Editor's foreword

Our focus for the November issue of Trade & Forfaiting Review is the exciting developments in China, where economic advancement has been linked to a shift towards a market economy in many goods and services, as well as openness to global trade and investment. Meanwhile, accession to the World Trade Organisation (WTO) has initiated a significant new chapter in the process of market reforms.

Up until now, progress in reform of the banking sector – essential to China’s transition to a market economy – has been erratic. This has been attributed to legacy issues combined with political, financial and social factors. Nevertheless, reform is slowly infiltrating the sector as the four state banks that dominate the system realise that they must begin to compete on their own merits since, ultimately, government support will be in line with enhancements to their individual performances or falter altogether.

Reform is also necessary as liberalisation is accompanied by increased competition. China’s entry to the WTO has paved the way for foreign banks to penetrate the country’s banking system. Most foreign banks will be looking to ally themselves with locals, thereby gaining an instant outlet through which to launch their products and services. These banks will inject capital and know-how into the Chinese industry, in addition to forming new partnerships as the major players scramble to secure their positions (p.14).

Turning to the export-finance market, China has witnessed some remarkable changes. Godwin Chang of SG justifies the claim that from a huge market that used export finance as a major source of funding, the country is barely using export financing at all within the capital-equipment-financing market (p.17).

Also in this issue, Donald Smith of Citibank argues that the current letter-of-credit situation is unacceptable for all parties – the buyer, the seller and the bank – and presents the case for international standard banking practices for the examination of documents (p.10). While Michael Kenny of law firm Watson, Farley & Williams explores variations in commodity-finance structures (p.25). It perhaps goes without saying that we continue to welcome all news and views from our readers. So please feel free to contact me at the usual address: llaypang@ark-group.com

Features

ISBP: a winning formula? Free
Donald Smith argues that the current letter-of-credit situation is unacceptable for all parties
– the buyer, the seller and the bank, possibly acting as an obstacle to future profitability and growth. He presents the case for international standard banking practices for the examination of documents.

China: on the economic up Free
Following entrance to the WTO late last year, China has opened up as a new trade-finance market boasting a fast-growing economy and rich trade opportunities. Jun Cheng reports.

Setting a new B2B partnership-model trend Free
China’s accession to the WTO has revealed a market paradise brimming with opportunities for multinational companies. But the country’s financial-services sector remains complex, requiring a new triangular partnership model between foreign banks, local banks and corporate clients to facilitate successful market penetration. Bruce Alter, Zeno Chow, Margaret Leung and MP Tsim explain.

Export financing trends: all quiet on the eastern front Free
The export-finance market in China is experiencing a spectacular about turn. Once a flourishing market, it now appears to have come to a complete standstill. Godwin Chang asks if the situation is set to change and if so, when.

New structures in commodity finance - variations on a theme Free
Despite different types of commodity and receivable forming the focus of a structured commodity financing, Michael Kenny insists that lenders don’t have to stray far from the beaten track. Established structures can be crafted in various ways, enabling parties to achieve their commercial aims while continuing to mitigate risks.

A new dawn in UK e-trade regulations Free
The Electronic Commerce (EC Directive) Regulations 2002 (SI No. 2013) came into force on 21 August 2002. It will have an immediate impact on businesses that offer online services, provide electronic newsletters, and use SMS to provide e-payments and advertise and market though their websites generally. Robert Bond explains.

Can banks become slaves to e-commerce trends? Free
Once a term that inspired wonderment, e-commerce is swiftly being erased from business-card titles, having promised so much and delivered penny stock returns. At least, that is what is reported in the press, says Michael Woods. He argues that a lot of good technology and business sense has survived the dot.com bust and today, corporations are not just talking
e-commerce, they are employing it and getting results.

Regulars

Indicative forfaiting rates Free
The forfaiting market continues to face similar influences and constraints as have been prevailing over the last few months - following elections in Turkey and the transition period in Brazil.

HVB: weathering the storm Free
Norbert Fritsch, Bernard Gloeckner and Werner Schmidt reveal to Layisha Laypang to what extent the economic difficulties faced by HVB Group have affected business within their respective departments and the performance and morale of their teams.

ING: one voice, one strategy, one market approach Free
During his career, Bernard Zonneveld, global co-head commodity group at ING, has been affected by several mergers and takeovers, the latest being the takeovers of BBL and BHF by ING. He tells Layisha Laypang how the restructuring has impacted on him and his team, in addition to sharing his views on the trade and commodity-finance market in general.

Coface@rating country ratings update Free
Accessible free of charge via www.cofacerating.com, this service provides regularly updated ratings for 140 of the world’s most important trading nations and aims to help companies find out where they can trade safely in the world.

All eyes on Brazil Free
The LTP Trade Finance Index from LTP Risk Management gives its September performance update. The month saw a poor performance by the index, with Argentina still casting a shadow.