SocGen to ease Sino-African trade

French bank Societe Generale SA is seeking to expand into Africa to tap the boom in the Sino-African trade and rapidly growing commercial activities of Chinese enterprises in the region.

While foreign banks remain highly regulated in China's domestic financial markets, the French bank is looking to capitalize on the rising demand for Chinese currency in African trade settlements.

Six banks in Africa, including SG-SSB in Ghana, Fina Bank Group in East Africa and Commercial Bank of Africa in Kenya, are currently in discussions with SG China to open yuan-denominated accounts.

So far, SG's Cote d'Ivoire subsidiary has successfully opened yuan-denominated accounts, according to Harry Liu, head of commercial banking at Societe Generale China.

"As Chinese companies go to Africa, they will need supporting banking services and it will take some time for Chinese banks to build their networks in Africa. Such demand will create opportunities for foreign banks in China, especially for those who have a strong network presence there," he says.

SG has one of the largest networks in Africa among European banks. It operates 870 branches in 15 African countries, according to Liu.

Leveraging on its extensive network in Africa, the French bank has been able to access the growing business activities of Chinese companies that are engaged in various sectors including energy, infrastructure, agriculture, telecommunications and manufacturing.

The bank is now providing financial services - including import and export financing, bond issuances and bank guarantees - to its Chinese clients in Africa, especially in the northwestern part of the continent, Liu says.

He says that SG has especially benefited from the rapid growth of Sino-African trade, and the fact that Africa has started to develop an appetite for yuan-denominated financial products.

Trade between China and Africa reached a record high of $198.5 billion last year, according to the Ministry of Commerce. Trade is expected to hit $325 billion by 2015, providing a strong base for growth in yuan trade settlements and yuan-denominated bonds.

French Finance Minister Pierre Moscovici said during a recent trip to Hong Kong that France and China have a mutual interest in making the Chinese currency more heavily used in trade in Africa.

In fact, Paris has been keen to build itself into a financial hub for yuan settlements in the eurozone and a bridge between Europe and Africa for Chinese companies.

Besides the strength of its network, SG also provides advisory services for Chinese companies in Africa that are often exposed to regulatory, legal and foreign exchange risks, Liu says.

"For example, many African nations have very tight foreign exchange controls. Many countries only accept guarantees issued by local banks, and some require all documents to be in French. SG's expertise and local knowledge can give Chinese corporates a valuable head start in unfamiliar markets," he says.

France's historical link with Africa is viewed as a key advantage in deepening the Sino-French strategic partnership. Widening the scope of Sino-French cooperation in Africa was also emphasized during French President Francois Hollande's visit to China in April.

Experts say the intention of Chinese and French leaders to deepen cooperation in Africa will offer enterprises on both sides a greater incentive to jointly seek business opportunities in the region.

"Instead of seeing China as a threat or a concern, French enterprises are more and more likely to see an opportunity," says Isabelle Fernandez, director of UBiFRANCE's office in China, an organization that promotes French business internationally.

"In fact, it will be a win-win game to play as French and Chinese companies have complementary roles to play in the region's development."

lixiang@chinadaily.com.cn

(China Daily Africa Weekly 06/21/2013 page21)