The Swiss Financial Centre – Ready for the Renminbi

1 Editorial 5

Renminbi set to become a major international currency 6

China and : A longstanding relationship 8 Trade and investments 8 Tourism 9

Core values and strengths of the Swiss financial centre 10 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 , 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. minbi for trade purposes, and is encouraging its use in for- The number of tourists visiting Switzerland from China has eign direct investments, the renminbi has not played a more than tripled since 2008, rising from 265,000 that year Switzerland was also one of the first countries to enter discernible role in trade and investments between Swit- to over 800,000 in 2012. Measured strictly in hotel over- into commercial agreements with the People‘s Republic zerland and China to date. Around 90% of Swiss exports nights, guests from China accounted for 7.4% of all foreign of China. A trade agreement became effective in 1974, a and imports are still conducted in Swiss francs, Euro and tourists to Switzerland in 2012. civil aviation agreement in 1975, a nuclear cooperation US dollars. agreement in 1986, an investment protection agreement It is likely that some of these visitors took advantage of in 1987, a scientific and technology cooperation agree- According to the Swiss Export Risk Insurance, new engage- Switzerland’s central position in Europe. Located in the ment in 1989, and a double taxation agreement in ment in insurance policies to China amounted to 263 milli- same time zone as Germany, France and , and being 1989/1991. Since the launch of Deng Xiaoping’s policy of on Swiss francs as at year-end 2012. This is a three-fold incre- one hour ahead of the UK, important European touristic liberalisation and reform in 1979, bilateral relations bet- ase compared to 2010 (CHF 86.5 m). The Swiss Export Risk and business destinations such as London, Paris, Brussels, ween Switzerland and China have developed at a brisk Insurance’s engagement is split into US dollars, Euro and Berlin, Frankfurt, Rome, and Madrid, are only a short flight or pace. In 2007, Switzerland formally recognised China as a Swiss francs. To date, there is no engagement in renminbi. train ride away. These are qualities that make Switzerland market economy. attractive to both, tourists and business travellers. In 2012, Swiss foreign direct investments into China moved In May 2013, China and Switzerland agreed to sign a com- up into the top 10 of foreign direct investments into China, prehensive free trade agreement, making Switzerland the amounting to 809 million US dollars (January – October

8 9 Core values and strengths of the Swiss financial centre

Swiss banking is unique because it rests on four core values racterised by close consultation and co-operation. In a Banking in Switzerland Switzerland well-positioned for that are distinctively Swiss: Excellence, stability, universality world marked by instability and uncertainty, Switzerland’s According to the 2013 IMF Global Financial Stability Report, business in renminbi and responsibility. These values are the reason for the con- experience in upholding internal and external peace and Swiss banks are the best capitalised worldwide and there- In view of the before-mentioned values and assets of the tinued success of the Swiss financial centre and they are stability make it the ideal location for doing business. fore extremely safe. The entire Swiss financial industry is Swiss financial sector, Switzerland is well-positioned to grounded firmly in the history and . tightly regulated to ensure that the reputation of Swiss function as a conduit for business with China and for use of Switzerland is a small country, but it is home to four diffe- banks remains intact. The Swiss regulator FINMA strictly the renminbi. The Swiss financial centre’s strengths include Historically, the conditions for economic success were not rent cultures and languages. This linguistic and cultural plu- supervises the banking industry, and Swiss banks also face an excellent financial market infrastructure, an innovative the best in Switzerland. The country has no natural resour- rality is the base for the global outlook of the Swiss econo- regular audits by independent examiners. and liquid financial market with a broad range of financial ces except for water, faces unfavourable climatic conditions my. Today Switzerland has one of the most open economies services, a reliable legal system and robust regulatory struc- and is landlocked in the middle of Europe. Thus, for genera- in the world and derives half of its gross domestic product A cross-section of the business reveals that Switzerland is a tures. The Swiss financial centre also offers favourable con- tions the Swiss had no choice but to distinguish themselves from export. Mirroring the diversity and heterogeneity of leader in cross-border private wealth management with a ditions for the offshore renminbi business with its high le- through diligence, professionalism and reliability if they the country, the Swiss banking system is based on the uni- share of 27% (2011) of the global market. It is also a top lo- vels of assets under management and its key role in wanted to succeed. The world famous and versal banking model which provides for a wide variety of cation for managing institutional assets for pension funds, international commodity trading. Swiss watches are just two examples of the results of this financial services that meet all needs and purposes. insurance companies, sovereign wealth funds, family offi- continued quest for the highest quality and perfection. ces and corporates. Institutional assets under management Swiss banks based in Hong Kong have offered a range of Such excellence is also a distinctive trait of Swiss banking, The actions of the Swiss banks are guided by a strong sense amount to around 2.5 trillion Swiss francs (2011). offshore renminbi products and services for some time. with its focus on quality, professionalism, innovation and of integrity and responsibility – towards their clients, soci- Several of these have begun to offer renminbi products to value for clients and shareholders. ety and the economy as a whole. This sense of responsibility Swiss banks have also been an enabling factor in commo- their Swiss and European clients and to book in Switzer- is pervasive throughout the profession and enshrined in dity trading by providing commodity trade finance exper- land. Most large and medium-sized banks clear renminbi The stability of Switzerland’s political and economic system Swiss law as an obligation of diligence and loyalty. This is tise and products, as well as first-class inspection and cer- payments either through an offshore renminbi account at is almost proverbial. Thanks to its tradition of neutrality in evident in the tradition of firmly protecting financial privacy, tification services. Over the past two centuries, Switzerland the Bank of China Hong Kong or through a correspondent foreign policy, the country in the centre of Europe has enjo- but also extends to other areas and to other stakeholders. has become a global trading hub for physical commodi- bank with an offshore renminbi account at the Bank of yed peace for more than 150 years. But peace and stability ties. Centred around Geneva and a second hub in the gre- China Hong Kong. The use of the renminbi will further be- are also a distinctive feature of the country’s internal political ater Zurich area, it boasts more than 500 firms with around nefit from the strong presence of Swiss banks in Singapore set-up. The government is composed of all relevant political 10,000 employees and contributes 3.6% to Swiss gross do- and its recently acquired capability to clear renminbi busi- parties according to their strength, and whenever possible, mestic product. According to the Geneva Trading and ness locally. it takes its decisions unanimously. This striving for dialogue Shipping Association, Geneva is among the world leaders and co-operation can also be found in the realm of the eco- for trading a variety of commodities. It holds one-third of nomy. The relationships between employers and emplo- global market share for crude oil and crude oil products. It yees are governed by the spirit of the “work-peace” agree- is the market leader for coal and oil seeds, and shares the ment that dates back to the 1930s and prevents strikes. The top spot with London for cotton trading. Also, it is the relations between government and industry are also cha- number-one trade for sugar in Europe.

10 11 12Zurich, the economic and financial centre of Switzerland 13 Swiss banking competences in China-related business

Banks in Switzerland offer a wide range of products and ser- Some advantages of invoicing and paying in renminbi are vices that will help to further establish the renminbi in Swit- likely to be: Favourable borrowing cost, lower foreign ex- Renminbi trade-related product shelf zerland and strengthen the internationalisation of the Chi- change risk and improved supplier access. For foreign firms Products/Services nese currency. Banks with presence in the People‘s Republic that buy and sell goods in China, the use of renminbi will Renminbi current accounts of China, Hong Kong or Singapore, are expanding their pro- provide a natural hedge. It can also lower the cost of ope- Offshore renminbi payment services duct shelf in Switzerland. rations on the mainland. In the offshore renminbi market, Offshore renminbi lending firms can manage their renminbi exposure using options Trade finance and export finance (to date primarily in US dollars, Swiss francs or Euro, but renminbi products will China trade-related products and services and forwards. Chinese clients may prefer to transact in be introduced if market demand grows) offered by banks in Switzerland their local currency, which should help foreign firms to – Import and export letters of credit; transferrable back-to-back and standby letters of credit; import and export Financing trade has been the prime channel of renminbi broaden their network of Chinese buyers and suppliers. documentary collections; guarantees; letters of indemnity internationalisation to date. There are no precise figures for This would render supply chains less dependent on cur- – Export finance loans to producers, sellers and buyers contingent upon insurance by Swiss Export Risk the current use of renminbi for inbound and outbound Si- rency movements. The Chinese central bank estimates that Insurance agency no-Swiss trade, but if we assume that the renminbi will at- overseas importers paying in renminbi could save 2 to 3% – Securitisation guarantees tain a 20% share within the next decade, we will likely see on their invoices. – Export finance commercial credits (not insured by Swiss Export Risk Insurance agency) an increase of renminbi invoiced or settled trade by a factor – Research and advisory services of 5 to 10. Furthermore, sizeable foreign direct investment activities denominated in renminbi offer opportunities for advisory This figure is likely to be even higher if parts of commodity and capital market services for Swiss banks. Switzerland has trade in Switzerland become renminbi denominated. Em- become a preferred location for headquarters and treasury ploying 1,700 people, Switzerland has become a leading centres for companies operating worldwide in various sec- centre for commodity trade finance. In 2011, it reached a tors. They too require banking infrastructure including ac- volume of approximately 1,500 billion Swiss francs. cess to capital, funding, investment opportunities and hedging capacities in all global currencies, as well as speci- So far, commodity trade finance is predominantly US dollar- alist know-how from law firms, accountants, auditors etc. based, but continued renminbi internationalisation will likely lead to the use of renminbi-based trade and export finance products.

14 15 Markets and advisory In Switzerland, 44 renminbi-denominated Eurobonds were Renminbi investment capabilities go hand-in-hand with A number of banks in Switzerland are able to provide pro- Foreign exchange products and services are at the core of traded on the SIX Swiss Stock Exchange as per January strong macro and micro research in China. Banks will need ducts and research for their clients. The work of the Asia trade, banking, and wealth management. A growing num- 2013. In the fourth quarter of 2012, turnover of renminbi significant support from Asia/China specialists if they do economic research units of several banks in Switzerland has ber of banks with a presence in Switzerland cater to their bond trading amounted to 8.5 million Euro which made not have their own in-house teams in China themselves. regularly won important awards. Some publications are clients’ renminbi product needs across a broad range of risk the renminbi the sixth-most traded foreign currency on the Large banks with a local presence in China can provide re- available to the general public, others only to clients. and investment horizons, mostly by offering offshore ren- SIX. The SIX also offers an attractive listing environment for search and other services to small and mid-sized banks in minbi-based products such as dim sum bonds. Eurobonds, which grants direct access to the deep pool of Switzerland and the European Union. capital in Switzerland. The market for dim sum bonds – bonds denominated in offshore renminbi and issued in Hong Kong – has grown China has relaxed its rules for the overseas listing of Chinese rapidly. The first offshore renminbi bond was issued by the companies and there are over 800 companies awaiting ap- Renminbi markets and advisory product shelf China Development Bank in 2007. Issuers since then inclu- proval for initial public offerings in China. A company can Products/Services Clients de the People’s Republic of China, Chinese banks and cor- apply at the China Securities Regulatory Commission to list Renminbi current accounts For individual, corporate and bank clients porates, and non-Chinese corporates, the latter making up overseas if it complies with the market standards where it Renminbi fixed term deposits For individual and corporate clients the lion’s share of issues. Though offshore renminbi bond wants to list. The primary beneficiary of the more liberal re- Renminbi lending For corporate clients issuance has been effectuated primarily in Hong Kong, Lon- gime will likely be Hong Kong, but some Chinese firms will Lending against renminbi collateral For corporate clients don has recently begun to follow suit; reportedly a sizeable consider listings in Europe. With its market-oriented regula- FX spot in offshore renminbi deliverable or For individual and corporate clients outside the People’s share of the investors hailed from Switzerland. tory environment, Switzerland offers an attractive listing non-deliverable Republic of China FX forward, FX swaps and FX options in offshore For individual and corporate clients outside the People’s process on the SIX. This efficient and cost-effective way to renminbi deliverable or non-deliverable Republic of China Dim sum issuance list allows companies to raise capital for further growth and Treasury services to increase visibility amongst an international investor base. 44 renminbi-denominated Eurobonds have been listed on the SIX Swiss Stock Exchange. In addition, the Chinese government and central bank are Chinese firms can be listed on the SIX. Economic, currency and investment research taking steps to further liberalise interest rates (e.g., for de- posits) and the renminbi exchange rate. The daily fluctu- ation band vis-à-vis the US dollar was doubled in 2012 to 1% and may be allowed to double again to 2%. This will lead to higher volatility and increase demand for risk manage- ment products such as foreign exchange and interest rate swaps, options and forwards.

Source: Bloomberg, Reuters

16 17 Wealth management and private banking Swiss financial centre is well-positioned to serve both Chi- – core competences of Swiss banking nese clients on the mainland and abroad with its full range China-oriented renminbi private banking product shelf China will continue to grow, and will at the same time shift of products, as well as non-Chinese clients in Switzerland Products/Services Volumes (estimates) towards a more consumption-driven society with a midd- and around the world with renminbi products and services. Offshore renminbi private banking current accounts Thousands of accounts le-class numbering in the hundreds of millions. The new Assets in custody or under management 10 – 20 billion renminbi Chinese President, Xi Jinping, confirmed that “China will in- Diversification has been a core competence of Swiss banks Fiduciary deposits Hundreds of accounts with billions of renminbi crease its effort to raise domestic consumption and genera- for decades. Hailing from a country outside of the domi- in assets under management te new areas of consumption growth”. nant currency blocks, Swiss banks have served their inter- Fixed income Billions of renminbi national clients by offering “outside the box” investment Structured products Hundreds of millions of renminbi Mutual funds Hundreds of millions of renminbi Financial wealth in China has increased rapidly during the strategies, including – but not limited to – - last decade. High net worth individuals – defined as having based products. In addition to diversification, another up- financial wealth exceeding one million US dollars – number side is the likely appreciation potential of the renminbi more than one million. Several hundred Chinese from the against the US dollar and other currencies. As the renminbi mainland are US dollar-billionaires according to a compilati- product shelf shows, clients can almost as easily have ac- on published in the “Hurun Report” (2013). Over the next ten counts in renminbi as in Euro or Yen.Thousands of clients years, some 83 million Chinese will graduate from college. hold such accounts, with assets in custody or under ma- As a consequence, Chinese citizens will accumulate finan- nagement exceeding 10 billion renminbi. cial wealth and require investment opportunities and wealth management services. Wealth management pro- Renminbi and Swiss franc appreciating duct issuances have already dramatically increased in China.

Investors in Switzerland, Europe and around the world will continue to invest in Chinese and/or renminbi-denomina- ted assets. Drivers will be the better economic and growth prospects of China compared to the low and slow growth in Europe and the United States, the low interest rate envi- ronment in most developed regions, and a general trend towards diversifying risk across a broader range of asset classes and currencies.

Source: Datastream Switzerland is a leader in cross-border wealth manage- ment, with a share of 27% (2011) of the global market. The

18 19 Asset management Access from abroad to the Chinese equity market can be Switzerland is a leader in managing institutional assets for complex due to several share types, multiple listings, cur- China-oriented renminbi asset management product shelf pension funds, insurance firms, sovereign wealth funds, fa- rencies, and restrictions. However, exchange traded funds Products/Services Volumes (estimates) mily offices, and corporate clients. Institutional assets ma- have made it easier to access multiple corners of the mar- Money market funds Tens of millions of renminbi naged by Swiss banks total around 2.5 trillion Swiss francs. ket, with more than 130 China-focussed products listed in Fixed income funds Billions of renminbi in assets under management 22 countries and 39 billion US dollars in assets under ma- Exchange traded funds 9 exchange traded funds listed on the SIX with assets In line with Switzerland’s importance as a major commodi- nagement. Exchange traded funds offer access to both the under management of 119 million US dollars ty trading hub, investments in commodity-based products onshore and the offshore market, as well as various sectors, Alternative investments Tens of millions of renminbi have increased from 4.3 billion Swiss francs in early 2007 to styles, and strategies providing intra-day liquidity to inves- Equity funds Hundreds of millions of renminbi around 37 billion Swiss francs in late 2012. This encompas- tors around the globe. ses primarily (active and passive) investment funds and exchange traded funds. The investments are largely in In April 2012, China announced a 50 billion renminbi quo- gold funds backed by gold physically stored in Switzer- ta specifically for the creation of exchange traded funds land. The SIX lists 120 exchange traded funds and 36 ex- that invest in the domestic A-share market. China-related change traded products referencing commodities. exchange traded funds have become the fourth-most po- pular exchange traded fund asset class globally, and at- Swiss financial firms are well-positioned to serve Chinese tracted 25 billion renminbi of inflows in 2012, second only clients on the mainland by using the Qualified Domestic to US funds. Institutional Investor scheme. This scheme enables Chine- se institutions to invest in foreign assets. Likewise, Swiss China permits foreign hedge funds to tap domestic assets firms serve clients in Switzerland and around the world and invest them overseas once they have obtained a licence with an interest in renminbi products. The main channels under the Qualified Domestic Limited Partner programme. for equity and bond investments in China are the Qualified Foreign Institutional Investors scheme for investments in foreign currency, and the Renminbi Qualified Foreign Insti- tutional Investors scheme for portfolio investments in off- shore renminbi. Banks based in Switzerland have sizeable quota and licences, making them prime actors in the above- mentioned schemes.

20 21 Outlook

If the past is any guide, the demand for China-related ex- Swiss and international firms in Switzerland will be attrac- pertise, products and services will continue to grow. Chine- ted by the possibility of facilitated renminbi transactions se tourists in Switzerland will number in the millions, trade with the Chinese market, important for both production and particularly investments will further increase and the and sales. Switzerland could gain a vantage point for the Chinese securities and derivatives markets will open and treasury units of multinational firms thanks to the facilitated unfold. Given the uncertain timeline for full liberalisation of access to the onshore renminbi which helps reduce the China’s capital account, markets for both the onshore ren- cost for both trade and investments. The same advantage minbi and its offshore siblings are bound to expand further. would benefit Swiss banks which handle this business. As a result, Switzerland could become a location of choice for Traditional strengths of Swiss industry and the Swiss finan- corporate services. cial centre should receive a further boost when the com- prehensive Free Trade Agreement with China takes effect. Private banking and asset management benefit from libe- Switzerland was the first country in Europe (with the excep- ralised access to the Chinese market. This provides new in- tion of Iceland) to conclude such an agreement with China. vestment opportunities and positions Switzerland for glo- bal diversification. Traditional Swiss financial centre In its white paper on the future of Swiss financial markets, strengths in wealth management and asset management the Swiss government declared in December 2012 its re- could cater to the huge need for managing private and in- solve to make Switzerland a hub for renminbi business. Ef- stitutional assets in China. Manageable wealth and demand forts are under-way which might eventually lead to the for wealth management services in China will increase as a establishment of a RMB-CHF swap line between the result of economic growth, a growing middle-class, longe- People‘s Bank of China and the . This vity and a liberalising economy. At the same time, investors would greatly facilitate renminbi clearing by a bank loca- outside of China will continue to diversify into Asian and ted in Switzerland, lowering transaction costs and high- Chinese securities and currency markets. They will ask for lighting Switzerland’s position as a European hub for China products, risk management instruments and related re- and renminbi business. search and advisory services. Financial firms based in Swit- zerland have the expertise to provide these services along The Swiss National Bank could benefit from an additional the value chain. opportunity to diversify its exchange rate policy and at the same time build closer ties with its counterpart in China. Strengthened co-operation gives access to market intelli- The People‘s Bank of China seeks to increase liquidity in its gence and knowledge, granting Switzerland a vantage markets and currency and is establishing strategic ties with point as a gateway to the Chinese market and economy. central banks around the world.

22 The Great Wall of China, the longest man made monument in the world 23 Swiss banks and Swiss foreign-owned banks with a presence in China

The Swiss financial centre is well-positioned to serve both UBS: UBS and its affiliates today have a staff of around 560 Chinese clients on the mainland and abroad with its full in Beijing, Shanghai, Hangzhou, Shenzhen and Guangzhou. range of products, as well as non-Chinese clients in Switzer- UBS‘s key operating platforms in China include UBS Securi- land and around the world with renminbi products and ties Co. Limited (UBSS), UBS (China) Limited, UBS SDIC Asset services. Several Swiss banks are present in mainland China, Management Limited and UBS Global Asset Management and more than a dozen are active in Hong Kong. (China) Limited, offering clients investment banking, wealth management and asset management services. UBSS, a col- Credit Suisse (CS): CS established ties with the Bank of laboration between UBS and domestic partners approved China as early as 1955 and opened a representative office by the State Council that was launched in 2006, has be- in Beijing in 1985. Since then, CS has steadily expanded come one of the top securities companies in China. UBS’s both its presence and business activities in and with China. wealth management and asset management businesses Today, CS is physically present in Beijing, Shanghai and Gu- are also developing steadily. In June 2012, the UBS Beijing angzhou. It has an asset management joint venture with branch was granted the status of a wholly foreign-owned Industrial and Commercial Bank of China (ICBC) and con- bank. UBS aims to build a long term, sustainable presence ducts securities business through the Credit Suisse Found- in China that contributes to the overall stable development er Securities joint venture. CS has obtained both QFII and of China’s financial sector. QDII status and has acquired a licence for RMB operations. China continues to be of strategic importance to clients of – first firm to receive QFII licence, May 2003 CS as they relocate production facilities to China, expand – first investor in a Sino-foreign fund management joint distribution networks and invest in the country’s growth venture (UBS SDIC Asset Management Limited) in segments. China remains a key focus market for CS in the which the foreign stake reached the 49% upper limit APAC region. – first and only international financial services firm to manage a fully licensed securities company (UBS – first-ever representative office of a Swiss bank in China, Securities Co. Limited) May 1985 – first Swiss bank to set up a wholly foreign-owned bank – first-ever frame loan agreement with Chinese counter- in China (UBS (China) Limited) part, January 1990 – first-ever IPO for PRC issuer abroad, October 1992 – first Sino-foreign investment banking joint venture approved in second round of Sino-foreign joint ventures licensed in China

24 Shanghai, China‘s economic engine 25 Zürcher Kantonalbank (ZKB): ZKB opened its office in network in mainland China comprises 144 outlets inclu- Beijing in March 1998. The largest Swiss cantonal bank fo- ding 28 branches throughout China, and offers a full range cusses on trade and export transactions for Swiss exporters of specialised banking and financial services in mainland and importers. The representative office in China plays an China. HSBC has become the leader in CNH services. important role in accommodating this business and sup- ports extensive relationships with numerous Chinese corre- Bank Julius Baer: Firmly established as Julius Baer’s second spondent banking partners. Zürcher Kantonalbank is in a home market, Asia is an important part of the growing glo- position to take country and commercial risk in China if re- bal investment universe. In China, the Bank was granted an quested by its clients. Corporate and SME clients are wel- investment quota under the QFII licence in 2011 – the first come to meet the bank’s representative in Beijing who has such permit given to a private bank. Based on this quota, a profound knowledge of international trade and the Chi- Julius Baer launched a China fund which allows clients to nese market. Since 2012, Zürcher Kantonalbank has provi- directly access the growing domestic equity and bond ded market making in CNY Offshore (CNH) denominated markets. This complements other renminbi-denominated fixed income and foreign exchange products which allow product offerings, including conversion services, accounts, clients to invest in the CNY offshore market. currency-linked investments and bonds. Responding to cli- ent demand, Julius Baer applied for an additional QFII in- HSBC: Established in Hong Kong and Shanghai in 1865, vestment quota in 2012 which allowed the bank to launch The Hongkong and Shanghai Banking Corporation Limited a new Julius Baer China Fixed Income Fund. In 2012, it also is the founding member of the HSBC Group – one of the signed an agreement with Bank of China enabling Julius world‘s largest banking and financial services organisations Baer to offer fiduciary deposit facilities in offshore renminbi with around 6,900 offices in over 80 countries and territo- (CNH). With its representative office in Shanghai, the bank is ries – and its flagship in the Asia-Pacific region. HSBC Limi- deepening its grasp of the strategically important Chinese ted is the largest bank incorporated in the Hong Kong Spe- market and the growth prospects it offers. cial Administrative Region and one of the SAR‘s three note-issuing banks. HSBC has had a continuous presence in mainland China for 147 years. It is one of the largest in- vestors amongst foreign banks in mainland China, having invested in select mainland financial services entities and in the growth of its own operations, including a 19% stake in Bank of Communications, and an 8% stake in Bank of Shanghai. It has a branch in Shanghai, which conducts for- eign currency wholesale banking business. The current

Imprint 26 Concept, design and composition: Janna Hagen, Print: Gremper AG /Pratteln, Picture source: iStockphoto, Thinkstock Swiss Bankers Association Aeschenplatz 7 PO Box 4182 CH-4002 Basel T +41 61 295 93 93 F +41 61 272 53 82 [email protected] www.swissbanking.org28