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Chongqing Facilitating Cross-border Settlement, Fueling Development of Highland for Inland Opening-up

    On October 23, State Administration of Foreign Exchanges, Chongqing (SAFE-Chongqing) announced that China Citic Bank has established its International Business Operation Center in Chongqing, which is currently in trial operation. The center is expected to be put into formal operation as early as the end of this year.
    “The center is designed to provide cross-border settlement, financing and other comprehensive services nationwide. In the future, as its operation develops well, a remarkable increment will be added to the existing ten-billion-dollar cross-border settlement business, further promoting the size of settlement business.” says a head of the Department of International Payment of Chongqing Foreign Exchange Administration.
    In recent years, Chongqing has been driving forward reform in finance and foreign exchange, exploring ways to facilitate cross-border settlement, promoting facilitation in trade and investment, thus providing strong support for the development of the highland for inland opening-up.
    Under such circumstances, a batch of finance institutions, including the International Business Operation Center of China Citic Bank, and innovative cross-border finance settlement services were created.
    Multiple measures facilitating cross-border settlement
    Considering the incomes and expenses of HP and its features as well as demands in settlement globalization, SAFE-Chongqing and other authorities strongly supported HP to set up its settlement center in Chongqing in 2010. Since 2014, based on the experience of HP settlement center, transnational companies such as Quanta, Wistron and Lifan were successively supported in their centralized operation of foreign exchanges.
    In the year of 2011, Chongqing initiated in the country a new mode for non-financial companies to enter the market, without any precedent for reference.
    Since 2016, in order to back the international trade and financing settlement between Chongqing and “Belt and Road” countries and regions, relevant departments have been vigorously exploring financing rules for international trade on land based on land transport and multimodal transport, setting up systems for bill issuing, goods picking up, registering and inquiring and credit enhancement. Based on this, Chongqing has carried out, for the first time, financing business of L/C settlement and import bills for parallel-imported vehicles in the waybill of China (Chongqing)-Europe train.
    According to information, the efforts of Chongqing in facilitating cross-border financial settlement involve several aspects, mainly in centralized settlement and centralized operation of foreign exchange of global capital of transnational companies, pushing non-financial enterprises into market, pilot run of foreign exchange payment for cross-border e-commerce, establishing financing rules for international trade and financing on land and other aspects.
    By far, the measures have turned out to be obviously fruitful. According to statistics, HP’s settlement center has done settlement of $509.9 billion accumulatively as of the end of this August, 1/6 of the company’s global cash flow. The 11 transnational companies in centralized operation of capital has paid or received $46 billion in accumulative total. The fund of Lifan Group in foreign exchange market among banks reached $3.82 billion. And cross-border e-commerce has been on a steady rise, making an accumulative settlement of $3.57 billion.
    Enterprises saving settlement cost
    Behind the data lies the real benefit for enterprises in cross-border settlement facilitation, capital efficiency improvement, decreased settlement cost and risk in cross-border cash flow.
    Take Lifan as an example: By centralized operation of foreign exchange, the group is able to concentrate spare funds among its affiliates to compensate the parts in short of funds, thus lowering the risk in cross-border cash flow and upgrading the efficiency of capital allocation of the group.
    Moreover, thanks to the direct access to foreign exchange trade market among banks for “wholesale price” for foreign exchange trade, Lifan Group saves a large amount of foreign exchange cost. To be specific, for each dollar of foreign exchange, it saves 0.012 yuan compared with buying foreign exchange from banks in the past. According to calculation, the group saved over 60 million yuan in its cost of foreign exchange during the period from 2010 to this August.
    An executive from Lifan Group says with emotion, 20 years ago, the settlement procedure for cross-border funds in foreign trade was so complicated that approvals were needed from banks, business inspection, foreign exchange and other authorities. It was quite troublesome. Now, foreign exchange administration is oriented by demands of enterprises, which largely facilitates settlement of companies, giving spacious room for their trade and investment.
    Financial and foreign exchange service continually optimized
    Actually, Chongqing has benefited a lot, viewed from a comprehensive perspective.
    According to a head of the Department of International Payment of Chongqing Foreign Exchange Administration, the increasing facilitation of cross-border settlement brings a huge amount of fund to Chongqing and forms a sound layout. This expands the fund pool of the financial industry in Chongqing and further improves industrial service ability. Meanwhile, it also acts as a model, attracting a growing number of enterprises from home and abroad to move their headquarters to Chongqing and financial institutions also establishing settlement bodies in Chongqing.
    For instance, China Construction Bank, Agricultural Bank of China, Ping’an Bank and China Citic Bank are successively setting up regional or national functional headquarters for cross-border settlement and offshore businesses, proactively exploring new modes and new businesses.
    A set of figures from SAFE-Chongqing also indicates that, benefiting from continually optimized foreign exchange and other services, Chongqing has become more open to the outside world in recent years, showing momentum in foreign economy development. In 2016, the total volume of export and import trade of the municipality reached $62.8 billion and bank agent foreign payment reached $103.1 billion, a 63.1% and 65% growth respectively compared with 2012. In the first eight months this year, the two figures reached $40.9 billion and $74.7 billion, both ranking the first in central and west China.

   

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