1. Offshore banking is a banking service in which the bank absorbs capital from non-residents in service of non-residents.
2. “Non-residents” refer to natural persons from abroad (including Hong Kong, Macau and Taiwan), legal persons (including Chinese-funded enterprises incorporated and based overseas), government agencies, international organizations and other economic organizations, including the overseas branches of Chinese-funded financial institutes but not inclusive of overseas representative units or offices of China-based organizations.
3. In June 2002, BOCOM became the first batch of China’s four commercial banks, authorized to provide an offshore banking service. On 24th September 2002, the offshore banking service centre of BOCOM was inaugurated in Shanghai.
II. Salient features
1. Preferential tax policy
2. Relaxed policy regulation
3. Convenient global fund-raising
4. Stable capital returns
5. Complete privacy
III. Operational scope and types of currencies
1. Operational scope: Forex deposit, forex loan, inter-bank loans, international settlement, forex trading, forex guarantee, consultation, and other services
2. Types of currencies: USD, euro, yen, HKD
IV. Featured products
1. Wealth management
Based on specific customer needs, the offshore banking centre can customize different types of financial products for the idle cash reserves of customers:
(1) Deposit products with synchronous floating interest rates of LIBOR and HIBOR, with the guarantee that prices are closely pegged to the market.
Time deposits (especially time deposits in US currency exceeding USD 10 million), with a maturity term as short as 1 day and the interest rate is determined entirely by the market. These time deposits offer the interest rates of LIBOR and HIBOR that far exceed the value of time-deposits provided at the interest rates mandated by the People’s Bank of China. Interest rates for time deposits exceeding USD10 million are determined by the depth of the client’s relationship with BOCOM. The highest interest-rate may reach the five basic points on the foundation of LIBOR and HIBOR.
BOCOM will specially assign professional managers to serve those customer accounts with deposits exceeding USD10 million. These managers will notify the customers one working day before maturity to relieve them from the hassles of managing their own deposits:
Time deposit accounts will be provided with either a time deposit slip or a deposit confirmation certificate. For customers who are accustomed to make time deposits regularly, we will send the BOCOM-endorsed deposit slip to the customers so the latter can conduct withdrawals when the deposit is mature.
For customers who have opened time deposit accounts, except for those from Shanghai, and wish to be spared the handover and management hassles on their deposit slips, the Centre will provide custody services in line with international practices – provided that the customers have completed the account-opening procedures at their respective local BOCOM branches, with a promise to only withdraw from the same counters, based on the data from BOCOM’s banking system. BOCOM will issue deposit confirmation certificates for these customers. Upon the deposit matures, the customers can proceed to the counters for withdrawal, hence sparing them the hassle of having to maintain a physical record of these deposit certificates.
(2) Structured deposit products that are linked to interest rates and forex rates
Through structured arrangements, and in accordance with the risk threshold of customers, their idle cash reserves can be invested to generate returns exceeding the interest-rate income from bank deposits, in a bid to optimize risk-weighted returns.
(3) Transactions such as spot, forward and option forex trading, with a minimum conversion cost of the various international currencies guaranteed.
These option products are linked to forex and interest rates. After selecting them, customers can, with the consideration on their payment needs and their personal discretion to invest based on the prevailing interest rates and the interest-rate market, through the receipt or payment of a certain option premium, secure income under the pre-determined level of risks undertaken or under the rationale of risks aversion.
Based on the actual payment needs of customers, BOCOM can arrange for them to engage in spot or forward forex trading, and to provide heavyweight customers with transactions at pre-determined price within a three-day period. On behalf of customers, BOCOM dealers will track changes of the international market between 8 am on Mondays to 2 am on Saturdays, with a view of completing the transactions at the pre-determined price.
BOCOM can also conduct transactions at negotiated interest rates, enabling customers to lock in prices for their long-term liabilities or assets obligations.
(4) Transactions and custody of bonds issued by the American government and renowned corporations, and entrusted management of bonds for customers, with a range of wealth-management products launched by BOCOM’s head office, facilitate a diversification of investment channels.
2. Integration of domestic and overseas businesses
(1) Provision of guarantees for domestic capital-raising services from foreign assets, with idle capital reserves abroad being put to effective use
(2) Provision of guarantee for overseas capital-raising from domestic assets, to facilitate a quick expansion of the overseas organizations
(3) Acquisitions and mergers of domestic enterprises by overseas enterprises, paving the way for capital entry into China’s market at the most opportune moments
(4) Financial arrangements made in a rational manner, through international trade undertaken by overseas window enterprises
(5) Transfer of domestic and overseas assets and share rights, thereby improving the flexibility and safety of investments
V. Which enterprises require offshore banking services most?
1. Domestic enterprises from China that have embarked on a business strategy of overseas expansion
2. Overseas enterprises in search of high returns for their idle capital reserves
3. Enterprises that are implementing a joint-development of their onshore and offshore business operations
4. Enterprises with the intention to engage in mergers and acquisitions in China and in overseas
5. Other enterprises that engage in international trade
VI. Basic modes of offshore banking services
1. Coordinated management of business operations and their network extension
2. By conducting the various banking activities through the offshore banking service centre, customers can directly enjoy professional face-to-face services
3. Capitalizing on the edge of BOCOM’s network, customers can enjoy a service extension from its local offshore banking services.