INDUSTRIAL AND COMMERCIAL BANK OF CHINA ICBC ...o n s o f U S D Chinese renminbi Euro US dollar Offshore Trading Products Currency Spot Outright forwards FX Swaps Currency swaps Options

INDUSTRIAL AND COMMERCIAL BANK OF CHINA

ICBC: Your Global PortalICBC: Your Global Portal

to RMB Marketto RMB Market

July 2012


1

Investment in RMB

General Introduction

Services Solution

Content


2

2003

General Introduction to Renminbi (RMB)

• RMB

– Renminbi (commonly abbreviated as RMB) is the official currency and legal tender in MainlandChina. The RMB is also referred to as Chinese Yuan. The currency symbol is "¥". The ISO codeused by SWIFT is CNY.

– The People's Bank of China (PBOC), China's central bank, is the authority to set and manage themonetary policy with regard to the RMB.

– For practical purposes RMB can be divided into two categories--CNY and CNH.

• CNY (onshore RMB)

– CNY (Chinese Yuan, onshore RMB) refers to RMB circulated and used (in cash and electronically)in Mainland China .

• CNH ( Offshore RMB)

– CNH refers to RMB circulated and used (in cash and electronically) outside Mainland China .

– The letter H in CNH stands for Hong Kong, since this was one of the first offshore centers wherethe CNY was allowed to circulate electronically.

– CNY remains the sole ISO code to identify the Renminbi globally.


Expanding use of RMB in Trade and investmentPromoting convertibility of RMB under capital accountRelaxing control on cross-border use of RMB by individuals

3

1993

2003

Sept2010

2009

RMB clearing service for personal customers in HK and Macau approved by PBOC

Pilot program: Shanghai and other four cities of Guangdong; Rules governing Cross-borderRMB settlement issued

Pilot area for cross-border RMB settlement expanded to cover whole Mainland China.

Overseas non-financial institutions allowed to open NRA RMB account in Mainland banksfor cross-border RMB business

Signing currency swap agreements with 12 countries/territories with a total value ofRMB841.2 billion

Aug2011

Signing local currency settlement agreements with 8 bordering territories

2008

General Introduction: Policy Overview

All importers and exporters in China will be able to settle cross-border trade in RMB, despitethe black list of PBOC.June

2012


4- 4 -

Channel of Overseas RMB Using Import from Mainland China or a third country RFDI Investment in China inter-bank RMB bond market Investment in China stock and bond market via RQFII Deposits Exchange to other currency

Channel of Overseas RMB Funding Export to Mainland China or a third country RMB financing from local market or Mainland China RODI from Mainland China RMB bond issuance in Mainland China and HK RMB purchase Currency Swap

Channel of Overseas RMB funding and using


Singapore,

13%

Sw itzerland,

5%

Macau, 2%

USA, 2%

Indonesia, 1%

Other, 3%

Hong Kong,

74%

5

As of 31 Dec., 2011

About 63.7% Cross-border RMB settlementconducted with HK

As of 31 July, 2010

About 74% Cross-border RMB settlementconducted with HK

Current Cross-border RMB Settlement

By the end of 2011, 181 countries and regions have participated into cross-border RMB business.

By the end of 2011, the settlement volume hit 2.58 trillion yuan (409 billion US dollars) , representing 10% ofChina's total trade, while it was 3.6 billions yuan at the end of 2009.

Source: PBOC

Regional Distribution of Cross-border RMB Settlement Volume


6

Market update: onshore and offshore

According to PBOC,RMB settlements have reached 10% of China's trade at the end of 2011

RMB Cross-border Trade Settlement CNH Bonds market in Hong Kong

Sources: WTO


7

Sources: WTO

World payments currencies versus trade

Potential for the RMB development 1


currency distribution of the global foreign exchange market turnover

0.0

10.0

20.0

30.0

40.0

50.0

1998 2001 2004 2007 2010

year

%

US dollar Euro Chinese renminbi Japanese yen other currencies

8

Potential for the RMB development 2

Sources: WTO

World merchandise exports by region and selected economy

0.0

5.0

10.0

15.0

20.0

25.0

1948 1953 1963 1973 1983 1993 2003 2010year

%

United States Germany France China Japan

0.43%

Sources: BIS


Turnover by currency pair in April 2010 had no major changes in ranking from three yearsearlier, although absolute turnover in the major currency pairs tended to increase.

USD/EUR remained by far the dominant pair (with a 28% share), followed at some distanceby USD/JPY with a slight increase to 14% of turnover.

USD/CNY represented only 1% of global foreign exchange market turnover.

Sources: BIS

Global FX Market Turnover by currency pair


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Currency Swap between China and other countries

Partnercountry/region

Scale Signing date

Australia 2,000 2012-3-22

Mongolia 100 2012-3-20

Turkey 100 2012-2-21

Malaysia 1,800 2012-2-8

UAE 350 2012-1-17

Pakistan 100 2011-12-23

Thailand 700 2011-12-22

Hong Kong 4,000 2011-11-22

Korea 3,600 2011-10-26

Kazakhstan 70 2011-6-13

Uzbekistan 7 2011-4-19

New Zealand 250 2011-4-18

Singapore 1,500 2010-7-23

Iceland 35 2010-6-9

Argentina 700 2009-4-2

Indonesia 1,000 2009-3-23

Belarus 200 2009-3-11

19003435

12162

16513

2009 2010 2011 2012

RMB 100 Millions

Total Size of RMB Currency Swaps

Australia is the first developed entity to signa currency swap agreement with China.

The main purposes of the swap agreementare to support trade and investment betweenAustralia and China.


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Competition on offshore RMB center

Hong Kong is unrivaled in its role as the biggest RMB offshore center

Hong Kong has first-mover advantage in offshore RMB business, and the offshoremarket has a very good foundation and a comprehensive series of products.

Singapore aims to be 2nd RMB offshore center

As the only international financial center in the ASEAN, the RMB services in Singaporecover the entire ASEAN population of over 500 million, with high credibility.

Singapore possesses mature foreign exchange experiences and talent resources.

Hong Kong

London

Singapore

London has been in efforts to build the RMB Western center outside Asia

In January 2012, the joint announcement by the U.K. government and Hong KongMonetary Authority that they will work together to develop offshore RMB trading.

In April 2012, HSBC Bank plc launched in London the first international RMB-denominated bond to be issued outside China.

In April 2012, The London Metal Exchange is considering allowing its members to clearcontracts in China's yuan currency as part of plans to set up its own clearing house.

Recently the Government of the City of London released a report, customers in Londonand the inter-bank RMB deposits reached 109 billion yuan, of which the customerdeposits of $ 350 billion.


Recent China-Japan financial cooperation

Tokyo aims to promote itself as another offshore RMB center.

A framework about financial cooperation has been established at government level.

A joint working team striving for China-Japan financial market development will be created.

China-Japan financial cooperation has gained remarkable achievements


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Investment in RMB

Service Solution


14

Advantages to invest in RMB 1

Why invest in RMB ?

Diversify theportfolio risk

In the context of the current international financial market turbulence, holdingRMB denominated assets can be an alternative choice to diversify the portfoliorisks.

RMB is welcomed by Chinese companies, and consequently it may make iteasier for French enterprises to reach their deal with Chinese counterparts.

Investment in RMB will facilitate French enterprises' market expansion in Chinaand help to set up its local market image.

Better way toaccess to China

Realize hedgingand appreciation

RMB exchange rate is relatively stable. In recent years, RMB has seencontinuous appreciation. In the long run, there is still room for appreciation.

RMB will deduct the trading cost and promote trading efficiency, and providewith French enterprises hedging capacity outside China.

New investmentchannel for higher

return

RMB can be invested in the RMB bonds in China mainland Bond/Equity Marketand the offshore RMB market to get higher returns.


Exchange Rate Indices, Jan 2010=100

Sources: WTO

RMB exchange rate is relatively stable and has seencontinuous appreciation.

Sources: IMF

Considering China’s growth perspectives, the risk for RMBdenominated assets is relatively low.

Advantages to invest in RMB 2

15


•Foreign institutions can buy onshore Chinese bond assets in two ways:- as a direct member of interbank bond market- under the QFII (qualified foreign institutional investors) program- relevant products provided by ICBC

Introduction to on-shore Bond Market

China’s Government Bonds Yields

Sources: Asia bonds online

Size and Composition of the LCY Bond Market (in RMB)

16


RMB Bondsin HK

Mainly short-to-medium term,ranging from 2 to 5 years

Tenor

Deals size is generally betweenRMB 1 billion and RMB 3 billion,depending on the financing needsof the issuer and the distributionpreference. The issuances by thefinancial institutions usually havelarger scale

Size

Including private banks, HKsubsidiaries of Chinese banks,insurance companies andindependent RMB funds

Investors

Fixed-rate in most of the cases

Coupon

RMB bonds can now be traded in HKex.RMB bond can be either traded publiclyor over-the-counter

Liquidity

Introduction to HK Offshore RMB Bond Market

17


0

20

40

60

80

100

120

Spot Outrightforwards

FX Swaps Currencyswaps

Optionsand others

type

billions

of

USD

Chinese renminbi

Euro

US dollar

Offshore Trading Products

CurrencySpot

Outrightforwards FX Swaps

Currencyswaps

Options andothers

US dollar 35.2 11.6 47.4 1.1 4.7

Euro 44.4 9.6 39.2 1.1 5.6

Chinese renminbi 23.7 41.6 19.9 0.2 14.6

Currency and instrument distribution of global foreign exchange market turnoverDaily averages in April, in billions of US dollars and percentages

Sources: BIS

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19


Services Solution

Investment in RMB


20

33 countries and regions, 239 overseas institutions ( as of Dec. 31, 2011)

1553 foreign correspondent banks in 136countries and regions (as of Dec. 31, 2011)

Service Solution: Global Service Network


21

1st bank conducted USD/CNH swap deal

1st bank invested in the Chinese mainland inter-bank

bond market

One of the 1st banks for CNH HIBOR benchmark offering

One of the 1st banks for CNH SPOT benchmark offering

1st bank conducted red-chip Dim Sum Bond underwriting

1st bank issuing 10-Y CNH subordinated bond

Service Solution: Proven Off-shore RMB Services

Many 1st in HK CNH Business


22

Trade Finance

RMB L/C Financing

RMB Refinancing

Derivatives Trading

NDF; DF; CCS; Option

Deposit & Loan

RMB Deposit and Loan with

difference terms and maturities

FX/RMB Exchange

Exchange services for

both trade and non-trade,

on-shore and off-shore

FX/RMB conversion

Capital Market

Bond issuance,

underwriting or

investment; RMB

IPO; Fund in Trust

Cross-bordersettlementRMB fund settlementfor trade and non-tradepurposes.

Full Products in RMB business

Service Solution: Comprehensive Product Series


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This report has been prepared solely for clients of ICBC and clients of certain affiliated

companies of ICBC on the basis that no part of it will be reproduced, transmitted or made

available to any other person. The information herein has been obtained from sources believed

to be reliable, but its accuracy and completeness cannot be guaranteed. No liability or

responsibility is accepted for any errors or for any negligence, default or lack of care or for any

loss or damage whatsoever that may arise from actions based on material contained in this

report. This document is not to be relied on as such or used in substitution for the exercise of

independent judgment.

Disclaimer

Documents

INDUSTRIAL AND COMMERCIAL BANK OF CHINA ICBC ...o n s o f U S D Chinese renminbi Euro US dollar Offshore Trading Products Currency Spot Outright forwards FX Swaps Currency swaps Options