OREANDA-NEWS.  October 24, 2012. Growth of China's foreign trade export, one of the "three wagons" - economic drivers, shows sign of changes since January this year. The main reason is the sluggish global economy recovery plagued by the weak demand, reported the press-centre of ICBC.

Another reason is the shortage of liquidity to finance trade credits. With the continued slow global recovery and enraged risks, many multinational financial institutions are pulling back their capital to own countries. This affects the international balance of payments, and liquidity shortage as a result. According to statistics, currently over 90% global trades are supported by loans, guarantee, insurance and other trade finance services.

Trade finance services from banks not only allow companies to use their cash flow more efficiently by turning their account receivables into working capital first, but increase their credit rating with the support from the bank to reduce risk, settle the trade. In light of the credit disruption, financial services to support foreign trade enterprises is a good solution to support the steady growth of foreign trade export.

Foreign Trade Growth by Comprehensive Financial Services
The full range of trade finance services from ICBC, the largest bank in China, to sustain export growth is a good testament to the above judgment. Starting from this year, ICBC offers more international trade financing services to support the healthy growth of foreign trade companies, given some of them already have to face declining orders and rising cost. In January-August period, ICBC ranked No.1 among the domestic peers by providing over USD 140 billion in international trade facility, up 38.41% from a year earlier, to foreign trade enterprises covering import documentary bill, L/C finance, export invoice finance and packing loans. While maintaining a robust loan growth, ICBC also focuses on the control of risk in transactions, customers and guarantee, and monitors closely the logistic, document flow and cash flow of borrowers. As of end of August, ICBC's rate of non-performing international trade facility loans was only 0.29%, down 0.09 percentage points from the beginning of the year. Quality of ICBC assets remained stable.

In actual practices, ICBC's trade finance solutions are a main driver to export growth. Statistics showed that, in the first eight months of this year, ICBC settled export transactions amounted to USD 272 billion, a year-on-year increase of 22.27% and 15.1 percentage points higher than the growth of China's export trade. Meanwhile, from January to August this year, ICBC settled import transactions and non-trading transactions totaling USD 362.97 billion and USD 217.6 billion respectively. Worthy of note is that, ICBC steps up the support to provide trade finance solutions to companies in Midwestern and Northeast China, as these companies change their approach to expand internationally or engage in coastal business. The economic restructuring in these regions (China's export zones) is marked by the growth of international trade finance which is higher than ICBC's average.

ICBC also sets up own multi-currency clearing network in major financial centers around the world to help companies reduce the cost of exchanging currency. Today, ICBC has a clearing network providing round-the-clock services from USD Clearing Center in New York, EUR Clearing Center in Frankfurt and JPY Clearing Center in Tokyo. Nowadays, companies can remit money from overseas faster and cheaper, since it no longer needs to go through foreign banks outside China and domestic banks as before. ICBC provides global cash management services to 2,900 companies, available in 40+ countries/territories and customized to the needs of centralized management of company cash liquidity in different countries, in different banks, in different currencies, less financial cost, as well as mitigating risk in business operation spanning different countries.

Integrated Services to Help Companies Increase Competitiveness
As related by industry insiders, trade finance is different from liquidity loans. Importers and exporters need trade finance facility for their everyday business. Besides, there are many options. A borrower can use up to 35 trade finance solutions. Banks have to provide different solutions to meet the requirements of the customers, especially how customers settle their trades, the steps and their counterparties. ICBC branches/subsidiaries and foreign trade enterprises get together to discuss the import/export situation.

Depending on their requirements, tailored solutions on international settlement and trade finance are provided encompassing settlement, financing, wealth management under one roof. Under the "Service Supermarket" model, ICBC offers integrated services in settlement, financing, wealth management and risk management covering the whole process of international trade and extending to domestic trades. Supported by ICBC's cutting-edge technology and extensive overseas network, ICBC branches at home and abroad join hand to offer unique trade finance solutions for customers to expand internationally. For customers, ICBC trade finance solutions help them lower their cost, hedge against exchange rate risk, reduce the FX required for the payment and guarantee the collection of account receivables. For foreign trade companies, ICBC trade finance solutions help them improve export competitiveness.

Take shipping industry as a case in point. Some shipowners already feel the strain as credit has become scarcer from overseas banks this year. Shipowners who have paid in advance do not wish to give up or default on the contract, unless it is absolutely necessary. Trade finance is critical at this point of time. On this ground, ICBC launched the "Vessel Link", a new ICBC product designed for vessel export companies, whose business requires large capital, high-tech and involves complex payment, with due consideration on their business characteristics and actual issues. Based on the conventional trade finance solutions, ICBC provides rollover loan in line with the different stages of ship building, supplemented by forward settlement of different tenors. These ICBC loans, under good risk control, provide funding for shipbuilders to export their vessels.

Another example is the settlement services for Guangdong companies engaged in processing for re-export/import. Given their special requirements and market needs, ICBC launched a new solution designed for close-tied supply chain, which combines international trade service, international trade finance and domestic trade finance supply chain. This creative solution provides greater access for core companies and upstream suppliers in processing trade to get loans.

Financial Innovation to Address Real Issues of Companies
To improve the trade finance services, ICBC strictly follows national measures of promoting foreign trade to launch innovative financial services for exporters. On August 1, 2012, ICBC settled the first FX transaction in China under the new FX administration for trade in goods. The transaction involved FX payment (import) and FX collection (export) for Sinochem Plastics Co., Ltd and Sinochem Hebei Fuheng Co., Ltd, two subsidiaries under Sinochem. This is also the first import/export FX settlement since the new FX administration for trade in goods is in force. When compared as before, ICBC counter staff now save 73% time in handling one FX receipt on export, 64% time in making one FX payment on import, since it involves fewer steps. For import and export companies, this means higher working capital turnover.

Meanwhile, as many large companies see their export drop and foreign-invested companies also lose their export competitiveness, while serving them as usual, ICBC will provide more innovative products and services to private companies, small-and-micro enterprises as a new force to China's export.

Zhejiang Yiwu is the largest wholesale market for small commodities in China. Over 99% companies in Zhejiang Yiwu are small-and-micro enterprises (MSEs) and individual industrial and commercial households doing trading business. A majority of them are small import/export enterprises. Many small foreign-trade enterprises receive a lot of orders. Yet, a good many of them have the difficulty to produce guarantee for bank loan since they only rent business premises in Yiwu without owning any property. In the end, they have no choice but give up some of the orders because of working capital shortage. Yiwu's Zhejiang Shuangjia Garments Co., Ltd ("Shuangjia") is a case in point. Shuangjia mainly engages in the production and sales of shirts. The company is a typical export company with over 90% Shuangjia shirts sold to Russia, UK, South Africa, USA and other international markets. This year, Shuangjia joined many exhibitions and expositions in China and overseas and won a large number of customer orders. However, the company lacked the necessary working capital to expand production timely. After numerous visits, ICBC customer manager designed a tailored finance solution for Shuangjia. ICBC granted a credit line of RMB 7 million for Shuangjia's international trade to address its immediate need of working capital.

Tailored Financial Services for Companies Expanding Internationally
Besides offering loans, ICBC offers special services to help small-and-micro export enterprises expand internationally based on their individual needs.

Hangzhou Taida is a small export enterprise producing and selling hardware and fixtures, mainly to USA, EU countries/territories. During the last few years, the market gradually becomes a buyer market as a result of the global financial crisis. Nowadays, Taida has to sell on credit or delivery against acceptance, instead of L/C or collection, which are international settlement options generally used before. Taida worries about liquidity shortage if allowing buyers to buy on credit. Moreover, Taida does not have sufficient collateral to secure bank loan. Another worry is that, the creditability of foreign importers may change during the financial crisis. The risk is that the importer may not pay for Taida goods. ICBC, after knowing the Taida's dilemma and understanding on Taida's settlement options, Taida's importers and quality of Taida's export goods, offered a buy-out export factoring solution that covered USD 5 million of revolving facility without recourse. ICBC provided loan to Taida within the credit line of USD 5 million if approved by import factor. ICBC will assume the risks that Taida's importers will not pay or low creditability. To Taida, the solution does not occupy his credit line, and needs not worry about that importers will not pay. It also provides a new source for small export enterprises to get funding while international trade market is in the doldrums.

The RMB services of ICBC outside China represent a range of cross-border RMB products and services for corporate clients to save the currency exchange expense, and provide strong support for Chinese foreign trade enterprises to prevent collection risk and exchange rate risk. In January-August period this year, ICBC processed cross-border RMB settlements to the tune of more than RMB 1 trillion, doubling the turnover from a year earlier. So far, ICBC has opened 308 cross-border RMB accounts for other banks and a clearing network spreading 60 countries/territories, ranking No.1 among all banks in China.