RMB Appreciation + Low Interest Cost &Nbsp; Foreign Exchange Loans Arbitrage Tide.

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The recent appreciation of the yuan against the US dollar has cooled down in the two quarter.

According to data released by the people's Bank of China, new foreign exchange loans in September amounted to 13 billion 300 million US dollars, once again the highest level since this year.

A person close to the banking regulatory authorities told reporters in Nandu that arbitrage arbitrage through Renminbi deposits, foreign exchange loans and long-term RMB hedging increased again.

A state-owned commercial bank's international business division told reporters that foreign trade enterprises use Renminbi deposits as collateral to obtain foreign exchange loans, and then earn profits through the long-term Renminbi hedging.

For example, yesterday, the central parity of US dollar to RMB was set at RMB 6.6762 yuan, while the 1 year US dollar exchange rate was RMB 6.4590/6.4640 yuan, and the difference in the middle price was over 3%.

At the same time, the current one-year fixed deposit rate of RMB is 2.5%, which is generally higher than the US dollar lending rate.

New loans for foreign exchange in September

In the middle of this year, the State Administration of foreign exchange (FSB) informed foreign banks about the unusual growth of foreign exchange loans and the violation of some foreign exchange businesses.

After the converging at the end of the two quarter, the growth rate of foreign exchange loans was blowout again at the end of the three quarter.

Since June 19th, China has reached the closing high since the start of the inter-bank market exchange trading in October 15th, during which RMB appreciated 2.8% against the US dollar.

At present, the US dollar lending rate is even less than 2.5% of the one-year RMB deposit rate, and the risk free arbitrage space is very large.

According to the data released by the people's Bank of China, foreign currency loans increased by US $43 billion 200 million in the first three quarters of this year, and foreign exchange loans increased by US $13 billion 300 million in September, the highest level since the beginning of this year, continuing the growth trend of foreign exchange loans in August.

"Foreign exchange loans increased by US $9 billion 355 million, US $9 billion 726 million and US $9 billion 704 million respectively in 1-3 months.

However, since April, there has been an inflection point in foreign exchange loans, and only $5 billion 200 million has been added to foreign exchange loans during that month.

The central bank's financial statistics released in the first half of July showed that in June, foreign exchange loans in the whole country decreased by 300 million US dollars, while foreign exchange loans in May decreased by 1 billion 400 million US dollars, showing negative growth for two consecutive months.

E Yongjian, a financial research center at Bank of communications, said that the extraordinary increase in foreign currency loans was related to the expectation of appreciation of the RMB exchange rate.

A state-owned commercial bank's international business department told reporters that the rapid growth of foreign currency loans is related to the risk free arbitrage of many foreign trade enterprises.

He told reporters that foreign trade enterprises use Renminbi deposits as collateral to obtain foreign exchange loans, and through long-term Renminbi hedging, they will be able to earn 20% of their profits in the rush hour.

Yesterday, the central bank put the US dollar against the central parity of RMB in RMB 6.6762 yuan, while the offshore market, the 1 year US dollar to the RMB non deliverable forwards RMB 6.4590/6.4640 yuan, the difference between the central and the yuan is over 3%, and the current one-year fixed interest rate is 2.5%, which is also higher than the US dollar loan interest rate.

The demand for foreign exchange in foreign trade enterprises is hot.

"This practice of empty handed white wolf has become the main means of profits for many foreign trade enterprises, and even some enterprises can magnify profits through repeated loans and settlement, which may threaten the security of the national exchange rate."

Those close to the regulatory authorities told reporters that the recent arbitrage arbitrage practice again signs of warming.

The head of the International Business Department of a joint stock bank said that foreign exchange loans were not allowed to arbitrarily pfer foreign exchange in the territory, but many enterprises tried to collect foreign exchange loans by illegal means in order to make two arbitrage. They once again deposited Renminbi in foreign exchange into another bank's pledge, and borrowed money from foreign exchange.

The reporter learned from the four major banks that the bank has launched a series of products such as RMB deposit mortgage, foreign exchange loan and long-term RMB hedging for foreign trade enterprises.

Such as Bank of China "Huili Da", ICBC's "remittance loan surplus" and CCB's "paying foreign exchange surplus".

A director of the International Business Department of a state-owned commercial bank told reporters in Nandu that such products are suitable for importers under the trend of RMB appreciation, hoping to avoid exchange rate risks and save the cost of foreign exchange purchase.

However, the staff of the large state-owned bank said that such products were sought after by investors, but the state-owned banks were afraid of the concern of the safe.

"In essence, the design principle of this kind of financial product is to carry out positive arbitrage between RMB deposit interest rate and foreign exchange loan interest rate and obtain the exchange earnings from RMB appreciation."

The above said that the arbitrage of such operations usually obtains two parts of the proceeds, one is the acquisition of spreads between foreign exchange loans and RMB deposits, the other is the use of RMB appreciation in the N D F market.

"Under the expectation of RMB appreciation, this kind of empty handed white wolf has a higher profit than the actual trade of the enterprise." many bank traders told this reporter that at the end of last year, at the beginning of the year, when the RMB appreciation expectations were strong, many large and small businesses would choose this way. "Even large scale state-owned enterprises will not refuse to face such a free lunch."