2013-05-13

Chinese exporters import gold as part of currency arbitrage schemes

Below is the Google Translate of a story on how the Chinese firms conduct currency arbitrage. Gold may have been used in some cases due to its high value to weigh ratio. The article closes with a key point: currency reform involves arbitrage and China cannot reform without arbitrage becoming part of the market. With the new leadership looking to press forward with reforms, the days of stable exchange rates are in the past.
The secret false trade arbitrage arbitrage the three model dismantling
import and export data reported in April soon as he announced the the false trade debate was detonated.
  The interpretation of the data, close to the "absurd": China's exports in April year-on-year growth accelerated to 14.7%, 10% higher than the year-on-year in March, well above market expectations of 9.2%. Imports grew by 16.8%, higher than market expectations of 13%. These two data again disappointing trade data conflict with South Korea and Taiwan.
  SG interpretation, data compared with Taiwan, mainland to Taiwan's exports growing faster than 51.9% (49.2% vs. -2.7%), while the mainland to Taiwan import growth the fast 58.6 percentage points (55.7% vs. -2.9% )! Among them, the most "do not fly" data import and export data. Where the water?
  "Even if the import and export air line?
  Popular RMB loans backed by a million can be rolled into billions of deposits, zero-risk, welcomed the consultation. "Along a microblogging clues, the reporter in Wuhan, a medium-sized foreign trade enterprises in Hong Kong on behalf of the identity, called the Fu surname "intermediaries" phone. Listen that what he wanted, he started Detailed lawful arbitrage entire process.
  "First of all, business license and financial statements and other documents, before other bank line of credit, the fastest two weeks by the bank's credit investigation
  company size requirements? "
  real trading background, the registered capital more than 100 million yuan to review by not less than 50 million yuan deposited HSBC outlets, issuing letters of credit guarantees by the domestic branch of the HSBC Hong Kong counterparts highest operational efficiency, three days around each spreads about annualized 0.9%. "
  reporter questioned whether it is necessary to provide true declarations with "Free Trade Zone, a day trip to deceive the public. The opposite came a laugh.
  Customs to really check, Shenzhen Free Trade Zone, the first ones to suffer in the end you are not to do foreign trade? Documents, the contract can be false, why waste logistics costs. "
  According to the body in Shanghai, "intermediaries" said the SAFE The reason why the introduction of four measures to strike hard re-export trade, which dealt with a number of non-foreign trade enterprises doping. "Some manufacturers engaged in the wholesale and retail profit-jealous, never export to customs, and this pierce the windows of paper."
  intermediaries Fu said that he preferred Class A enterprises to direct their export declarations, contracts or invoices able to prove the authenticity of the transaction documents and any other kind of direct bank in the process of payment, import and export exchange earnings without online verification. "Excellent credit record B enterprises (trade foreign exchange receipts and payments by the bank to the implementation of electronic data verification), can also be involved in less than 100 million yuan arbitrage."
  However, the Hang Seng Corporate and Commercial Banking, said Lin Yansheng accepted to our inquiries, Hong Kong after receiving the onshore guarantee, the Bank had not had actual contact, requires companies to submit all the documents again, does not exclude to send personnel to the Free Trade Zone or mark personally inspect the declaration of goods take up to a month.
  Senior trade sources, the bank is generally more stringent review in the credit phase, the territory branch successfully issued a letter of guarantee, foreign counterparts deny the possibility of the RMB trade finance is almost zero.
  100 million yuan loans from Hong Kong banks, and the latter in urgent need of reflux. Fu agent said the bank account manager will provide Hong Kong or offshore company registration, money circulation at least two or more times in order to apply for a trade reflux.
  "If often to settle trade with the Mainland, Hong Kong companies will be better." A Hong Kong company registration agency believes that offshore corporate easy to give the impression of leaving tax evasion, from the regulatory point of view, the Hong Kong company's concern about the relative low. According to regulations, the Hong Kong banking sector RMB funds through trade channels, pay for the imports of goods from China directly back to the Mainland.
  The offshore renminbi loans after repeated account to go, quite covert. Finally, Habitat housing just signed a new trade contracts with domestic parent company, the procurement of raw materials, gold and the name of a new bank, the completion of the trade under reflux.
  Three models arbitrage
  arbitrage secret expansion of trade data according to Merrill Lynch's report of May 10, arbitrage model can have several.
  First, starting from the fourth quarter of last year, the offshore market for RMB assets rose, which led to the offshore RMB / USD (offshore RMB trade), compared to onshore RMB / USD (onshore RMB trade) are much more expensive. The peak in January, the offshore RMB onshore RMB expensive 0.6%. Therefore, offshore and onshore RMB between the arbitrage opportunities. "It looks very complicated, in fact, very simple arbitrage." Said Bank of America Merrill Lynch, for example:
  arbitrage in the Mainland to borrow $ 1 million for 6.2 million yuan onshore exchange rate of 6.20, and then imported from Hong Kong gold and other goods of low logistics costs and pay by RMB 6.2 million yuan flows to Hong Kong as an offshore RMB, by Hong Kong partner, offshore exchange rate of 6.15 into dollars, get $ 1,008,130. Finally, then the original imported gold exports to Hong Kong partnership and profit of $ 8.13 thousand U.S. dollars (without regard to logistics and other costs), the end of the process.
  However, there are people in the industry, imports of gold involved 13% of the value-added tax, the actual profit will be deducted for tax expenditures, arbitrage profits will be badly affected.
  Bank of America Merrill Lynch judgment, the benefits of import and export of gold is small size, high value, and therefore is an ideal subject of such arbitrage. According to the data of the Customs and Excise Department, the first quarter of recent years, the Mainland to Hong Kong's gold exports rose year-on-year to 300%, the mainland from Hong Kong's gold imports soared 175%, which can be a gold cross-border arbitrage between the Mainland and Hong Kong mobile strong evidence.
  The second model is offshore arbitrage between the onshore RMB interest rate. This arbitrage is very simple, is based on the arbitrage between the two different interest rates. Arbitrageurs can borrow offshore RMB of low interest rates, side-by-side into the high interest rates in the onshore RMB.
  Arbitrage interest rate of 6% in the Mainland to borrow 100 million yuan two weeks, and then the interest rate of 3% in the bank, to require banks to issue letters of credit. The letter of credit, arbitrageurs partner or a related company of RMB 100 million yuan a year to get loans from banks in Hong Kong. Then arbitrageurs from the Mainland's exports of some low-volume, high-value goods to its Hong Kong partner, and receivables of 100 million yuan, and 100 million he returned to the bank. How to make a profit? RMB deposit interest rate and the cost of the offshore renminbi financing is his profit. Currently, after deducting the costs spread of 70 basis points. 1 billion two weeks Gross profit 700,000 250,000 loans a month cost to be deducted, and ultimately profit 450,000.
  The third model is arbitrage between the spreads and the appreciation of the renminbi. This is the most complex model in onshore RMB offshore U.S. dollar, as well as between the shore RMB / USD and offshore RMB / USD.
  For example, in Mainland China loan of 100 million yuan, an interest rate of 6% loan-to-two weeks, $ 1 billion to the bank to deposit into a one-year time deposits, the interest rate of 3%, let banks issue letters of credit, assuming that offshore USD / CNY 6.15, outside related enterprises in Hong Kong at 2% interest rate to borrow $ 16,260,000. Domestic enterprises through the export of gold or high-tech products, dollar loans reflux. At this point in the shore exchange rate of 6.2, to remove the loan interest, profit 56 million yuan in profits into time deposits. Year, fixed deposits of 1.036 billion yuan, net profit of about 360 million within one year 2% appreciation of the RMB against the U.S. dollar, the profits to be $ 592,000.
  Bank financing "wade"
  If the rhythm is faster? If the flow of capital and then "change" mean?
  According to this reporter, the flow of capital arbitrage, has entered the bank financing, reap higher profits than the deposit.
  Huang Qun (a pseudonym), a logistics company in Shenzhen Free Trade Zone to work in the past year, he has been involved in rumors of Shenzhen Futian Free Trade Zone, drove business now.
  "Free Trade Zone and Hong Kong exchanges belonging to the re-export trade, not taxable," said Huang Qun, "so the cost is very low, as long as there is sufficient demand and resources, you can do great." Huang Qun said "demand" is refers to the Free Trade Zone of warehousing enterprises, foreign trade settlement limits through the re-warehousing business, business loans backed by a bank to obtain low-interest funds from Hong Kong. These funds transferred to the mainland, mainly through the purchase of financial products arbitrage.
  The reporter of a Free Trade Zone, warehousing enterprises of foreign trade foreign exchange financing operational processes: (registered enterprises) in the bank set up a margin account and a financial account and associated information; preparation of related documents submitted to the bank, according to the amount required by the bank to handle the knot and payment procedures.
  Margin account deposits can be recycled by T2 (2 working days cycle time) to do, T1 (1 working day cycle) to do. "Said Huang Qun.
  For example, foreign trade warehousing companies in the margin account deposit 100 million margin, in accordance with the 20 working days of the month and T2, a month corresponds to one billion foreign capital inflows. This session, the Bank in accordance with 4 ‰ -5 ‰ "drove" from knot and payment amount to the bonded area of foreign trade warehousing company "dividends", "you can get up to six thousandths.
  Ping An Bank financial markets related to the reporter said, "a lot of profit-taking after the inflow of hot money, real estate, the stock market can be, but the bank financing is a relatively way to gain a solid and flexible way."
  According to the Ping An Bank Financial Markets Department sources, the bank in this session not only a margin deposit to increase the sales of financial products, but also a lot of money in the middle income "within the warranty credit business," the bank's enthusiasm is also very high. "   In fact,
  after the frenzy
, Free Trade Zone and day trips, or exchange differences arbitrage, is not a new trick. New, in the context of the internationalization of the RMB, the new channel opened up, so that the return of the offshore renminbi loan funds more smoothly.
  "Since the fall of 2012, China's trade data, especially the export data has been seriously distorted." Merrill Lynch chief economist Ting Lu believes.
  HKMA data show that in March of this year, trade finance has also become the major promoter driven growth in the size of loans, compared with December last year, trade finance grew by 20.1% to HK $ 460.2 billion, compared with the same period last year, this an increase of 22.4%.
  In October last year, between the onshore and offshore RMB exchange differences are very small, and by the fourth quarter of last year, conditions began to mature. "Ting Lu pointed out that, on the one hand, the RMB against the U.S. dollar appreciation again, the Chinese economy has begun rebound, on the other hand, offshore, in the onshore RMB against the U.S. dollar exchange differences to expand, expand the arbitrage profit margins, and people gradually mastered the secret of how to use the difference between onshore and offshore exchange rates and interest profit.
  Spreads and exchange differences driven, arbitrage activity is rampant, the export growth bubble inflate. Ting Lu, after reasonable adjustments, from January to April this year, the growth rate of exports, but up and down 5%, much lower than the 17.3% increase data show.
  (Trade distortion) reflecting the survival of small and medium-sized enterprises in the Mainland increasingly difficult, and the deteriorating economic situation in the Mainland, forcing enterprises to take the risk. "Hu Yifan, chief economist of Haitong International.
  In the short-term cross-border trade RMB settlement of the case, the decline of the Industrial environment, so that the charm of arbitrage activities greatly increased, foreign trade enterprises, the fastest three days to achieve a return of 0.9%, will undoubtedly become more attractive following the real estate financial products.
  "The excessive growth of RMB trade finance to cover the illegal arbitrage worry; currency appreciation is expected to attract foreign capital influx, the domestic document fraud introduction of offshore RMB against the countries to open 'within loans backed' to support domestic enterprises to go out of mind, its side effects, in turn, will hinder the the the RMB capital liberalization process. "CITIC Bank (International) business chief economic strategist Liao Qun.
  For any similar space market spreads, copy a similar pattern is not impossible.
  "Taiwan's trade with some water." Hu Yifan, Taiwan imports year-on-year increase of up to 55.7% in April, exports and imports of high-tech products year-on-year by a significant increase of 25.5% and 41.7%, but most other categories of products The level of growth is significantly weaker, and even showed a year-on-year downward trend or a weak single-digit growth, this may also reflect forged import and export invoices.
  Ting Lu also pointed out that the same problem, the fourth quarter of last year and the first quarter of this year, the growth rate of exports of the mainland to Taiwan are 32%, while Taiwan Customs statistics show that in the same period, the mainland increase in imports from Taiwan were only 2% and 6 %.
  The arbitrage activity itself is an important prerequisite to ensure market efficiency and capital mobility can not kill all arbitrage activities. "Deutsche Bank Greater China chief economist Jun Ma pointed out that, to the U.S. dollar offshore market, for example, 96% of the transactions arbitrage, hedging or investment functions, only less than 4% for the actual trade settlement. Therefore, capital arbitrage itself is the only way for a national financial markets from a closed to an open.
  Since the inevitable question is placed in front of the regulators, how to solve the problem?
  Regulatory authorities must be in the process of transition, the gradual opening of the capital account, can not let the arbitrage activities in the trade under development is too fast. "Ma Jun, otherwise, the import and export business entities indulged in capital operation, not only caused the trade figures virtual The increase in hot money from foreign exchange to offshore renminbi inflows, but not conducive to the national management of liquidity.
  Hu Yifan funds indulge in arbitrage activities, but also to the domestic monetary authorities issued a real signal - only 4% of the market price of RMB loans given, Mainland approximately 6% of the level of interest rates is clearly too high.
  "With the expansion of the market, arbitrage is bound to be more, will be more obvious, it is now in the hands of concessions to make the difference." Hu Yifan, in addition to strengthen customs links check file, cargo and other measures, regulatory The layer also needs to conform to market pricing consider adjusting the level of interest rates.

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