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Handelsbanken Shanghai Helping your business succeed in China

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President Hu Jintao shaking hand with Mr. Pär Boman, President and Group Chief Executive of Svenska Handelsbanken, in June 2007 at Handelsbanken’s office in Stockholm

Svenska Handelsbanken opened a representative office in Beijing in 1982 and became the first Swedish and Nordic bank with an office in China

Branch office in Hong Kong opened in 1988, today the only Nordic bank with a branch office in Hong Kong

Representative office opened in Taipei in 1990, until today the only Nordic bank with an office in Taipei

Branch office in Shanghai opened in 2005, once again the first Nordic bank with a branch office in China

In February 2009 Svenska Handelsbanken Shanghai branch became the first Nordic bank to be granted a RMB business licence

Svenska Handelsbanken is also the only Nordic bank with a leasing company in China

Svenska Handelsbanken is also the first Nordic bank to issue an off-shore RMB bond

Your local banking partner in Greater China

330 years experience of banking in Greater ChinaHandelsbanken’s history in China

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Payments

Domestic payments

Cross-border payments

Entrustment loans

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Accounts

Local currency accounts

Foreign currency accounts

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Internet banking

Global Online

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Trade finance

L/C Guarantees Discounting of Bills & BAD

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Treasury

FX spot FX forwards Deposits

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Handelsbanken Shanghai services overview

Shanghai

Financing

Working capital loans

Fixed-asset loans

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Leasing

Finance Lease

Operating Lease

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5Accounts and internet banking

Foreign currency accounts Current account (used for daily transactions)

Pledge deposit (cash collateral as security for guarantees, L/C etc.)

Capital account (used for registered capital injection)

Temporary capital account (pre-operating expenses – can be converted into capital account)

Representative office account

Offshore account (for offshore company’s settlement with China)

Escrow account

Local currency accounts Ordinary account (for daily transactions, loans, call deposit and etc.)

Temporary account (handling of temporary operations)

Special account (used for special business related to governmental projects)

Term deposit account (term deposit of minimum CNY 1m as regulated for individual account)

Accounts

Note: 1) CNAPS is a local currency settlement system in China

1 Internet banking

Global online Communication methods

– Account information (balance/transaction enquires)– Cross-border payments– Domestic payments

Information in real-time for Handelsbanken accounts with internet available at any place in the world

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6Payments/cash management and financing

Foreign currency payments Incoming payments (e-port card needed for customs clearing for trade)

Outgoing payments

Domestic payments (only when payer and payee are the same company)

Payments are subject to documentation requirements according to Chinese foreign exchange regulations

Local currency payments Credit vouchers

Cheques

T/T through CNAPS1

Entrustment loans Only possible between sister companies

Payments and cash management

Note: 1) CNAPS is a local currency settlement system in China

3 Financing

Working capital loans Short-term loans

– Foreign and local currency

Long-term loans– Foreign currency

Fixed-asset loans Short-term loans

– Foreign and local currency

Long-term loans– Foreign currency

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Treasury

Trade finance and treasury

FX Spot Local currency vs. foreign currencies (i.e. SEK, EUR, USD, etc.)

Foreign currencies vs. foreign currencies

FX Forwards Always local currency vs. foreign currencies (i.e. SEK, EUR, USD, etc.)

Deposits Deposit rates fixed by Peoples Bank of China

Trade finance

Letter of Credit (“L/C”) Export business

– L/C advising, L/C confirmation, L/C discounting– Bill discount (Bill includes shipping documents, packing list and etc.)

Import business– L/C issuing– Bill discount

Documentary collection

Guarantee issuance (foreign and local currency) Bid bond guarantee Advanced guarantee Payment guarantee Performance guarantee Warranty/court/customs guarantee Advanced payment guarantee Rental guarantee Shipping guarantee

Discounting of Banker Acceptance Draft “BAD”

Discounting of Receivables

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Leasing

Leasing

Finance lease and operating lease For new fixed assets investment

– Cars, production equipment and machine etc.

For acquiring working capital based on the assets on your book through Sale & Lease Back structure

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9Total investment and shareholder capital

Registered capital Off-shoredebt

The registered capital is a function of the WOFE’s total investment size (see table above)

The remainder between the total investment and the shareholder capital is the company’s Foreign Debt Quota “FDQ”. This quota defines the maximum amount of off-shore debt a company can borrow

A company’s FDQ can be used for short-term and long-term loans

Note that usage of long-term loans will “eat up” the FDQ for good

On-shore debt

Graphic overview

Total investment

Registered capital, %

Minimum RegisteredCapital

USD 3mor less

70% N.A.

USD 3–10m 50% USD 2.1m

USD 10–30m 40% USD 5m

USD 30mor more

30% USD 12mShareholder’s equity at inception

Company Foreign Debt Quota

Additional on-shore external financing from banks in China

Total investment

On-shore debt unlimited

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Process overview Comments

Entrustment loans

In China corporations can distribute and transfer funds within the group by means of entrustment loans

For RMB transfers there is no need to have locally incorporated holding companies

The transaction is based on a three-party lending agreement between the two sister companies and the Agent Bank

How it works Cash rich Company A provide funds of RMB 5m to sister

Company B through the Agent Bank

The Agent Bank collects interest of [x]% p.a. from sister Company B and transfer it back to Company A– The interest rate should be based on the arm’s length principle

If the loan is still needed at the time of repayment a new agreement will be established between the two parties

Company A pays a commission fee to the Agent bank

Agent Bank

Company BCompany A

Loan agreement: RMB 5mTenor: 6 months

Fixed interest rate: [x]% p.a.

RMB

5m

RMB 5m

Retu

rn In

tere

st

Collects Interest

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Process flow overview

Discounting of Banker Acceptance Draft

Buyer and Seller establish a bilateral agreement (stipulating invoice tenor, price etc.)

Buyer uses its local bank to issue a Bankers Acceptance Draft “BAD” based on the two parties bilateral agreement. The BAD tenor cannot exceed 6 months according to PBOC regulation

The Buyer forwards the BAD to the Seller

Delivery of goods takes place

Seller transfer the BAD to Handelsbanken Shanghai

Handelsbanken Shanghai pays Seller discounted purchase price of the BAD

The Local Bank pays invoice to Handelsbanken Shanghai on the maturity date of the BAD

Buyer Seller

Local Bank

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2

5

6

7

2

1

Handelsbanken Shanghai

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7

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12Forward exchange contract

A forward exchange contract or a “FX forward” is a binding contract to buy or sell a certain amount of foreign currency at a pre-agreed rate and on a certain future date

A forward contract is the easiest way of covering exchange risk because it locks in the exchange rate. This strategy mitigates one of the problems that customer experience when importing or exporting in foreign currency

In order to carry out a FX forward the customer need to advise the agent bank the amount, the currencies, the expiry date and whether customer would like to buy or sell the currency

Our minimum transaction amount is USD 10,000

Process flow overview

01Jan

Fixing price for buying USD and selling local currency

FX forward01 Apr

Buying USD

A company know that they will pay-out a dividend to its parent company in USD three months from now

By using a forward contract the company can lock in the CNY/USD exchange rate today

3 months

13Global On-line – the link to your international banking transactions

Direct online access to summarized account information for international accounts, both with Handelsbanken and with other banks

Intra-group transfers Make transfers between Handelsbanken

accounts and accounts with other banks

Make same-day transfers between Handelsbanken accounts in different countries with no loss of interest days

Payment orders in other countries Execute local payments and cross-border

payments from accounts in other countries Payments can be made both from a local

account with Handelsbanken or from an account with another bank in the country where you wish to execute the payment

Collaboration with international banks One point of contact for all your international

bank transactions

Graphic overview