What in your view are the prospects of cooperation between Chinese and Russian banking sectors?
According to the principles determined by the Financial Cooperation Sub-Committee of the Chinese-Russian Premiers Regular Meeting Committee, the main cooperation between Chinese and Russian banks are bilateral national currency settlement, actively expansion the use of national currency to carry out the project finance and trade finance cooperation, as well as in the fields of bank cards, insurance and financial supervision, etc.
Is it nowadays complicated for ICBC to operate as a bank in Russia? Are there any plans to expand banking business in the country? Are you looking at buying assets in local banks?
As of the end of June 2015, in terms of total assets, ICBC Moscow ranked 99th among 795 banks in Russia. Its market reputation and influence is steadily enhancing.
Being the biggest Chinese Bank in Russia in terms of its assets, ICBC Moscow has gradually entered the list of Russian local mainstream banks and its indicators continue to lead the Chinese Banks. In the beginning of this year ICBC Moscow has opened an additional office in Greenwood area in Moscow. In addition, St. Petersburg branch is also in preparation and scheduled to open this year.
A number of Russian companies have recently indicated that they would like to use local currencies (ruble and yuan) for trade settlements. Do you see the potential for yuan-ruble trade growth? How may its volume change in the next 5 years?
In the recent years, the internationalization of RMB continues to develop rapidly. In 2014 the portion of Cross-border RMB payments to China's local and foreign currency cross-border payments rose to 23.6%.
According to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) statistics, in December 2014, RMB has become the second largest trade financing currency, the fifth largest payment currency and the sixth largest foreign exchange currency in the world. As of the end of May 2015, the People’s Bank of China has signed the bilateral local currency swap agreement with central banks or monetary authorities in 32 countries and regions, with the total size of 3.1 trillion yuan.
As one of the largest banks in the world, Industrial and Commercial Bank of China operates with abundant capital and well developed systems (we have the leading FOVA system, powerful GCMS system, SUMMIT system, FMBM system, foreign exchange trading system and money lending system etc).
We have institutions all over 42 countries and regions with rich overseas business experience. ICBC is the first commercial bank who has CNY Clearing bank across Asian, European and American time zones in the world. 6 CNY clearing centers authorized by People’s Bank of China make ICBC the 24-hour non-stop clearing network in the world.
In addition, we also hope that Central Bank of Russia can think over and negotiate with People’s Bank of China as soon as possible for setting up a CNY clearing bank in Russia. CNY Clearing Bank can provide the Russian local financial market with CNY liquidity support channel, CNY funds return channel and the CNY bond issuing channel. The CNY Clearing bank can also take advantage of the 3 market-member qualifications (foreign currency market, bonds market and lending market) in mainland China authorized by People’s Bank of China to expand the CNY funds investment channel of Russian investors.
For Russian local financial market, CNY clearing bank can enhance the CNY clearing efficiency, decrease the CNY clearing cost and diversify the CNY investment and financing products; For Russian local commercial banks, the simplification of CNY transactions can create the conditions for the banks to carry out more CNY investments and financing products; For Russian local corporations, the continuous expansion of CNY funds, investments and financing products can facilitate the Russian corporations to use CNY for settlements in the trade with China, which will not only make the Russian corporations enhance the ability of negotiating prices, decrease the business costs, but also can make them using the spare CNY funds at hand to invest and get more profits.
That’s the reason why we think a CNY clearing bank should be established in Russia as soon as possible. ICBC, as the biggest bank dealing with the CNY businesses in the world, is willing to take the responsibility of being the CNY clearing bank in Russia.
Is ICBC planning to participate in the New Silk Road project together with Russian companies?
The Silk Road Economic Belt connects China and Russia, as well as the Central Asia and European countries. The construction of the Silk Road Economic Belt is the ambitious economic vision of cooperation among countries along it. All the countries shall make efforts together and move forward for the mutual-benefit and common secure destination.
May 9, 2015, China and Russia have signed the “Joint Declaration on the Silk Road Economic Belt construction and the Eurasian Economic Union docking cooperation”. In the declaration it confirmed that Russia supports the Silk Road Economic Belt construction and is willing to cooperate closely with China to push the declaration. China supports Russia in actively pushing the integration progress in the frame of Eurasian Economic Union and will start the negotiation in the field of trade cooperation with Eurasian Economic Union.
This joint declaration has laid the solid foundation for Russia and China to build the New Silk Road together.
ICBC will cooperate closely with the Russian corporations and participate together in the Silk Road Economic Belt construction. For the construction of Silk Road Economic Belt, ICBC has obvious advantages in the following 3 aspects:
First of all, ICBC has built the business network layout which highly matches the construction of Silk Road Economic Belt and the 21st century maritime Silk Road. Along the Silk Road there are 120 branches and subsidiaries involving 18 countries including Russia. The financing service is accessible to all the planning areas of the construction of Silk Road Economic Belt and the 21st century maritime Silk Road.
Secondly, ICBC has a wealth of business resources in the relevant fields of Silk Road construction. As of the end of June 2015, ICBC has supported 81 “one belt one road” projects, with the total financing amount of 11.6 billion USD. At the same time ICBC has reserved 130 commercial projects with good prospects, investments amounting to 158.8 billion USD, the projects involve electric power, communication, gas, oil, mining, telecommunication, machinery, park constructions and agricultural industries.
Thirdly, ICBC has built a multi Silk Road economic belt financial service system covering deposits and loans, settlements, trade finance, assets management, investment banking, private banking, cross-border RMB business and financial market operations and can provide a strong global service support for the enterprises.
Is investing in BRICS countries your priority or are you interested in other countries as well?
At the current moment ICBC has established 339 institutions outside China in 42 countries and regions and indirectly covered 20 African countries as a shareholder of Standard Bank Group. It has become the Chinese bank which covers the widest range of areas in the world. If our
overseas institutions were regarded as an independent banking entity, it could be one of the world’s top 100 banks in terms of scale and profitability.
A number of Russian companies and banks have indicated intent to enter Chinese debt market. What are their perspectives? What legislation and regulatory issues may they face?
September 28 2005, the international multilateral financial institution for the first time was permitted to issue the RMB bonds in China, the bond was named “Panda Bonds”. This is the first time for Chinese bond market to introduce the foreign institution issuers, it’s also an important measure and useful attempt for the Chinese bond market to open to the outside world.
It is of high significance for China to permit the international issuers in the domestic market to issue RMB bonds. First of all, it will help to promote the opening up of China’s bond market. Secondly, it helps to improve the current status of Chinese enterprises with low proportion of direct financing and helps to reduce the exchange rate risks of the enterprises. Therefore the international institutions including Russian institutions issuing RMB bonds in mainland China is bound to promote the healthy and rapid development of China’s bond market as well as the financial markets.
When in 2005 the first Panda bonds were issued, the “Interim measures of international development institutions issuing RMB bonds” regulated that the panda bond funds cannot be transferred to overseas, the funds can only be used for the investment constructions in mainland China. Later, as a part of Chinese debt capital market reform, Chinese government promised to loosen regulation of the investment funds into and out of China.
By 2012, China has made some amendments to the above-mentioned “Interim Measures” so that the funds obtained by the issuance of RMB bonds may be converted into foreign currencies and transferred to overseas use. As a result, large international companies and financial institutions have the motives to issue Panda bonds in mainland China. Besides the “Interim Measures” regulates that the financial institutions registered in mainland China should be the major underwriter and the bonds are sold to interbanks, not for individual sale.
VTB has recently been granted access to trading on Chinese interbank bond market. In your view, will it set a trend for other Russian banks to follow the case?
First of all I would like to make a brief introduction of the supervision and service framework of the Chinese interbank market. People’s Bank of China is Chinese interbank bond market regulator. China Central Depository & Clearing Co., Ltd (CCDC) and Shanghai Clearing House (SHCH) are the clearing organizations providing bond registration, custody, settlements, agency service for interbank markets.
China Foreign Exchange Trade System (CFETS) provides the trade system and organizes trades for interbank bond market as well as performs the function of the market frontline supervision. National Association of Financial Market Institutional Investors (NAFMII) is a self-discipline organization voluntarily consisted of the market participants, including interbank bond market, interbank market, foreign exchange market, bill market and gold market.
Approved by Chinese regulators, overseas institutions those can enter the Chinese domestic interbank bond market and conduct trading include: foreign central banks or monetary authorities, cross-border trade RMB settlement overseas participating banks, oversea RMB Clearing Banks, other oversea financial institutions that participate in cross-border service trade testing, Renminbi Qualified Foreign Institutional Investors (RQFII), Qualified Foreign Institutional Investors (QFII) as well as other oversea investors approve by the People’s Bank of China.
If Russian banks get the approval of entering Chinese interbank bond market, ICBC is willing to provide clearing agent, custodian and other services to help the Russian friends to conduct the bond investments and financing in the Chinese interbank bond market and open up a new channel for CNY assets increase. ICBC has great advantages in the field of custodian of QFII and RQFII: First of all, ICBC has a strong capital security guarantee and transaction capabilities.
As of the end of 2014, the total assets of ICBC have reached 20.61 trillion yuan and it is the largest bank in the world, in terms of total assets; Secondly ICBC possesses advanced systems and professional service team. As early as 1997, ICBC has become the first batch of traders on the tier one open market of People’s Bank of China. At the same time ICBC is the leader on the international market as well, it is the biggest investor, settlement bank and market maker in the Chinese interbank market.
It is biggest international RMB FX market maker. ICBC can provide one-stop service for Russian banks who would like to invest in the Chinese interbank bond market, including opening the onshore, offshore accounts, efficient trading and settlement, professional market analysis, etc.
ICBC is actively engaged in energy and aviation projects in Russia. What other sectors does ICBC consider perspective?
In terms of corporate finance, ICBC has maintained business contacts with Russian customers in many industries, in addition to energy and aviation, also include electricity, mining, chemical, oil and gas, telecommunication, retails, machinery, metallurgy and other industries.
Is ICBC discussing financing of Yamal LNG project with Novatek?
Yamal LNG project is an important project with cooperation of Novatek, China Petroleum and France’ TOTAL. In 2013, Chinese banks have signed a MOU with the project. According to the process of the project, if the customer has the financing demands in the future, ICBC will analyze carefully based on the relevant regulations and negotiate with the related industries in accordance with the commercial principals to carry out the follow-up work.
Are you interested in investing in Rosneft projects?
According to the requirements of the banking industry in China, ICBC cannot make the direct investments in the enterprises’ equity.
If there are good projects and enterprises in Russia looking for Chinese investors, since ICBC at the current moment has nearly 5 million corporate customers and more than 450 million individual customers, we can help Russian enterprises to look for the potential investors relied on our customer bases. In fact, we have already started the relevant work, we are assisting some of Russian projects to match with the Chinese investors.