In the award presentation ceremony of Global Finance magazine’s “2008 Best Chinese Banks and Companies” award programme on March 5th, CCB was named, among other titles “Best Trade Financing Bank in China”.  To CCB, the award of this title is a milestone in the development of its trade financing business.

The trade financing business has been a long forgotten “corner”.  In the development of international business, the focus has always been restricted to international settlement, with trade financing considered a sideshow of not much significance in helping towards the objective of enhancing market competitiveness.  With the sustained rapid growth of China’s foreign trade and the breakneck development of the trade and finance markets in the last five years, the trade financing “pie” has become bigger and bigger, and the huge sum of intermediate business income concealed behind trade financing has gradually caught the attention of various banks.  This is particularly so at a time when the domestic commercial banks in China are actively adopting the concept of risk capital management and are intensively carrying out adjustments in their credit structures.  With its characteristic low risk, fast turnaround, low engagement of economic capital, high integrative earnings and substantial contribution to intermediary business, trade financing is becoming a favourite and a focal point of the Chinese banking industry.

To develop its trade financing business, CCB has been vigorously carrying out innovations in products and service technology and in making timely rationalisation of business processes and adjustment of its credit system.  To ensure the speedy development of its international settlement business on a bank-wide basis, it has been stepping up its efforts in making direct sales pitch to its key customers; increasing the intensity of training of its branches; and driving for greater inputs in trade financing in its branches.  As at the end of 2007, the balance of its on-balance sheet trade financing had more than doubled on a year-on-year basis, while the volume of its international settlement had reached a historical record of almost US$300,000 million.  Income from international settlement fees had also set a historical record, while in the last two years, both the income from and the volume of international settlement business had doubled.

From a forgotten corner in the past to the flower-paved award presentation platform of today, CCB’s trade financing business has undergone taxing changes; and these changes match well with the strategic needs of CCB in transforming its corporate business.  Changes imply innovation, and innovation results in the radiation of vitality and vigour from CCB’s trade financing.

Achieving Success through Focussing on Innovation

The ability to innovate determines competitiveness.  To be able to remain invincible in the cutthroat competition of the trade financing arena, one has to break away from conventions and innovate incessantly.  That is why CCB treats innovation as the top priority in its work in trade financing and ensures that awareness for innovation is implemented throughout product format, systems and processes as well as acceptance conditions, etc.  In addition to tracking the activities of its colleagues in trade, CCB is treating problems reflected by its branches as opportunities for improvements and innovation.  It is paying particular emphasis in making use of the individualised financing solutions it provides to specific customer groups as targets and directions for innovation.  This way, it ensures that innovation awareness permeates throughout every part of its trade financing efforts.

Diligence is rewarded.  In 2007, CCB’s international business department launched at one stretch a total of 12 products.  While many of the trade financing ones were the first of its kind in the trade, such as “Commodity Financing”, “Direct Export Factoring”, “Outright Purchase under Short-term Export Credit Insurance”, the “Ship Export Factoring” business remained a unique product.  CCB has also stepped up concerted activities with domestic and overseas associates and cooperation in trade financing business with foreign banks; zealously launching new products such as trade assets transfers, trade financing risk participation and supply chain financing, etc.  In turn, product innovation has established a sound market image for CCB.

Science and technology is the primary productivity.  In the area of innovation of service technology, CCB was the first in the Chinese banking sector in setting up a bank-wide trade financing document processing centre and in adopting a globally advanced IMEX (NTFS) processing system.  On top of these, CCB had, in 2007, initiated and completed the development and application promotion of an “Online Trade Settlement System”.  The launching of this system has changed the traditional service format of CCB’s international business and allows not only automatic transmission of business information between a customer’s terminal and that of the back-office system of CCB but also online operating capability at customer terminals.

To bring the productivity of science and technology innovations into full play, a Six Sigma quality management project was initiated in the above-mentioned document centre in 2007 and, through business process reengineering, the quality of document audit had been raised while operational risk had been lowered.  Meanwhile, planning for the bank-wide centralisation of document processing has been progressing steadily and the professional advantage of centralised processing is becoming evident gradually.

Sustained Development is Only Possible if Risk is under Controlled

To compete in a fiercely contested market not only requires the support of an abundance of innovative products but more importantly, a change of mind-set.  It would require switching from the previous risk control concept of over-emphasising on customer centred acceptance qualification to a concept focussing on process control and management of transaction risk.  Control of risks at the process level allows trade financing solutions to be more flexible and more closely in line with market needs.  The core of trade financing risk management will be under tight control, and the capability of the branches in business management and control will be boosted, and consistent risk preference will be vigorously maintained throughout the bank.  All trade financing products will adopt the same rules and regulations and a consistent set of standards.  For acceptance of businesses which have exceeded normal authority, a stringent approval system will be adopted so that risk is under effective control even when trade financing business is rapidly developing.

Statistics revealed that, in 2007, when the balance of trade financing grew sharply, the non-performing ratio of newly issued financing was practically zero.  What was more, the accumulative non-performing ratio for both on-balance sheet and off-balance sheet business at the end of the period was much lower than the trade average.  Through these results, it can be discerned that trade financing has already become a corporate credit asset of the highest quality in the whole bank.  The facts have demonstrated that, while the scale of trade financing was expanding in leaps and bounds, non-performing ratio was also controlled at historically the best levels.

From “Small and Beautiful" to "Large and Strong”

Due to historical reasons, CCB’s market share in international settlement business has always been low.  Even though a high rate of growth was sustained in recent years, the overall size of the business remained small.  At this stage, CCB maintains that the emphasis of its trade financing is on quality and, because it is but a tiny share of the total asset of the whole bank, its characteristic is “small and beautiful".  But then in future, it must grow large and strong and gain an overall competitive advantage through its scale.

This year, both domestic and overseas environment for international business development has remained grim.  In view of this situation, CCB has, at the beginning of this year, vigorously adopted a series of measures including redoubling of its product innovation efforts and the pooling and coordination of its domestic and overseas resources.  In short, it will ensure rapid growth of this business through product innovation and business process reengineering.  Judging from the results for the first two months of this year, both the amount of and the income from international settlement have sustained a high rate of growth.  So in this Olympic year, CCB is expecting more rewards from its international settlement business.