HSBC has assisted a Chinese corporate, a subsidiary of Baoxin Automobile Group, in using the free trade account in the Shanghai Free Trade Zone  to conduct foreign currency borrowing from offshore markets. HSBC becomes the first foreign bank to complete such a deal after China further relaxed the rules governing offshore borrowing activities via FTAs in the zone.

 

China’s central bank recently unveiled a new policy easing a number of requirements on offshore borrowing activities in the Shanghai FTZ, including removing pre-approvals, increasing the borrowing quota and expanding the transaction types, among other relaxed rules.

 

Following the policy rollout, HSBC has conducted the first transaction among foreign banks by borrowing in US dollars from an offshore market via the FTA and lending it at the offshore rate to the Baoxin subsidiary in the Shanghai FTZ, in a trade financing deal worth about US410 million.

 

This transaction lowered funding costs for Baoxin by around two per cent compared to its traditional borrowing from onshore banks. Baoxin is among the first auto dealers participating in an auto import pilot programme launched earlier this year in the Shanghai FTZ aimed to lower the prices of imported cars in China. Transactions of this type through the FTA will strongly support Baoxin’s car imports under the pilot scheme, while ultimately benefiting car buyers.

 

Yang Hansong, CEO of Baoxin, said: “Listed on the Hong Kong Stock Exchange, Baoxin is one of Chinsas leading companies focusing on high-end car sales. As we are one of the first companies participating in the newly-launched auto import pilot in the Shanghai FTZ, the new funding solutions offered by HSBC in the zone will greatly facilitate our business expansion.”

 

Terence Chiu, executive vice-president and head of commercial banking for China at HSBC, said: “The new policy in the Shanghai FTZ has largely expanded the size of and channels for offshore borrowing activities for financial institutions and corporates in the zone, thereby enabling them to improve funding structures and lower funding costs. This further demonstrates the zone’s leadership in piloting financial reforms in China. As one of the first foreign banks to set up FTAs in the zone, HSBC will continue to leverage our global connectivity to advance our efforts in supporting corporate’s business growth in the Shanghai FTZ.