The Swiss Financial Centre – Ready for the Renminbi
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The Swiss Financial Centre – Ready for the Renminbi 1 Editorial 5 Renminbi set to become a major international currency 6 China and Switzerland: A longstanding relationship 8 Trade and investments 8 Tourism 9 Core values and strengths of the Swiss financial centre 10 Banking in Switzerland 11 Switzerland well-positioned for business in renminbi 11 Swiss banking competences in China-related business 14 China trade-related products and services offered by banks in Switzerland 14 Markets and advisory 16 Wealth management and private banking – core competences of Swiss banking 18 Asset management 20 Outlook 22 Swiss banks and Swiss foreign-owned banks with a presence in China 24 Editorial Commercial relations between Switzerland and China date China’s further development and arguably for the emer- back to the 17th century, spanning several Chinese dynasties gence of the global currency system of the 21st century. up to the formation of the People’s Republic of China in 1949. Only a few months thereafter, Switzerland recognised Renminbi internationalisation started in earnest in 2008 du- the new People’s Republic of China – one of the first Western ring the global financial crisis. China’s central bank signed states to do so. In the mid-1950s, Swiss banks were among bilateral renminbi currency swap agreements with eight the first Western banks to establish correspondent banking central banks totaling over 800 billion renminbi. A year later, relationships with Chinese banks. Today, our two countries China introduced a pilot scheme for cross-border renminbi have very strong relationships and there is no doubt that the trade settlement which soon expanded to all of China and free-trade agreement will deepen them even more. to a large group of trading partners. Since March 2012, all licensed mainland exporters and importers can settle in Over the last few years, the Swiss financial centre has been renminbi with companies outside China. An important revamping its value proposition for renminbi business, ser- stepping stone was Hong Kong. Over the last decade, it has ving clients in China as well as clients in Switzerland and developed into a global hub for the offshore renminbi and other locations around the world. Renminbi accounts with has established an active interbank offshore renminbi mar- banks in Switzerland are available to private and corporate ket and offshore renminbi clearing. The offshore renminbi clients, and a rapidly growing number of products and ser- has become a de-facto currency and is used for lending, vices are available to commodity trade finance, private ban- trading, invoicing, payments, securities transactions and as king, and asset management clients. Furthermore, a num- a store of value. In this regard, Swiss investors are major ber of major Swiss banks are present in China and more buyers of offshore renminbi-denominated dim sum bonds. than a dozen are active in Hong Kong, where they use their local operations for renminbi payments and clearing. As il- Eventually, the renminbi is bound to become a global re- lustrated in this brochure, the Swiss financial centre is well- serve currency. By 2020 the renminbi will possibly be one positioned to serve both Chinese and international clients of the top three international reserve currencies and an on the mainland and abroad. important investment currency. With its full range of pro- ducts and services, Switzerland is well-positioned to serve A Chinese proverb says that a cautious man crosses a river all client needs in Switzerland and abroad. step by step from one stone to the next. This approach to venturing into potentially risky and unknown territory im- plies both prudence and persistence. Chinese authorities have taken the same approach for the internationalisation of their currency, an undertaking of great importance for Patrick Odier, President of the Swiss Bankers Association 4 Geneva, the most international city of Switzerland 5 Renminbi set to become a major international currency Short history of renminbi internationalisation 2002 Introduction of Qualified Foreign Institutional Investor scheme Late 2008 Renminbi internationalisation begins in earnest with rise of global financial crisis China has become the world’s second largest economy, its Similarly, the renminbi has taken on a growing role in for- 2010 Expansion of offshore renminbi trade settlement to all of China leading exporter, the largest holder of foreign currency re- eign direct investments into China and outward invest- Hong Kong Monetary Authority permits issuance of offshore renminbi bonds in Hong Kong serves, and a major source and recipient of foreign direct ments from China. Foreign direct investments denominated and allows financial institutions to open offshore renminbi accounts investments. By 2016, the International Monetary Fund ex- in renminbi amounted to 35% of inward foreign direct in- 2011 January pects China to account for over one-third of total global vestments in 2012, while outward investments in renminbi People’s Bank of China launches scheme for settling foreign direct investments in renminbi economic growth. totaled 6% and continue to grow rapidly. August Vice-Premier Li Keqiang affirms central role of Hong Kong for renminbi internationalisation The Chinese government has begun to promote the inter- Rising trade and investment flows in renminbi produced an December nationalisation of the renminbi. According to the Renmin- expanding pool of liquidity of 900 billion at the end of last Renminbi Qualified Foreign Institutional Investor scheme permits offshore renminbi investments bi Globalisation Index published by Standard Chartered year. Renminbi financing and foreign exchange markets in China Bank, internationalisation of the renminbi has seen a se- have reached an estimated daily turnover of 13 to 25 billion 2012 March ven-fold increase since December 2010. The renminbi is for spot and forward transactions. All licensed mainland exporters and importers permitted to settle in renminbi with companies taking on a growing importance as both an onshore and outside China offshore currency. In a series of steps, the Chinese government has raised the Spring quota for qualified foreign institutional investors to invest Expansion of Qualified Foreign Institutional Investor scheme from 30 billion US dollars to As a global payment currency, the renminbi has moved offshore renminbi in the Chinese stock and bond markets 80 billion US dollars from position 35 in October 2010 to number 13 in only two to 270 billion. London aspires to become Europe‘s renminbi hub years. Some 12% of China’s external trade is currently settled June in renminbi, an almost six-fold increase in three years. To- China’s central bank has authorised Chinese banks in Hong Launch of direct trading between renminbi and Yen day, more than 10,000 financial institutions conduct busi- Kong, and recently also in Taiwan and Singapore, to do off- August ness in renminbi, up from 900 two years ago. By 2015 Chi- shore renminbi clearing. Taiwan signs memorandum of understanding for renminbi clearing with China nese companies expect one-third of Chinese external trade November to be renminbi-denominated. By the same year, more than In addition, Chinese authorities have announced the intro- 18th Congress of the Communist Party reaffirms financial sector reform and further renminbi half of China’s trade with emerging markets amounting to duction of the China International Payment System by internationalisation 2 trillion US dollars is likely to be settled in renminbi. 2013, which will integrate offshore payment systems into 2013 February China’s domestic payment scheme CNAPS. Launch of clearing of offshore renminbi business in Singapore April Australia and China agree to direct CNY-AUD trading June Bank of England and People‘s Bank of China agree on RMB 200 billion RMB-GBP swap line 6 7 China and Switzerland: A longstanding relationship In the mid-17th century, traders and missionaries from first country in Europe (with the exception of Iceland) to 2012). Some 300 Swiss companies with over 700 branches Switzerland established contact with the Chinese Empire. have negotiated such an agreement. are present in China, employing around 136,000 people in Trading relations developed at a rapid pace, leading to the China as at year-end 2010. This corresponds to 5.1% of the opening of a Swiss trading agency in Shanghai in 1912. Trade and investments total workforce employed by Swiss companies abroad. In 2012, China’s exports to Switzerland amounted to 10.3 Swiss capital stock in China amounted to 8 billion Swiss The first official contacts between the two countries were billion Swiss francs, somewhat higher than Swiss exports to francs in 2010 and 13 billion Swiss francs in 2011. made in 1906. Relations between Switzerland and the Re- China, which totaled 7.8 billion Swiss francs. The majority of public of China were codified in a treaty of friendship in exports from Switzerland consist of machinery and electro- Chinese foreign direct investments into Switzerland incre- 1918, a few years after the fall of the Qing dynasty. nics (28.3%) as well as watches and jewels (32.2%). Similarly, ased by almost 10 million US dollars to 84 million US dol- China’s main exports to Switzerland are machinery and lars as per October 2012. In 2011, around 50 Chinese firms Switzerland recognised the newly-established People’s electronics (40.3%). Swiss exports to emerging Asia have were present in Switzerland (twice as many as two years Republic of China on 17 January 1950 – one of the first almost tripled since 2000, compared to an increase of 60% prior), including Sinopec, CBC, Suntech, Huawei, Neusoft Western states to do so. The People‘s Republic of China of all Swiss exports from 2000 to 2011. and Alibaba. made its first appearance on the international stage when Chinese Premier Chou En-lai took part in the Indochina Although China has largely liberalised the use of the ren- Tourism Conference in Geneva in 1954.