Profiting from the cross-border settlement market of OBOR by the SMEs has increasingly grown

2016-04-12

Reported by China Economic Net, Beijing on April 12 (Reporter: Li Yusi) The small and medium-sized enterprises (the "SMEs") can be described as "ballast stone" of the real economy. Under the new normal of economic downturn, the state attaches an unprecedented importance to the SMEs. The slogan of "widespread entrepreneurship and innovation" supports the development of the SMEs with green light all the way, and the proposal of OBOR strategy puts the SMEs on the fast track of "going out". 
 
In China, the SMEs is an enterprise group with the largest number and greatest innovation, which provides more than 50% of the tax revenue for China, and creates more than 60% of GDP and offers more than 80% of urban jobs. 
 
Compared with the large enterprises, the reform of the SMEs is charactered with low cost and fast introduction of new mechanism, thus it is always regarded as "trial plot" and "pioneer". Because of its important roles, under the new normal of economy, how to service the enterprises transformation and upgrading and "going out" have been focused by the top designers and industry. 
 
It is the best opportunity to "go out".
 
Many people believe that nowadays and the next decade will be the golden age for Chinese enterprise to "go out". 
 
Data shows that Chinese enterprises increase with a burst of growth at the rate of more than 10,000 enterprises established per day, and the SMEs' monthly growth rate is over 30%. It is noteworthy that despite the export of our country declines slightly at present, the export performance of the SMEs is still strong. The export-oriented SMEs not only dominate in the quantity, but also their amount of exports account for more than 60% of China's total exports, which makes an outstanding contribution for the growth of China's economy, employment, tax revenue. 
 
In fact, in addition to incentive policies, in the big context of the "supply-side reform", more and more enterprises begin to realize the urgency of transformation and upgrading. Enterprises should work out their own salvation instead of waiting for death under the "removing capacity". On balance, "going out" is the best choice. 
 
Where there is money, where there is SMEs. Compared to the large state-owned enterprises which are inflexible due to the large scale, the SMEs have become the most active cells with the keen sense of market smell in the real economy. For business opportunities brought by the OBOR, the SMEs have already been eager to have a try. 
 
Most business opportunities concentrate in the field of the modern manufacturing industry. From the structure of export products of the SMEs, the exports of communication equipment, computers and other electronic equipment manufacturing industry, electrical machinery and equipment manufacturing industry, textile industry, and transportation equipment manufacturing industry all rank the top five in industries. 
 
Report on the work of the government this year first puts forward "Made in China 2025", which has laid out a blueprint for the development of China's manufacturing industry in the coming decade. In the near future, in the eyes of foreign consumers, "Made in China" will no longer mean inferior quality and low price. Let's take textile and garment industries as examples. The garment industry has been equipped with highly skilled technology in certain Chinese cities, and according to information, the luxury goods industry also takes a low-key approach to improve itself, 20% of Prada products are all produced in China. 
 
There is no a blueprint drawn at one stroke. If "Made in China" wants to end the awkward situation of “large but not strong", the SMEs need to take one step at a time, and to "go out" without ostentation so as to achieve the blueprint. 
 
Finance is required to go first for enterprises to "go out". 
 
Only the policy guidance is not enough. Although the macroscopical framework has been set, the micro channels are not dredged basically. There are still a lot of obstruction for Chinese SMEs to "go out". 
 
On the one hand, in most cases, the SMEs are unable to access to the traditional financial institutions in financing due to the SMEs themselves with limited resources and low level of risk prevention. On the other hand, due to poor information channels of foreign trade, the SMEs fail to build effective contact with foreign clients, and lack relevant of financial experience when signing and performing contracts. 
 
Let's take the method of settlement as an example, choices made by most SMEs cannot reasonably avoid risks and unfavorable factors resulting in suffering losses in vain during the export settlement. The reach scope of payment and settlement of large-scale commercial banks cannot extend to the SMEs, while domestic cross-border payment, settlement, clearing systems are not perfect, which make the matter relating to the difficult "going out" for the SMEs far worse. 
 
At the same time, the sharp fluctuation of two-way rate has also become a major trouble for the most SMEs to "go out". In some countries whose monetary systems are less stable, a little signs of trouble in the market will cause a sharp currency depreciation, furthermore, the capital return of US dollar settlement system dominated by the SWIFT is slow, which may lead the whole year's "harvest" of the SMEs in vain. 
 
A Chinese-funded petroleum enterprise suffers great losses during the petroleum transaction with Kazakhstan. It is because the settlement adopts Tenge with less stable currency value, and the direct exchange loss arising from devaluation of domestic currency converts into over RMB 2 billion resulting in the finally accounted net earnings of foreign exchange only amounting RMB 0.052 billion. 
 
The large state-owned enterprises even like this, while for the SMEs, the precarious situation in the exchange rate fluctuations can be imagined. Due to lack of a set of convenient and fast RMB settlement system, many enterprises worry too much for "going out", and even are discouraged. 
 
In addition, due to the high cost of foreign settlement system channel, it is more difficult for the SME with small capital and little profit to afford such cost. In competition with foreign enterprises, only the currency exchange makes the SMEs lose in the starting line. Natural disadvantage of the use of currency shows that Chinese enterprises are in urgent need of a matured international settlement service system to escort their cross-border trade business. 
 
 
IBS escort for enterprises' going overseas 
 
Thankfully, the cross-border settlement market has increasingly grown. 

As the world's second largest financial settlement infrastructure provider, the IBS (International Business Settlement, which is affiliated to IZP Group) mainly orients to the global market, especially the countries along "One Belt and One Road", to arrange the global financial clearing and settlement network to provide international clearing and settlement services for global trade and consumption.
 
Different from the traditional big state-owned banks which shut the door on the SMEs, IBS's services not only cover large multinational companies, but also the commitment to provide tailor-made settlement facilities for small and medium-sized enterprises. 
 
IBS knows the pain of SMEs in entering overseas markets, understand the core of international trade transactions are settlement network. Therefore, with the aid of OBOR, IBS rapidly connected with systems of overseas central banks in various countries, deployed five regional settlement circles in Central Asia, Europe, Middle East, Africa and South Asia region to establish direct settlement channel of RMB. 
 
In this system which uses RMB as the settlement currency, IBS reduces the time limit of settlement of enterprises to T+1 or even T+0, which greatly reduces the exchange losses suffered by enterprises resulting from exchange rate instabilities in small countries, and helps the SMEs effectively reduce transaction costs and exchange rate risk. 
 
To achieve big business one should have big pattern, and to achieve big pattern one should have great wisdom. OBOR makes the Chinese economy standing on the world stage, and it is also a feast arranged by the reform designers for Chinese enterprises' going overseas. No matter for the enterprises' cross-border trades, or the foreign investment to build factories, or the international capacity cooperation, finance is an integral part of the leading role. As the most fundamental financial infrastructure of OBOR, the settlement system is the lifeblood of cash flow and the internationalisation of RMB. Through the construction of global new settlement system and standards, IBS builds the network rapidly and lead a new global settlement pattern.