denotes premium content | Dec 5 2008 Trade & Forfaiting Review magazine archive
Volume 9 Issue 6
China and India are often bundled together when discussing shifts in global trade patterns: their incessant demand for commodities, for example, has driven up prices and stoked fears of world shortages in some categories, such as oil. In other ways, though – namely export flows and related financial structures – the two countries could not be more different.
India’s economy was not structured to sustain large exports of capital equipment. But with its manufacturing economy showing new signs of life that may be about to change. In fact, some bankers believe trade finance opportunities in India are just as great as they are in China.
The potential for structured export finance, for instance, is growing as Indian manufacturers of steel, paper, petrochemicals and high-tech electronic equipment expand their capacity in response to domestic demand – and some even in response to export demand. But are global banks ready for a new China?
A recent study by the India Semiconductor Association reveals India’s electronic production sector grew at a rate of 25% in 2005 and is expected to reach a growth rate of 50% in 2010. "Indian electronics-equipment manufacturing is expected to grow at 5.5 times the... rate of global electronics-equipment production [during the period] 2010 [to] 2015," the report states.
In other news, official sources have revealed that India’s exports topped $100bn for the first time in fiscal year 2005-2006, which ended on 31 March. This is a growth rate of about 25% over the previous financial year. Meanwhile, the Indian government has set a target of achieving $150bn in exports by 2008-2009 and doubling India's share of global trade to 1.5% from its current 0.8%.
Michele Martensen, editor
Features
Going soft
The trend towards longer tenors and lower margins in Russian energy and metals financings has led to a greater interest in soft commodity financing from trade banks active in that market, write Robert Lang-Anderson and Alexander Rymko, lawyers in the Moscow office of Denton Wilde Sapte.
Global sourcing: a strategic imperative
By outsourcing trade processing requirements to a global bank, smaller players can maintain and grow their existing trade customer base, meet the expectations of their customers, and continue to enjoy a revenue stream from these activities, writes Mike Quinn, global trade services, JPMorgan Chase.
Speeding up short-term finance
As a mechanism to fund short-term transactions, letters of credit have been notoriously clumsy to use. But as courts around the world identify poor practices, this may be about to change. Amanda Greene reports.
Driving a soft bargain
Softs are among the few commodities left where banks can make a profit. Not surprisingly, many are making moves to enter this once clubby world. Amanda Greene reports.
Testing the water
Even the most bureaucratic export credit agencies are redefining their approach to foreign supply as trade flows realign. Bolder agencies are testing the waters with entirely new concepts, supporting subsidiaries in foreign markets or providing political risk insurance for commodity hedging. What is behind this shift? A changing concept of national interest. Erika Morphy reports.
Export authority
China is becoming a net exporter of capital goods, a long-standing shift spurred on by Sinosure’s proactive policies. The credit agency’s splash on the export scene, though, has made it easy to overlook developments within other financial institutions – both public and private – that are having just as much impact in China’s trade finance community. Erika Morphy reports.
Cash cures
In October 2005, Anne Collard was appointed product management director at Lloyds TSB corporate transaction services, with overall responsibility for the bank’s full cash and trade product range. She talks to Trade & Forfaiting Review about getting close to clients by dismantling the frontier between cash and trade.
Regulars
Would you credit it?
MoneyBank’s trade & commodity finance group is submitting a credit request for a margin top-up facility for a leading global commodities house…
60-second interview
Trade & Forfaiting Review quizzes Roderick Fraser, Standard Bank’s head of energy finance for the Americas, about the China-India effect on Latin America.
The sun still shines on participant banks
Far from disappearing, the role of participant banks in the trade-related syndicated loan market remains as vital as ever. Guy Brooks, head of trade-related syndications at Deutsche Bank in London, explains.
Letter from Hong Kong
Sometimes I apply for jobs advertised in The Economist or Financial Times. I think my CV is really good and an exact match for the role. But then a few weeks later I get one of those standard letters saying: “Your CV is most impressive but out of the two million applications we had for this job we found candidates more closely fitting the requirements of our clients... blah, blah, blah...”
STF upturn in China
The past twelve months has seen a real upturn in structured trade finance in China, with a number of notable transactions taking place, writes Trevor Clark, a partner in the Hong Kong office of law firm Linklaters.
