$£              CNY


  FX              CNY
account         account                                                                   CNY            €$£

                                                                                          CNY             FX
                  CNH                                                                   account         account
 €$£
                                              RMB clearing bank
                  CNT                         Bank of China                               CNY            €$£
                                              in Hong Kong
• Either you keep CNT
  (max 3 months)                                                                        • Bank will return the
• Or convert into FX                                                                      money if your supplier
• Or transfer outside                                                                     does not meet the
  (making it CNH)                                                                         conditions

   KBC Bank HK                                                                               Local bank



Similarly, if you are the beneficiary of an RMB LC from your Chinese buyer, the settlement will be
done on you CNY account with KBC HK and will be qualified as CNT.

                                                                                                                   15
                                                                                  Questions and Answers

If you would like more information on our service offer, please do not hesitate to contact us.



Stefaan Stappers
General Manager KBC Hong Kong branch
+852 2879 3388
Stefaan.stappers@kbc.be


Jo Vander Stuyft
European Desk Corporate Banking
+852 2879 3372
Jo.vanderstuyft@kbc.be


Andre Liu
European Desk Corporate Banking
+852 2879 3412
Andre.liu@kbc.be

								
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