Chongqing - Premier Li Qiang delivered the Government Work Report on March 5 and pointed out that in 2024, the balance of international payments had remained basically stable, foreign trade had reached a historic high, international market share had continued to rise steadily, and foreign exchange reserves had exceeded 3.2 trillion U.S. dollars.

The report outlined that the main goal for 2025 is stabilizing foreign trade, with efforts to strengthen policies, support businesses in securing orders, expand markets, and improve financial services like financing, settlement, and foreign exchange.

Innovative hedging solutions for exchange rate risks

In an exclusive talk with the People's Bank of China (PBC) Chongqing Municipal Branch on March 7, a Bridging News reporter learned that as more businesses become involved in the Belt and Road Initiative, they inevitably face the challenge of foreign exchange risk due to currency fluctuations.

For example, along the New International Land-Sea Trade Corridor (ILSTC), the currencies of ASEAN countries are mostly minor currencies, which tend to be more volatile and have limited trading liquidity.

To help enterprises manage exchange rate risks, the State Administration of Foreign Exchange Chongqing Municipal Branch encourages banks to introduce innovative derivative tools, such as American and Asian-style foreign exchange options, and hybrid products like "minor currency differential settlement + CNY-USD forward" combinations. These solutions aim to address the exchange rate hedging needs for currencies along the ILSTC.

New International Land-Sea Trade Corridor Chongqing International Logistics Hub Park Project. (Photo/PBC Chongqing Municipal Branch)

For example, the Chongqing Branch of United Overseas Bank (China) has introduced an innovative service for Southeast Asian currencies. This service enables direct exchange, financing, and hedging of CNY with currencies like the Singapore Dollar, Thai Baht, and Indonesian Rupiah. By bypassing traditional transaction patterns, this method reduces exchange costs and improves efficiency.

The State Administration of Foreign Exchange Chongqing Municipal Branch also encourages domestic banks and their foreign affiliates to use "overseas Non-Deliverable Forward (NDF) + domestic differential settlement" for minor currency hedging. 

This strategy locks in the exchange rates of minor currencies against the USD through NDF contracts, while domestic differential settlement secures the USD-CNY exchange rate, providing CNY hedging against minor currencies.

In 2024, Chongqing’s banks facilitated minor currency exchange rate hedging transactions totaling approximately 60 million U.S. dollars, with related enterprises engaging in over 100 million U.S. dollars of cross-border transactions.

Financial plan boosts local businesses expanding abroad

To support the growing and diverse financial needs of Chongqing-based enterprises expanding internationally, the PBC Chongqing Municipal Branch has introduced a cross-border financial support action plan in collaboration with the State Administration of Foreign Exchange Chongqing Municipal Branch. 

This plan integrates policies for domestic and foreign currency settlement, financing, and investment services, offering comprehensive and effective financial support to help local businesses succeed abroad.

For example, Chongqing's local company in the non-ferrous metal smelting and rolling industry, exporting products to countries like Brazil and Luxembourg, faces various financing challenges as it expands internationally. These include setting up overseas accounts and managing exchange rate risks.

In response, China CITIC Bank's Chongqing branch has offered the company a tailored cross-border financial package. This includes efficient settlement and transaction processing, foreign currency deposits, customized exchange rate hedging solutions, and support for overseas affiliates through the establishment of a Non-Resident Account (NRA).

The PBC Chongqing Municipal Branch also said that over 20 digital cross-border financial products, such as the "Land-Sea Trade Corridor Loan" and "Export E-Financing," have been introduced to meet businesses' diverse financing and settlement needs.

Built on the Cross-border Financial Services Platform of the State Administration of Foreign Exchange, a key financial infrastructure, these innovations have enabled Chongqing to implement nine application scenarios, facilitating 58.4 billion USD in trade financing and settlement for nearly 1,800 enterprises.