ICBC Leasing to focus on RMB settlements

Important part of firm's strategy for expansion includes aircraft sector

BEIJING - ICBC Leasing Co Ltd, one of the largest financial leasing companies in China, will emphasize cross-border yuan settlements this year, its chief executive officer told China Daily.

"As the yuan internationalizes, more and more foreign companies are willing to receive payments in the currency, so we will stress cross-border yuan settlements as a primary task this year," Cong Lin said.

ICBC Leasing became the first Chinese leasing company to pay for aircraft in yuan when it ordered 42 planes in early August.

"Aircraft are paid for in dollars, based on international practice", Cong said. However, Airbus SAS allowed the leasing firm to pay for the deal, valued at more than 20 billion yuan ($3.13 billion) based on its list price of $75 million for each plane, in dollars or yuan.

The planes will be delivered within four years.

Cong added that in October, ICBC Leasing will take delivery of a Supramax dry-bulk vessel from Chengxi Shipyard Co Ltd in Jiangsu province and charter it to a client in Hong Kong for a yuan-denominated rental.

"For ships not trading in China, freight and/or the hire are usually paid in dollars. Now we are trying yuan-based settlement, which can make the yuan more widely used and influential," Cong said.

According to Cong, Chengxi Shipyard used to be paid in dollars, which it then had to exchange for yuan. Accepting yuan directly is more convenient for the shipyard and also helps China reduce its foreign reserves.

The People's Bank of China and five other financial authorities announced last month that all parts of the country are allowed to use the renminbi in cross-border trade settlements, a sign of China's intentions to proceed with the internationalization of the yuan.

ICBC Leasing is a subsidiary of the Industrial and Commercial Bank of China Ltd, with a registered capital of 5 billion yuan, mainly focusing on aircraft and ship leasing.

Cong said the aircraft market has great potential in China because of strong demand.

Boeing Co has forecast that Chinese carriers will spend $480 billion to buy 4,330 aircraft over the next two decades and will remain the largest market outside the United States, generating roughly $5 billion in annual turnover.

Cong said ICBC Leasing is operating 68 aircraft, and the 42 new planes are vital for achieving the company's target of operating more than 200 aircraft by 2014.

"We also plan to buy aircraft made in the Airbus A320 family for final assembly in Tianjin and lease them to foreign airline companies," Cong said.

"The internationalization of the leasing industry can play an important role in Chinese trade to use our foreign reserves," Cong said.

According to Cong, there were roughly 1,600 aircraft in China at the end of 2010, with about two-thirds leased from domestic and foreign leasing companies. Chinese leasing companies operate fewer than 200 aircraft.

"More than 800 aircraft used in China are owned by foreign leasing companies," Cong said. "If China buys these aircraft and leases them to Chinese airline companies, we can use our foreign reserves well."

According to the China Association of Enterprises with Foreign Investment, the trade volume of China's financial leasing market was about 420 billion yuan in 2010, with 200 billion yuan coming from 17 financial leasing companies regulated by the China Banking Regulatory Commission.

The three largest financial leasing companies, ranked by registered capital, were CDB Leasing Co Ltd, ICBC Leasing Co Ltd and CCB Leasing Co Ltd.