Macao can enhance its role as a financial platform

9 October 2016

Macao can further develop its financial sector by providing new services and supporting companies from China and the Portuguese speaking countries. The territory’s issuing banks, Bank of China and Banco Nacional Ultramarino, are the financial institutions geared to support Macao’s platform in promoting relations between China and the Portuguese-speaking countries.

Macao Magazine spoke with Wang Jun, deputy general manager of Bank of China (Macau Branch)

1. Bank of China Macau Branch has set up a special sector to be in charge of the economic and trade relations between China and Portuguese-speaking countries, what will be the specific work of this sector? How many personnel are there employed in it? Are they all Portuguese speakers? When has it been set up, and do you plan to expand its scale?

Bank of China Macau Branch serves as the bank of issue, agency bank of public treasury, RMB clearing bank, the Chairman of the Macau Association of Banks, it also acts as an important financial partner of the SAR Government. To seize the crucial opportunity brought by the Belt and Road Initiative, Bank of China Macau Branch is actively cooperating with the SAR Government to build a commercial and trade cooperation service platform between China and Portuguese-speaking countries, to promote the moderate industrial diversity, to support the development of SMEs, to cultivate youth talents, to encourage youth entrepreneurship, and to make contribution to the stable and sustainable development of Macao’s economy and finance.

In 2014, Bank of China Macau Branch was designated by the Head Office of the Bank of China as the Portuguese-speaking countries’ cross-border RMB clearing platform inside the Group, and the Portuguese-speaking Business Working Team was set up in the same year. The work of the team is focusing on financial service cooperation and business development between China and Portuguese-speaking countries. In 2015, Bank of China Macau Branch, approved by the People’s Bank of China, began to provide RMB clearing services towards Portuguese-speaking countries. At the beginning of 2016, Bank of China Macau Branch established a financial institution sector, based on the work of the former Portuguese business working team, it continues to produce the bilingual benefits of Chinese and Portuguese, leading the work of the Portuguese business development within various departments of the Branch. At present, there are bilingual professionals who can fluently speak Chinese and Portuguese in various business areas of the Branch. The target of Bank of China Macau Branch is to make the Branch a “financial services platform of commercial and trade cooperation between China and Portuguese-speaking countries”, providing a full range of financial services for the SAR government’s “commercial and trade cooperation services platform between China and Portuguese-speaking countries”, and promotes the use of RMB in trade exchanges between China and Portuguese-speaking countries.

2. Bank of China has set up branches in Brazil, Angola, Portugal, with Mozambique the next destination point. What significance does such a branch network have for the work in Macao? What is the relationship between those branches and the Macau Branch?

Bank of China has set up more than 600 branches in more than 40 countries and regions, including Portugal, Brazil and Angola. Bank of China Macau Branch can make use of the advantages of this global network of BOC Group, and provides a full range of financial services such as business banking, investment banking, insurance and asset management for financial institutions, enterprises and individual clients. We actively seize the opportunity brought by the nation’s Belt and Road Initiative and Macao’s process of building “a commercial and trade cooperation service platform between China and Portuguese-speaking countries” and give full play to the BOC Group’s advantages, it has formed the business layout in Asia-Pacific, Europe, Africa and Latin America, especially in Portuguese-speaking countries. Through the network cooperation with the BOC Group branches in Portugal, Brazil and Angola, and through carrying out strategic cooperation and business dealings with banks in Portuguese-speaking countries, we have initially established a capital settlement network primarily for Portuguese-speaking countries, and spreads out business across Iberian Peninsula, Africa, and South America.

3. What are some of the concrete areas that Bank of China deals with in Portuguese-speaking countries? Is it financing, IT support, or business? Can all the entrepreneurs in these Portuguese-speaking countries seek funding from Bank of China in their business operations?

Bank of China Macau Branch has a fully-functioning banking license in Macao, it can engage in corporate finance, personal finance and financial market business and other commercial banking services. In recent years, we have actively expanded our investment banking business, structured finance business, integrated cross-border financial services, which can provide our customers with more international and professional services to meet customers’ diverse financial needs. So we are very pleased to provide, as much as possible, a full range of financial services for the enterprises from China and Portuguese-speaking countries in support of the operating activities.

In recent years, Bank of China Macau Branch has taken advantage of the opportunities brought by visiting Portugal, Brazil, Angola, Mozambique and other Portuguese-speaking countries with the delegation of IPIM, and gives presentations of its RMB business and Macao’s “platform” advantage in different occasions. On the other hand, in 2015, Bank of China Macau Branch organized many promotional meetings regarding RMB business in Macao, Lisbon and Porto, targeted at the financial institutions and corporate customers of Portuguese-speaking countries. In October this year, Macau Branch will hold RMB business promotional activities in conjunction with BNU in Lisbon.

Bank of China Macau Branch has currently established corresponding relationships with more than 30 banks in Brazil, Portugal, Angola, Mozambique, Cape Verde, East Timor, and there are more than 10 banks in Portuguese-speaking countries which have opened their current trade accounts of RMB, US dollar and euro in Macau Branch, it has built a safe and efficient financial clearing channel for commercial customers between China and Portuguese-speaking countries. Recently, Bank of China Macau Branch has handled the RMB clearance of remittances to mainland, China for the banking industries in Portugal, Brazil, Angola and Mozambique, which as reflected the important role of Macao as a “platform between China and Portuguese-speaking countries”.

4. Bank of China and BNU have signed a cooperation agreement regarding Portuguese-speaking countries, however, if both sides are interested in the same field, or even in the same region, then how would this agreement be conducted?

Bank of China Macau Branch and BNU are both mainstream banks in Macao, we respectively serve as the Chairman and Vice-Chairman of the Macau Association of Banks, and have formed a long-term friendly and cooperative relationship. In 2015, the two banks have signed a cooperation protocol of markets business in China and Portuguese-speaking countries, aiming at a joint development and mutual benefit. The two sides will establish a more in-depth and comprehensive business partnership and provide our mutual customers with quality, efficient and convenient financial services. Since the signing of the protocol, through building information exchange platforms and communication channels and sharing market trade information between China and Portuguese-speaking countries, the two parties have laid down the foundations for promoting mutual business referrals, agency settlement and giving credit business.

The customer groups of our bank and BNU have different features, but in general, our two banks’ relations are more complementary than competitive, even if there is competition, we will seek a result with mutual benefit through friendly cooperation.

5. It is a pity for the SMEs in Portuguese-speaking countries that they often cannot get funds required for their projects. What are the conditions for Bank of China to finance such projects? Are such SMEs required to cooperate with Chinese enterprises?

We note that SMEs have gradually become an important part of the economic constitution in Macao, mainland China and Portuguese-speaking countries and are generally facing problems of risky and unaffordable financing. As a socially responsible bank, the Head Office of Bank of China has already begun to promote cross-border SME matching services and organized a number of large domestic and foreign SME matching activities, through a “one to one” business negotiation model, it has helped small and medium enterprises at home and abroad to directly exchange business needs, matched the quality foreign SMEs with domestic SMEs, and thus achieved the interconnection of domestic and foreign SMEs. During the MIF last year, Bank of China Macau Branch and Bank of China Guangdong Branch had jointly invited more than 50 Guangdong SMEs to Macao as participants and had specially arranged enterprise matching activities with enterprises from Portuguese-speaking countries. During the Canton Fair this year, we also have invited local enterprises from Portuguese-speaking countries to go to Guangzhou and participate in the Domestic and Foreign SME Investment and Trade Fair sponsored by Bank of China.

This year, the Bank has redeployed our SME service team from the corporate finance department to the personal finance department in order to have a more effective combination of the business of SME services and personal finance, to strengthen the communication and to increase supportive strength for SMEs. The 5th Ministerial Conference of the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries will be held in Macao in October, which will coincide with the SME matching activities in Macao being prepared by Bank of China Macau Branch. For the corporations and projects that have full compliance with the requirements of regulations and banking policies, Bank of China Macau Branch is willing to provide cash management, financing, operation insurance, international settlement, integrated financial management and other professional, caring, high quality and fully integrated financial services.

6.  Can Bank of China get the information from those Chinese large enterprises that have the intention of cooperating with SMEs in Portuguese-speaking countries? What kind of intermediary has Bank of China been in this process?

Bank of China Macau Branch maintains long-term good relations of cooperation with China-Africa Development Fund, China-Portuguese Speaking Countries Cooperation and Development Fund, China-Brazil Industrial Capacity Cooperation Fund and other fund companies, and we assist them in looking for investment opportunities in Portuguese-speaking countries. As a member of the Bank of China Group, we also maintain smooth information-sharing channels with domestic and foreign branches of the Group. By taking advantage of the various visit opportunities, we not only developing publicity, but also do we have in-depth understanding of the demand of local markets and customers, and provide matchmaking for the enterprises in need.

Bank of China Macau branch has always been adhered to the operation principle of “Rooted in Macau & Steadfast in Serving”, and actively builds platforms for the commercial customers from China and Portuguese-speaking countries in Macao, including direct selling platform for individual customers, E-commerce financial platform for SME customers, investment and financing platform for companies and financial institutions customers as well as a big data platform providing back-office supports. In July, Bank of China Macau branch, Macao Economic Services (MES), Macao Trade and Investment Promotion Institute (IPIM) and MACAU EDI VAN S.A. (TEDMEV) jointly organized the “Cross-Border Conference” with the theme of “the outlook of the development of cross-border E-Commerce industry • Macao’s opportunities and challenges”. The conference was committed to building a perfect platform and creating more opportunities for Macao’s local enterprises and outstanding suppliers from Portuguese-speaking countries to approach the prosperous Mainland E-Commerce market that will assist enterprises in finding potential business partners and forging successful long-term relationships. The effect of the activities that day was very satisfactory, according to initial reports, with more than 60 cooperation intentions reached in half a day of the conference

7. Since the establishment of the special department of trade and economic relations in Portuguese-speaking countries, could any projects serve as examples to show what kind of assistance the Bank of China can offer?

Currently many Chinese-funded enterprises have carried out entity investments in Portuguese-speaking countries, in China, most of which are customers of Bank of China. Bank of China Macau Branch will positively respond to the national’s “go globally” strategy, assist Chinese-funded enterprises to expand markets in Portuguese-speaking countries. Through the advantages of both internal and external links, we have provided financing support for the construction of some key projects regarding people’s livelihood and infrastructure that are part-funded by Chinese-funded enterprises in the Portuguese-speaking countries. I believe there will be more and more cooperation opportunities like this.

Bank of China Macau Branch has also assisted many Chinese companies setting up platform companies in Macao, helping to expand their business with Portuguese-speaking countries by taking advantages of convenient communication and tax incentives between Macao and Portuguese-speaking countries, and providing credit support for the qualified customers and projects.

8. During the past few months, trade between China and Portuguese-speaking countries has been in decline. Does Bank of China believe that it has a trend of recovery? Or is it necessary to seek new areas to develop the relationship between China and the Portuguese-speaking countries?

Since the establishment of the Forum Macao in 2003, China and Portuguese-speaking countries have enjoyed an increasingly close economic and trade exchange with rapid growth of the bilateral trade volume. In 2003, the bilateral trade volume between China and Portuguese-speaking countries was only 11 billion US dollars, while in 2011 it had exceeded 100 billion US dollars, and in 2014 it reached the highest point of more than 130 billion US dollars. In 2015, influenced by the price decline of bulk commodity, especially the impact of the decline on oil prices as well as the currency devaluation in Brazil and African Portuguese-speaking countries, the bilateral trade volume between China and Portuguese-speaking countries fell to 98.5 billion US dollars.

We believe that this decline is in line with international trends. Back in 2009, there was also a near 20% drop of the bilateral trade between China and Portuguese-speaking countries. Besides that, China and Portuguese-speaking countries are highly complementary in economy, so the drop on the volume of trade does not necessarily mean the reducing on quantum of trade. Take Brazil for example, in 2015, the bilateral trade volume between China and Brazil dropped by 17%, although the trade volume of three major products—soybeans, crude oil and iron ore, which counts for about 70% of the total volume of trade between two countries, has declined, their quantum of trade were increased year-on-year by 25%, 0.49% and 135% respectively. Basing on this, we can see that the depreciation of Brazil BRLs and the fall of bulk commodity prices both have played a positive role in stimulating the bulk commodity exports from Brazil to China.

Overall, although there was a decline regarding the volume of trade between China and Portuguese-speaking countries, the trade quantum of major commodities remained stable or was even increased. Along with the global economic recovery, the long-term trend of a growth in bilateral trade will remain. We will also assist companies to find new opportunities for development in the fields of people’s livelihood, science and technology and innovation.

9. Will Macao set up a RMB clearing house and when? Which banks will join it? What significance will the establishment of this clearing house bring to the plan of RMB being an international payment currency?

With the constantly increased investment from the Monetary Authority of Macao for Macao’s financial infrastructure, over the past 10 years, Macao’s financial infrastructure has been gradually perfected. Take RMB business for instance: in 2004, approved by the People’s Bank of China, Bank of China Macau Branch becomes a primary clearing bank that directly connects to the People’s Bank of China’s CNAPS system, and the RMB business has officially been conducted in Macao. In support of the Monetary Authority of Macao, the clearing bank model continues to be mature and improving, the types of RMB business in Macao continue to be expanded. Starting from a purely personal business, the types of RMB business that are engaged in Macao has gradually expanded to the areas of trade and investment. The business types under a clearing bank model has been improved, from dealing with only four services which are RMB deposits, FX exchange, remittance and bank cards for personal customers in 2004, to the current situation that the clearing bank services have been expanded to more than 10 items, including cash deposit and withdraw service, cross-border trade settlement, bill clearing, inter-bank borrowing, local inter-bank transfers, cross-border fund allocation and so on. In 2015, the RMB clearing volume in Macao has reached 1.57 trillion Yuan, with a year-on-year growth of 22.8%, ranking ninth globally.

On March 7 this year, the RMB RTGS system constructed by the Monetary Authority of Macao was officially put into operation. It began to provide real-time settlement services for bank customers’ RMB remittance and the inter-bank RMB fund remittance and transfer. This marks a further improvement of the financial infrastructure in Macao, it is not only conducive to the management of RMB capital settlement risk and the improvement of the settlement efficiency, but will also further promote the deepening of the regional financial cooperation, simplify the expansion of the cross-border use of RMB, and facilitate the process of Macao developing into a RMB clearing platform for trade between China and Portuguese-speaking countries.

As for the establishment of the RMB clearing houses in Macao, it is still under discussion at this stage. According to the Report on the development of China’s banking industry (2016), the trading volume of RMB will steadily expand in central bank reserves among all countries, and become the third-largest international payment currency next only to the US dollar and the euro in the next five to ten years. We believe that with the accelerating process of the internationalization of RMB, it is much likely to introduce RMB bills business into Macao, and to begin with the form of exchanging electronic notes, and the construction of the RMB clearing house will be started. By then, the financial infrastructure in Macao will be further improved, and the current 24 banks in Macao who are dealing with RMB business should have the opportunity to participate.

Faced with the historic development opportunity of the internationalization of RMB, Bank of China Macau Branch, as the RMB clearing bank and the RTGS settlement bank in Macao, under the guidance of the People’s Bank of China and the Monetary Authority of Macao, benefiting from the support and coordination from the banking industry, will actively cooperate with SAR Government’s strategy of developing moderate economic diversity, promote the healthy and stable development of the RMB business in Macao, and actively produce a RMB clearing platform between China and Portuguese-speaking countries, as well as promote the  regional economic cooperation between Guangdong and Macao. In addition, we will fully support all the RMB business infrastructure work being implemented by the Monetary Authority of Macao, improve our settling efficiency and service quality, strengthen business compliance management and risk control, aim at providing our customers with safe, high quality and efficient financial services. (Macao Magazine)