“Our Shanghai branch has 46 members of staff, and the capital base for our business in China is substantial. We currently support about 350 corporate clients from our Northern European home markets, conducting business here”, says Juliette Xue-Lascoux, General Manager of SEB’s Shanghai office.
And doing business in China does, of course, differ from doing business in Northern Europe. This is partly due to the nature of Chinese regulatory practices.
“Firstly, anyone incorporated in China and doing business here can by and large only use onshore banks as their financial service providers. Secondly, the markets are often steered through political decisions, not always formalised through written rules. This enhances the need for a banking partner with local knowledge, an ear to the rail, and an ability to be in direct dialogue with regulators. Someone who can interpret the actual objectives, before providing advice to clients”, Xue-Lascoux continues.
The non-formalized decisions are called “Window guidance” and are used to communicate unofficial expectations, ranging from restrictions on dividend payments to limits on exchange rates in currency trading.
Another somewhat special feature of the Chinese market is the two different versions of the country’s currency, the Renminbi. There is the CNY, a domestic non-deliverable currency which can only be settled onshore in China, during the Chinese market’s opening hours. There is also the CNH, a currency used anywhere outside mainland China, in international trade. The CNH is fully deliverable and can be traded around the clock, just like EUR or SEK.
“In addition to Shanghai, we have offices in both Hong Kong and Singapore, allowing us to support clients in both onshore trading, within China, and offshore trading – that is, trading the Chinese currency from outside of China. We provide currency services, including hedging, for CNY as well as CNH”, says Chloe Merdjanian, Senior FX Sales for SEB in Singapore.
International trade, involving a multitude of currencies, always entails currency risks. In addition, being active in a market with capital controls and foreign currency regulations requires some extra considerations. This is one of the instances where SEB’s expertise and local presence can come in handy.
“An example can be found in a European parent company lending money to its Chinese subsidiary – funds which then need to be converted to Renminbi for local use. Due to China's foreign exchange regulations, converting the loan involves a high degree of complexity. We can help with that process, as well as provide a hedging strategy to manage the FX risk over the loan’s duration”, Xue-Lascoux says.
At the same time, Chloe Merdjanian stresses that SEB provides streamlined solutions for easy conversion and hedging of Chinese currency.
“Our FX China Connect service enables international companies to trade and hedge Chinese currency directly with SEB AB – just as they do with EUR, SEK, and NOK. Clients can access both onshore, CNY, and offshore, CNH, exchange rates from outside China. This is particularly useful for large transactions, such as dividend payments.”
Merdjanian continues:
“The difference between exchange rates for CNY and CNH, respectively, can be significant, and we help make sure our clients have access to the rate that is the most favourable at the time of converting.”
Summarising SEB’s Chinese offering, Xue-Lascoux concludes:
“We provide solutions tailored to the Chinese business needs of corporates from our home markets – the Nordics, UK, Germany and the Netherlands. Our local presence in the region means we can aid our clients in navigating the regulatory environment and managing their currency flows, both for the onshore and offshore Renminbi. All in all, we help ensure their Chinese operations run as smoothly and efficiently as possible.”