1

The Swiss Financial Centre – Ready for the Renminbi

Editorial 5

Renminbi set to become a major international currency 6

China and Switzerland: A longstanding relationship 8

Trade and investments 8

Tourism 9

Core values and strengths of the Swiss financial centre 10

Banking in Switzerland 11

Switzerland well-positioned for business in renminbi 11

Swiss banking competences in China-related business 14

China trade-related products and services offered by banks in Switzerland 14

Markets and advisory 16

Wealth management and private banking – core competences of Swiss banking 18

Asset management 20

Outlook 22

Swiss banks and Swiss foreign-owned banks with a presence in China 24

4 5

Commercial relations between Switzerland and China date

back to the 17th century, spanning several Chinese dynasties

up to the formation of the People’s Republic of China in

1949. Only a few months thereafter, Switzerland recognised

the new People’s Republic of China – one of the first Western

states to do so. In the mid-1950s, Swiss banks were among

the first Western banks to establish correspondent banking

relationships with Chinese banks. Today, our two countries

have very strong relationships and there is no doubt that the

free-trade agreement will deepen them even more.

Over the last few years, the Swiss financial centre has been

revamping its value proposition for renminbi business, ser-

ving clients in China as well as clients in Switzerland and

other locations around the world. Renminbi accounts with

banks in Switzerland are available to private and corporate

clients, and a rapidly growing number of products and ser-

vices are available to commodity trade finance, private ban-

king, and asset management clients. Furthermore, a num-

ber of major Swiss banks are present in China and more

than a dozen are active in Hong Kong, where they use their

local operations for renminbi payments and clearing. As il-

lustrated in this brochure, the Swiss financial centre is well-

positioned to serve both Chinese and international clients

on the mainland and abroad.

A Chinese proverb says that a cautious man crosses a river

step by step from one stone to the next. This approach to

venturing into potentially risky and unknown territory im-

plies both prudence and persistence. Chinese authorities

have taken the same approach for the internationalisation

of their currency, an undertaking of great importance for

China’s further development and arguably for the emer-

gence of the global currency system of the 21st century.

Renminbi internationalisation started in earnest in 2008 du-

ring the global financial crisis. China’s central bank signed

bilateral renminbi currency swap agreements with eight

central banks totaling over 800 billion renminbi. A year later,

China introduced a pilot scheme for cross-border renminbi

trade settlement which soon expanded to all of China and

to a large group of trading partners. Since March 2012, all

licensed mainland exporters and importers can settle in

renminbi with companies outside China. An important

stepping stone was Hong Kong. Over the last decade, it has

developed into a global hub for the offshore renminbi and

has established an active interbank offshore renminbi mar-

ket and offshore renminbi clearing. The offshore renminbi

has become a de-facto currency and is used for lending,

trading, invoicing, payments, securities transactions and as

a store of value. In this regard, Swiss investors are major

buyers of offshore renminbi-denominated dim sum bonds.

Eventually, the renminbi is bound to become a global re-

serve currency. By 2020 the renminbi will possibly be one

of the top three international reserve currencies and an

important investment currency. With its full range of pro-

ducts and services, Switzerland is well-positioned to serve

all client needs in Switzerland and abroad.

Patrick Odier, President of the Swiss Bankers Association

Editorial

Geneva, the most international city of Switzerland

6 7

China has become the world’s second largest economy, its

leading exporter, the largest holder of foreign currency re-

serves, and a major source and recipient of foreign direct

investments. By 2016, the International Monetary Fund ex-

pects China to account for over one-third of total global

economic growth.

The Chinese government has begun to promote the inter-

nationalisation of the renminbi. According to the Renmin-

bi Globalisation Index published by Standard Chartered

Bank, internationalisation of the renminbi has seen a se-

ven-fold increase since December 2010. The renminbi is

taking on a growing importance as both an onshore and

offshore currency.

As a global payment currency, the renminbi has moved

from position 35 in October 2010 to number 13 in only two

years. Some 12% of China’s external trade is currently settled

in renminbi, an almost six-fold increase in three years. To-

day, more than 10,000 financial institutions conduct busi-

ness in renminbi, up from 900 two years ago. By 2015 Chi-

nese companies expect one-third of Chinese external trade

to be renminbi-denominated. By the same year, more than

half of China’s trade with emerging markets amounting to

2 trillion US dollars is likely to be settled in renminbi.

Similarly, the renminbi has taken on a growing role in for-

eign direct investments into China and outward invest-

ments from China. Foreign direct investments denominated

in renminbi amounted to 35% of inward foreign direct in-

vestments in 2012, while outward investments in renminbi

totaled 6% and continue to grow rapidly.

Rising trade and investment flows in renminbi produced an

expanding pool of liquidity of 900 billion at the end of last

year. Renminbi financing and foreign exchange markets

have reached an estimated daily turnover of 13 to 25 billion

for spot and forward transactions.

In a series of steps, the Chinese government has raised the

quota for qualified foreign institutional investors to invest

offshore renminbi in the Chinese stock and bond markets

to 270 billion.

China’s central bank has authorised Chinese banks in Hong

Kong, and recently also in Taiwan and Singapore, to do off-

shore renminbi clearing.

In addition, Chinese authorities have announced the intro-

duction of the China International Payment System by

2013, which will integrate offshore payment systems into

China’s domestic payment scheme CNAPS.

Renminbi set to become

a major international currency Short history of renminbi internationalisation

2002 Introduction of Qualified Foreign Institutional Investor scheme

Late 2008 Renminbi internationalisation begins in earnest with rise of global financial crisis

2010 Expansion of offshore renminbi trade settlement to all of China

Hong Kong Monetary Authority permits issuance of offshore renminbi bonds in Hong Kong

and allows financial institutions to open offshore renminbi accounts

2011 January

People’s Bank of China launches scheme for settling foreign direct investments in renminbi

August

Vice-Premier Li Keqiang affirms central role of Hong Kong for renminbi internationalisation

December

Renminbi Qualified Foreign Institutional Investor scheme permits offshore renminbi investments

in China

2012 March

All licensed mainland exporters and importers permitted to settle in renminbi with companies

outside China

Spring

Expansion of Qualified Foreign Institutional Investor scheme from 30 billion US dollars to

80 billion US dollars

London aspires to become Europe‘s renminbi hub

June

Launch of direct trading between renminbi and Yen

August

Taiwan signs memorandum of understanding for renminbi clearing with China

November

18th Congress of the Communist Party reaffirms financial sector reform and further renminbi

internationalisation

2013 February

Launch of clearing of offshore renminbi business in Singapore

April

Australia and China agree to direct CNY-AUD trading

June

Bank of England and People‘s Bank of China agree on RMB 200 billion RMB-GBP swap line

8 9

In the mid-17th century, traders and missionaries from

Switzerland established contact with the Chinese Empire.

Trading relations developed at a rapid pace, leading to the

opening of a Swiss trading agency in Shanghai in 1912.

The first official contacts between the two countries were

made in 1906. Relations between Switzerland and the Re-

public of China were codified in a treaty of friendship in

1918, a few years after the fall of the Qing dynasty.

Switzerland recognised the newly-established People’s

Republic of China on 17 January 1950 – one of the first

Western states to do so. The People‘s Republic of China

made its first appearance on the international stage when

Chinese Premier Chou En-lai took part in the Indochina

Conference in Geneva in 1954.

Switzerland was also one of the first countries to enter

into commercial agreements with the People‘s Republic

of China. A trade agreement became effective in 1974, a

civil aviation agreement in 1975, a nuclear cooperation

agreement in 1986, an investment protection agreement

in 1987, a scientific and technology cooperation agree-

ment in 1989, and a double taxation agreement in

1989/1991. Since the launch of Deng Xiaoping’s policy of

liberalisation and reform in 1979, bilateral relations bet-

ween Switzerland and China have developed at a brisk

pace. In 2007, Switzerland formally recognised China as a

market economy.

In May 2013, China and Switzerland agreed to sign a com-

prehensive free trade agreement, making Switzerland the

China and Switzerland:

A longstanding relationship

first country in Europe (with the exception of Iceland) to

have negotiated such an agreement.

Trade and investmentsIn 2012, China’s exports to Switzerland amounted to 10.3

billion Swiss francs, somewhat higher than Swiss exports to

China, which totaled 7.8 billion Swiss francs. The majority of

exports from Switzerland consist of machinery and electro-

nics (28.3%) as well as watches and jewels (32.2%). Similarly,

China’s main exports to Switzerland are machinery and

electronics (40.3%). Swiss exports to emerging Asia have

almost tripled since 2000, compared to an increase of 60%

of all Swiss exports from 2000 to 2011.

Although China has largely liberalised the use of the ren-

minbi for trade purposes, and is encouraging its use in for-

eign direct investments, the renminbi has not played a

discernible role in trade and investments between Swit-

zerland and China to date. Around 90% of Swiss exports

and imports are still conducted in Swiss francs, Euro and

US dollars.

According to the Swiss Export Risk Insurance, new engage-

ment in insurance policies to China amounted to 263 milli-

on Swiss francs as at year-end 2012. This is a three-fold incre-

ase compared to 2010 (CHF 86.5 m). The Swiss Export Risk

Insurance’s engagement is split into US dollars, Euro and

Swiss francs. To date, there is no engagement in renminbi.

In 2012, Swiss foreign direct investments into China moved

up into the top 10 of foreign direct investments into China,

amounting to 809 million US dollars (January – October

2012). Some 300 Swiss companies with over 700 branches

are present in China, employing around 136,000 people in

China as at year-end 2010. This corresponds to 5.1% of the

total workforce employed by Swiss companies abroad.

Swiss capital stock in China amounted to 8 billion Swiss

francs in 2010 and 13 billion Swiss francs in 2011.

Chinese foreign direct investments into Switzerland incre-

ased by almost 10 million US dollars to 84 million US dol-

lars as per October 2012. In 2011, around 50 Chinese firms

were present in Switzerland (twice as many as two years

prior), including Sinopec, CBC, Suntech, Huawei, Neusoft

and Alibaba.

TourismThe number of tourists visiting Switzerland from China has

more than tripled since 2008, rising from 265,000 that year

to over 800,000 in 2012. Measured strictly in hotel over-

nights, guests from China accounted for 7.4% of all foreign

tourists to Switzerland in 2012.

It is likely that some of these visitors took advantage of

Switzerland’s central position in Europe. Located in the

same time zone as Germany, France and Italy, and being

one hour ahead of the UK, important European touristic

and business destinations such as London, Paris, Brussels,

Berlin, Frankfurt, Rome, and Madrid, are only a short flight or

train ride away. These are qualities that make Switzerland

attractive to both, tourists and business travellers.

10 11

Core values and strengths

of the Swiss financial centre

Swiss banking is unique because it rests on four core values

that are distinctively Swiss: Excellence, stability, universality

and responsibility. These values are the reason for the con-

tinued success of the Swiss financial centre and they are

grounded firmly in the history and culture of Switzerland.

Historically, the conditions for economic success were not

the best in Switzerland. The country has no natural resour-

ces except for water, faces unfavourable climatic conditions

and is landlocked in the middle of Europe. Thus, for genera-

tions the Swiss had no choice but to distinguish themselves

through diligence, professionalism and reliability if they

wanted to succeed. The world famous Swiss army knife and

Swiss watches are just two examples of the results of this

continued quest for the highest quality and perfection.

Such excellence is also a distinctive trait of Swiss banking,

with its focus on quality, professionalism, innovation and

value for clients and shareholders.

The stability of Switzerland’s political and economic system

is almost proverbial. Thanks to its tradition of neutrality in

foreign policy, the country in the centre of Europe has enjo-

yed peace for more than 150 years. But peace and stability

are also a distinctive feature of the country’s internal political

set-up. The government is composed of all relevant political

parties according to their strength, and whenever possible,

it takes its decisions unanimously. This striving for dialogue

and co-operation can also be found in the realm of the eco-

nomy. The relationships between employers and emplo-

yees are governed by the spirit of the “work-peace” agree-

ment that dates back to the 1930s and prevents strikes. The

relations between government and industry are also cha-

racterised by close consultation and co-operation. In a

world marked by instability and uncertainty, Switzerland’s

experience in upholding internal and external peace and

stability make it the ideal location for doing business.

Switzerland is a small country, but it is home to four diffe-

rent cultures and languages. This linguistic and cultural plu-

rality is the base for the global outlook of the Swiss econo-

my. Today Switzerland has one of the most open economies

in the world and derives half of its gross domestic product

from export. Mirroring the diversity and heterogeneity of

the country, the Swiss banking system is based on the uni-

versal banking model which provides for a wide variety of

financial services that meet all needs and purposes.

The actions of the Swiss banks are guided by a strong sense

of integrity and responsibility – towards their clients, soci-

ety and the economy as a whole. This sense of responsibility

is pervasive throughout the profession and enshrined in

Swiss law as an obligation of diligence and loyalty. This is

evident in the tradition of firmly protecting financial privacy,

but also extends to other areas and to other stakeholders.

Banking in SwitzerlandAccording to the 2013 IMF Global Financial Stability Report,

Swiss banks are the best capitalised worldwide and there-

fore extremely safe. The entire Swiss financial industry is

tightly regulated to ensure that the reputation of Swiss

banks remains intact. The Swiss regulator FINMA strictly

supervises the banking industry, and Swiss banks also face

regular audits by independent examiners.

A cross-section of the business reveals that Switzerland is a

leader in cross-border private wealth management with a

share of 27% (2011) of the global market. It is also a top lo-

cation for managing institutional assets for pension funds,

insurance companies, sovereign wealth funds, family offi-

ces and corporates. Institutional assets under management

amount to around 2.5 trillion Swiss francs (2011).

Swiss banks have also been an enabling factor in commo-

dity trading by providing commodity trade finance exper-

tise and products, as well as first-class inspection and cer-

tification services. Over the past two centuries, Switzerland

has become a global trading hub for physical commodi-

ties. Centred around Geneva and a second hub in the gre-

ater Zurich area, it boasts more than 500 firms with around

10,000 employees and contributes 3.6% to Swiss gross do-

mestic product. According to the Geneva Trading and

Shipping Association, Geneva is among the world leaders

for trading a variety of commodities. It holds one-third of

global market share for crude oil and crude oil products. It

is the market leader for coal and oil seeds, and shares the

top spot with London for cotton trading. Also, it is the

number-one trade for sugar in Europe.

Switzerland well-positioned for business in renminbiIn view of the before-mentioned values and assets of the

Swiss financial sector, Switzerland is well-positioned to

function as a conduit for business with China and for use of

the renminbi. The Swiss financial centre’s strengths include

an excellent financial market infrastructure, an innovative

and liquid financial market with a broad range of financial

services, a reliable legal system and robust regulatory struc-

tures. The Swiss financial centre also offers favourable con-

ditions for the offshore renminbi business with its high le-

vels of assets under management and its key role in

international commodity trading.

Swiss banks based in Hong Kong have offered a range of

offshore renminbi products and services for some time.

Several of these have begun to offer renminbi products to

their Swiss and European clients and to book in Switzer-

land. Most large and medium-sized banks clear renminbi

payments either through an offshore renminbi account at

the Bank of China Hong Kong or through a correspondent

bank with an offshore renminbi account at the Bank of

China Hong Kong. The use of the renminbi will further be-

nefit from the strong presence of Swiss banks in Singapore

and its recently acquired capability to clear renminbi busi-

ness locally.

12 13Zurich, the economic and financial centre of Switzerland

14 15

Swiss banking competences

in China-related business

Banks in Switzerland offer a wide range of products and ser-

vices that will help to further establish the renminbi in Swit-

zerland and strengthen the internationalisation of the Chi-

nese currency. Banks with presence in the People‘s Republic

of China, Hong Kong or Singapore, are expanding their pro-

duct shelf in Switzerland.

China trade-related products and services offered by banks in SwitzerlandFinancing trade has been the prime channel of renminbi

internationalisation to date. There are no precise figures for

the current use of renminbi for inbound and outbound Si-

no-Swiss trade, but if we assume that the renminbi will at-

tain a 20% share within the next decade, we will likely see

an increase of renminbi invoiced or settled trade by a factor

of 5 to 10.

This figure is likely to be even higher if parts of commodity

trade in Switzerland become renminbi denominated. Em-

ploying 1,700 people, Switzerland has become a leading

centre for commodity trade finance. In 2011, it reached a

volume of approximately 1,500 billion Swiss francs.

So far, commodity trade finance is predominantly US dollar-

based, but continued renminbi internationalisation will

likely lead to the use of renminbi-based trade and export

finance products.

Some advantages of invoicing and paying in renminbi are

likely to be: Favourable borrowing cost, lower foreign ex-

change risk and improved supplier access. For foreign firms

that buy and sell goods in China, the use of renminbi will

provide a natural hedge. It can also lower the cost of ope-

rations on the mainland. In the offshore renminbi market,

firms can manage their renminbi exposure using options

and forwards. Chinese clients may prefer to transact in

their local currency, which should help foreign firms to

broaden their network of Chinese buyers and suppliers.

This would render supply chains less dependent on cur-

rency movements. The Chinese central bank estimates that

overseas importers paying in renminbi could save 2 to 3%

on their invoices.

Furthermore, sizeable foreign direct investment activities

denominated in renminbi offer opportunities for advisory

and capital market services for Swiss banks. Switzerland has

become a preferred location for headquarters and treasury

centres for companies operating worldwide in various sec-

tors. They too require banking infrastructure including ac-

cess to capital, funding, investment opportunities and

hedging capacities in all global currencies, as well as speci-

alist know-how from law firms, accountants, auditors etc.

Renminbi trade-related product shelf

Products/Services

Renminbi current accounts

Offshore renminbi payment services

Offshore renminbi lending

Trade finance and export finance (to date primarily in US dollars, Swiss francs or Euro, but renminbi products will

be introduced if market demand grows)

– Import and export letters of credit; transferrable back-to-back and standby letters of credit; import and export

documentary collections; guarantees; letters of indemnity

– Export finance loans to producers, sellers and buyers contingent upon insurance by Swiss Export Risk

Insurance agency

– Securitisation guarantees

– Export finance commercial credits (not insured by Swiss Export Risk Insurance agency)

– Research and advisory services

16 17

Markets and advisoryForeign exchange products and services are at the core of

trade, banking, and wealth management. A growing num-

ber of banks with a presence in Switzerland cater to their

clients’ renminbi product needs across a broad range of risk

and investment horizons, mostly by offering offshore ren-

minbi-based products such as dim sum bonds.

The market for dim sum bonds – bonds denominated in

offshore renminbi and issued in Hong Kong – has grown

rapidly. The first offshore renminbi bond was issued by the

China Development Bank in 2007. Issuers since then inclu-

de the People’s Republic of China, Chinese banks and cor-

porates, and non-Chinese corporates, the latter making up

the lion’s share of issues. Though offshore renminbi bond

issuance has been effectuated primarily in Hong Kong, Lon-

don has recently begun to follow suit; reportedly a sizeable

share of the investors hailed from Switzerland.

In Switzerland, 44 renminbi-denominated Eurobonds were

traded on the SIX Swiss Stock Exchange as per January

2013. In the fourth quarter of 2012, turnover of renminbi

bond trading amounted to 8.5 million Euro which made

the renminbi the sixth-most traded foreign currency on the

SIX. The SIX also offers an attractive listing environment for

Eurobonds, which grants direct access to the deep pool of

capital in Switzerland.

China has relaxed its rules for the overseas listing of Chinese

companies and there are over 800 companies awaiting ap-

proval for initial public offerings in China. A company can

apply at the China Securities Regulatory Commission to list

overseas if it complies with the market standards where it

wants to list. The primary beneficiary of the more liberal re-

gime will likely be Hong Kong, but some Chinese firms will

consider listings in Europe. With its market-oriented regula-

tory environment, Switzerland offers an attractive listing

process on the SIX. This efficient and cost-effective way to

list allows companies to raise capital for further growth and

to increase visibility amongst an international investor base.

In addition, the Chinese government and central bank are

taking steps to further liberalise interest rates (e.g., for de-

posits) and the renminbi exchange rate. The daily fluctu-

ation band vis-à-vis the US dollar was doubled in 2012 to

1% and may be allowed to double again to 2%. This will lead

to higher volatility and increase demand for risk manage-

ment products such as foreign exchange and interest rate

swaps, options and forwards.

A number of banks in Switzerland are able to provide pro-

ducts and research for their clients. The work of the Asia

economic research units of several banks in Switzerland has

regularly won important awards. Some publications are

available to the general public, others only to clients.

Renminbi investment capabilities go hand-in-hand with

strong macro and micro research in China. Banks will need

significant support from Asia/China specialists if they do

not have their own in-house teams in China themselves.

Large banks with a local presence in China can provide re-

search and other services to small and mid-sized banks in

Switzerland and the European Union.

Renminbi markets and advisory product shelf

Products/Services Clients

Renminbi current accounts For individual, corporate and bank clients

Renminbi fixed term deposits For individual and corporate clients

Renminbi lending For corporate clients

Lending against renminbi collateral For corporate clients

FX spot in offshore renminbi deliverable or non-deliverable

For individual and corporate clients outside the People’s Republic of China

FX forward, FX swaps and FX options in offshore renminbi deliverable or non-deliverable

For individual and corporate clients outside the People’s Republic of China

Treasury services

44 renminbi-denominated Eurobonds have been listed on the SIX Swiss Stock Exchange.

Chinese firms can be listed on the SIX.

Economic, currency and investment research

Source: Bloomberg, Reuters

Dim sum issuance

18 19

Wealth management and private banking – core competences of Swiss bankingChina will continue to grow, and will at the same time shift

towards a more consumption-driven society with a midd-

le-class numbering in the hundreds of millions. The new

Chinese President, Xi Jinping, confirmed that “China will in-

crease its effort to raise domestic consumption and genera-

te new areas of consumption growth”.

Financial wealth in China has increased rapidly during the

last decade. High net worth individuals – defined as having

financial wealth exceeding one million US dollars – number

more than one million. Several hundred Chinese from the

mainland are US dollar-billionaires according to a compilati-

on published in the “Hurun Report” (2013). Over the next ten

years, some 83 million Chinese will graduate from college.

As a consequence, Chinese citizens will accumulate finan-

cial wealth and require investment opportunities and

wealth management services. Wealth management pro-

duct issuances have already dramatically increased in China.

Investors in Switzerland, Europe and around the world will

continue to invest in Chinese and/or renminbi-denomina-

ted assets. Drivers will be the better economic and growth

prospects of China compared to the low and slow growth

in Europe and the United States, the low interest rate envi-

ronment in most developed regions, and a general trend

towards diversifying risk across a broader range of asset

classes and currencies.

Switzerland is a leader in cross-border wealth manage-

ment, with a share of 27% (2011) of the global market. The

Swiss financial centre is well-positioned to serve both Chi-

nese clients on the mainland and abroad with its full range

of products, as well as non-Chinese clients in Switzerland

and around the world with renminbi products and services.

Diversification has been a core competence of Swiss banks

for decades. Hailing from a country outside of the domi-

nant currency blocks, Swiss banks have served their inter-

national clients by offering “outside the box” investment

strategies, including – but not limited to – Swiss franc-

based products. In addition to diversification, another up-

side is the likely appreciation potential of the renminbi

against the US dollar and other currencies. As the renminbi

product shelf shows, clients can almost as easily have ac-

counts in renminbi as in Euro or Yen.Thousands of clients

hold such accounts, with assets in custody or under ma-

nagement exceeding 10 billion renminbi.

China-oriented renminbi private banking product shelf

Products/Services Volumes (estimates)

Offshore renminbi private banking current accounts Thousands of accounts

Assets in custody or under management 10 – 20 billion renminbi

Fiduciary deposits Hundreds of accounts with billions of renminbi in assets under management

Fixed income Billions of renminbi

Structured products Hundreds of millions of renminbi

Mutual funds Hundreds of millions of renminbi

Renminbi and Swiss franc appreciating

Source: Datastream

20 21

Asset managementSwitzerland is a leader in managing institutional assets for

pension funds, insurance firms, sovereign wealth funds, fa-

mily offices, and corporate clients. Institutional assets ma-

naged by Swiss banks total around 2.5 trillion Swiss francs.

In line with Switzerland’s importance as a major commodi-

ty trading hub, investments in commodity-based products

have increased from 4.3 billion Swiss francs in early 2007 to

around 37 billion Swiss francs in late 2012. This encompas-

ses primarily (active and passive) investment funds and

exchange traded funds. The investments are largely in

gold funds backed by gold physically stored in Switzer-

land. The SIX lists 120 exchange traded funds and 36 ex-

change traded products referencing commodities.

Swiss financial firms are well-positioned to serve Chinese

clients on the mainland by using the Qualified Domestic

Institutional Investor scheme. This scheme enables Chine-

se institutions to invest in foreign assets. Likewise, Swiss

firms serve clients in Switzerland and around the world

with an interest in renminbi products. The main channels

for equity and bond investments in China are the Qualified

Foreign Institutional Investors scheme for investments in

foreign currency, and the Renminbi Qualified Foreign Insti-

tutional Investors scheme for portfolio investments in off-

shore renminbi. Banks based in Switzerland have sizeable

quota and licences, making them prime actors in the above-

mentioned schemes.

Access from abroad to the Chinese equity market can be

complex due to several share types, multiple listings, cur-

rencies, and restrictions. However, exchange traded funds

have made it easier to access multiple corners of the mar-

ket, with more than 130 China-focussed products listed in

22 countries and 39 billion US dollars in assets under ma-

nagement. Exchange traded funds offer access to both the

onshore and the offshore market, as well as various sectors,

styles, and strategies providing intra-day liquidity to inves-

tors around the globe.

In April 2012, China announced a 50 billion renminbi quo-

ta specifically for the creation of exchange traded funds

that invest in the domestic A-share market. China-related

exchange traded funds have become the fourth-most po-

pular exchange traded fund asset class globally, and at-

tracted 25 billion renminbi of inflows in 2012, second only

to US funds.

China permits foreign hedge funds to tap domestic assets

and invest them overseas once they have obtained a licence

under the Qualified Domestic Limited Partner programme.

China-oriented renminbi asset management product shelf

Products/Services Volumes (estimates)

Money market funds Tens of millions of renminbi

Fixed income funds Billions of renminbi in assets under management

Exchange traded funds 9 exchange traded funds listed on the SIX with assets under management of 119 million US dollars

Alternative investments Tens of millions of renminbi

Equity funds Hundreds of millions of renminbi

22 23

Outlook

If the past is any guide, the demand for China-related ex-

pertise, products and services will continue to grow. Chine-

se tourists in Switzerland will number in the millions, trade

and particularly investments will further increase and the

Chinese securities and derivatives markets will open and

unfold. Given the uncertain timeline for full liberalisation of

China’s capital account, markets for both the onshore ren-

minbi and its offshore siblings are bound to expand further.

Traditional strengths of Swiss industry and the Swiss finan-

cial centre should receive a further boost when the com-

prehensive Free Trade Agreement with China takes effect.

Switzerland was the first country in Europe (with the excep-

tion of Iceland) to conclude such an agreement with China.

In its white paper on the future of Swiss financial markets,

the Swiss government declared in December 2012 its re-

solve to make Switzerland a hub for renminbi business. Ef-

forts are under-way which might eventually lead to the

establishment of a RMB-CHF swap line between the

People‘s Bank of China and the Swiss National Bank. This

would greatly facilitate renminbi clearing by a bank loca-

ted in Switzerland, lowering transaction costs and high-

lighting Switzerland’s position as a European hub for China

and renminbi business.

The Swiss National Bank could benefit from an additional

opportunity to diversify its exchange rate policy and at the

same time build closer ties with its counterpart in China.

The People‘s Bank of China seeks to increase liquidity in its

markets and currency and is establishing strategic ties with

central banks around the world.

Swiss and international firms in Switzerland will be attrac-

ted by the possibility of facilitated renminbi transactions

with the Chinese market, important for both production

and sales. Switzerland could gain a vantage point for the

treasury units of multinational firms thanks to the facilitated

access to the onshore renminbi which helps reduce the

cost for both trade and investments. The same advantage

would benefit Swiss banks which handle this business. As a

result, Switzerland could become a location of choice for

corporate services.

Private banking and asset management benefit from libe-

ralised access to the Chinese market. This provides new in-

vestment opportunities and positions Switzerland for glo-

bal diversification. Traditional Swiss financial centre

strengths in wealth management and asset management

could cater to the huge need for managing private and in-

stitutional assets in China. Manageable wealth and demand

for wealth management services in China will increase as a

result of economic growth, a growing middle-class, longe-

vity and a liberalising economy. At the same time, investors

outside of China will continue to diversify into Asian and

Chinese securities and currency markets. They will ask for

products, risk management instruments and related re-

search and advisory services. Financial firms based in Swit-

zerland have the expertise to provide these services along

the value chain.

Strengthened co-operation gives access to market intelli-

gence and knowledge, granting Switzerland a vantage

point as a gateway to the Chinese market and economy.

The Great Wall of China, the longest man made monument in the world

24 25

Swiss banks and Swiss foreign-owned

banks with a presence in China

The Swiss financial centre is well-positioned to serve both

Chinese clients on the mainland and abroad with its full

range of products, as well as non-Chinese clients in Switzer-

land and around the world with renminbi products and

services. Several Swiss banks are present in mainland China,

and more than a dozen are active in Hong Kong.

Credit Suisse (CS): CS established ties with the Bank of

China as early as 1955 and opened a representative office

in Beijing in 1985. Since then, CS has steadily expanded

both its presence and business activities in and with China.

Today, CS is physically present in Beijing, Shanghai and Gu-

angzhou. It has an asset management joint venture with

Industrial and Commercial Bank of China (ICBC) and con-

ducts securities business through the Credit Suisse Found-

er Securities joint venture. CS has obtained both QFII and

QDII status and has acquired a licence for RMB operations.

China continues to be of strategic importance to clients of

CS as they relocate production facilities to China, expand

distribution networks and invest in the country’s growth

segments. China remains a key focus market for CS in the

APAC region.

– first-ever representative office of a Swiss bank in China,

May 1985

– first-ever frame loan agreement with Chinese counter-

part, January 1990

– first-ever IPO for PRC issuer abroad, October 1992

– first Sino-foreign investment banking joint venture

approved in second round of Sino-foreign joint

ventures licensed in China

UBS: UBS and its affiliates today have a staff of around 560

in Beijing, Shanghai, Hangzhou, Shenzhen and Guangzhou.

UBS‘s key operating platforms in China include UBS Securi-

ties Co. Limited (UBSS), UBS (China) Limited, UBS SDIC Asset

Management Limited and UBS Global Asset Management

(China) Limited, offering clients investment banking, wealth

management and asset management services. UBSS, a col-

laboration between UBS and domestic partners approved

by the State Council that was launched in 2006, has be-

come one of the top securities companies in China. UBS’s

wealth management and asset management businesses

are also developing steadily. In June 2012, the UBS Beijing

branch was granted the status of a wholly foreign-owned

bank. UBS aims to build a long term, sustainable presence

in China that contributes to the overall stable development

of China’s financial sector.

– first firm to receive QFII licence, May 2003

– first investor in a Sino-foreign fund management joint

venture (UBS SDIC Asset Management Limited) in

which the foreign stake reached the 49% upper limit

– first and only international financial services firm to

manage a fully licensed securities company (UBS

Securities Co. Limited)

– first Swiss bank to set up a wholly foreign-owned bank

in China (UBS (China) Limited)

Shanghai, China‘s economic engine

26

Zürcher Kantonalbank (ZKB): ZKB opened its office in

Beijing in March 1998. The largest Swiss cantonal bank fo-

cusses on trade and export transactions for Swiss exporters

and importers. The representative office in China plays an

important role in accommodating this business and sup-

ports extensive relationships with numerous Chinese corre-

spondent banking partners. Zürcher Kantonalbank is in a

position to take country and commercial risk in China if re-

quested by its clients. Corporate and SME clients are wel-

come to meet the bank’s representative in Beijing who has

a profound knowledge of international trade and the Chi-

nese market. Since 2012, Zürcher Kantonalbank has provi-

ded market making in CNY Offshore (CNH) denominated

fixed income and foreign exchange products which allow

clients to invest in the CNY offshore market.

HSBC: Established in Hong Kong and Shanghai in 1865,

The Hongkong and Shanghai Banking Corporation Limited

is the founding member of the HSBC Group – one of the

world‘s largest banking and financial services organisations

with around 6,900 offices in over 80 countries and territo-

ries – and its flagship in the Asia-Pacific region. HSBC Limi-

ted is the largest bank incorporated in the Hong Kong Spe-

cial Administrative Region and one of the SAR‘s three

note-issuing banks. HSBC has had a continuous presence

in mainland China for 147 years. It is one of the largest in-

vestors amongst foreign banks in mainland China, having

invested in select mainland financial services entities and

in the growth of its own operations, including a 19% stake

in Bank of Communications, and an 8% stake in Bank of

Shanghai. It has a branch in Shanghai, which conducts for-

eign currency wholesale banking business. The current

network in mainland China comprises 144 outlets inclu-

ding 28 branches throughout China, and offers a full range

of specialised banking and financial services in mainland

China. HSBC has become the leader in CNH services.

Bank Julius Baer: Firmly established as Julius Baer’s second

home market, Asia is an important part of the growing glo-

bal investment universe. In China, the Bank was granted an

investment quota under the QFII licence in 2011 – the first

such permit given to a private bank. Based on this quota,

Julius Baer launched a China fund which allows clients to

directly access the growing domestic equity and bond

markets. This complements other renminbi-denominated

product offerings, including conversion services, accounts,

currency-linked investments and bonds. Responding to cli-

ent demand, Julius Baer applied for an additional QFII in-

vestment quota in 2012 which allowed the bank to launch

a new Julius Baer China Fixed Income Fund. In 2012, it also

signed an agreement with Bank of China enabling Julius

Baer to offer fiduciary deposit facilities in offshore renminbi

(CNH). With its representative office in Shanghai, the bank is

deepening its grasp of the strategically important Chinese

market and the growth prospects it offers.

Imprint

Concept, design and composition: Janna Hagen, Print: Gremper AG Basel/Pratteln, Picture source: iStockphoto, Thinkstock

28

Swiss Bankers Association Aeschenplatz 7 PO Box 4182 CH-4002 BaselT +41 61 295 93 93 F +41 61 272 53 82 office@sba.ch www.swissbanking.org