Benefits accrue to companies seizing opportunity
Print Edition
AS the Shanghai pilot free trade zone marked its half-year anniversary last month, the Shanghai Financial Services Office cited a few case studies that underscore the role nonbank financial institutions play in the reform process.
Hony Capital (Shanghai) Co
Hony Capital, the private equity investment arm of Legend Holdings Ltd, is the first among its peers to benefit from simplified administrative approvals in the free trade zone when making outbound investments.
In February, Hony Capital paid 186 million yuan (US$30 million) as partial payment to acquire Cayman Island-registered PPLive Corp, the biggest online TV service provider in China, through its branch in the free trade zone. The transaction was completed in a mere five days.
“It used to take months to complete a deal like this,” said Shen Shunhui, director of Hony Capital. “Now the approval system has been transformed into a simple filing system for cross-border investments. That will greatly benefit Chinese companies in expanding their operations abroad.”
The filing system he describes means that a company like Hony no longer needs approvals from various authorities for a foreign acquisition. The management committee of the zone simply issues a certificate after required forms are filled out and submitted. A company can receive approval for currency settlement from the foreign-exchange regulator by simply showing the certificate.
According to Shen, Hony Capital last month completed its second outbound investment in the zone and it took only four days.
So far, 23 outbound investment projects, valued at US$4.9 trillion, have been completed in the zone. Any project valued at US$300 million or less qualifies for the simpler filing system as long as it doesn’t involve national security.
BoCom Financial Leasing Co
Bank of Communications Financial Leasing Co, the wholly owned subsidiary of Shanghai-based Bank of Communications, the fifth-biggest lender in China, was the first of its kind to establish a branch in the pilot zone. The unit there specializes in aircraft and vessel leases.
A month after its establishment, BoCom Leasing completed its first deal in the zone, delivering a Boeing-737 jet to Yangtze River Express, a subsidiary of Hainan Airlines. It has also agreed to lease two Boeing-777 aircrafts to Air China Ltd.
The company has also entered into a shipbuilding contract with China Shipping Industry Co for three container ships with maximum capacity of 9,400 twenty-foot equivalent units (TEUs) each. The ships will be leased to Marseille-based CMA CGM SA, the third-largest container company in the world. In February, BoCom Leasing’s branch in the free trade zone received 700 million yuan in overseas loans to support business expansion. The loan was extended by the Singapore branch of Bank of Communications.
“Being able to borrow overseas has expanded our financing channels and lowered our costs,” said Chen Min of the leasing company.
BoCom Leasing is one of the biggest leasing companies in China. At the end of last year, it reported total assets over 90 billion yuan, including 45 aircraft and 140 ships. Assets are expected to top 100 billion yuan by 2015, according to Chen.
99Bill Corp
99Bill Corp, a Shanghai-based third-party payment company, recently linked up with Trade-Van Information Services Co of Taiwan to provide yuan payment services for cross-Strait e-commerce. 99Bill is one of five payment companies that have tapped into new business opportunities offered by the free trade zone since February.
The e-commerce platform operated by the two companies facilitates paperless, cross-border trading using digitalized contacts, clearance documents and delivery slips, which largely reduce the transaction cycle. Additionally, the yuan settlement capability provided by 99Bill will enhance trading by mitigating currency-exchange risk and raising payment-clearing efficiency for buyers and suppliers.
The platform supports business-to-business trading as well as transactions between business and individual customers. Money is placed in escrow by the platform until the clearance of goods is completed.
99Bill supports payment via international cards, such as Visa and MasterCard, and via domestic bankcards. It has formed partnerships with major Chinese banks, China UnionPay and a number of service providers and merchants. Taipei-based Trade-Van specializes in customs services, including a free trade zone platform, a bonded audit and management system, a container information platform and shipping and customs clearance.
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