OREANDA-NEWS. November 07, 2012. Agricultural Bank of China Limited (“ABC”) held at Shanghai International Convention Center a launch conference for its new product “Piao Yuan Tong”, China’s first standard bill rediscount product for aggregate transactions. Officials from the Shanghai Financial Services Office, Shanghai Head Office of the People’s Bank of China, and Shanghai Office of the China Banking Regulatory Commission attended and addressed the conference, reported the press-centre of ABC.  

Heads and experts specialized in bill operations of sixteen commercial banks, including Industrial and Commercial Bank of China, Bank of China, and China Construction Bank, were present at the conference. They exchanged ideas extensively and expressed their willingness to cooperate with ABC regarding this financial instrument.

According to sources from the Bill Business Department of ABC, the newly launched “Piao Yuan Tong” is the first product based on forward bill transactions in the domestic bill market. It not only meets the market trend and governmental regulation, but also satisfies current needs and sustained development demand. To satisfy customers’ increasingly diversified needs in the bill rediscount market, the Bill Business Department of ABC began to make concerted efforts to develop the bill rediscount product “Piao Yuan Tong” for aggregate transactions since the beginning of 2011. It was put into test operation in May this year. Operation procedures have been optimized and the operation system has been proved stable by and large. So far, ABC has completed RMB6 billion worth of transactions with five peers.

As a new financial product meeting the bill market trend and regulatory requirements, “Piao Yuan Tong” restructures various traditional bill products and introduces new elements of forward trading. ABC pioneered in introducing this standard product for aggregate transactions and a new forward trading model, and injecting new driving forces for the long-term development of China’s bill market.

 “Piao Yuan Tong” is introduced as a combination of a spot bill transaction and a forward bill transaction. To be specific, the two parties will sign a forward bill contract corresponding to the bills in the spot contract they ink at the same time, and the maturity date of the spot transaction is also the execution date of the forward bill transaction. There are two modes of the product, that is, “spot repurchase + forward repurchase” and “spot repurchase + forward buyout”. For the two parties in a rediscounting transaction, “Piao Yuan Tong” has the following apparent advantages. Firstly, in aggregate transactions involving spot/forward and repurchase/buyout, it can better satisfy customers’ different financing preferences and provide more comprehensive services. Secondly, bills in the physical form are not needed in forward transactions, thus saving time and cost, and guaranteeing timely transfers of funds and safe transactions.

Thirdly, interest rates applied to forward transactions can be fixed or floating, which can satisfy different risk appetites. Therefore, the “Piao Yuan Tong” instrument can be used widely by price-sensitive institutions which are actively engaged in bill transactions, use bill rediscount to allocate resources, have a demand for twice pricing, and need to hedge future liquidity and interest rate risks related to bills. The launch of “Piao Yuan Tong” helps realizing mutual interests of both trading parties and will undoubtedly play a positive role in promoting trading and investment in the market.

 “Piao Yuan Tong” represents a useful attempt and a good beginning of ABC’s meeting the bill market trend. The derivatives markets, including the bill forwards market, have huge development room and may become the “blue ocean” for the bill market in the future. ABC adheres to the principles of giving attention to both reality and future, emphasizing business innovation and risk control, and satisfying market needs and regulatory requirements. It will spare no effort in developing new financial products and launching new instruments following the market development trend, to maintain the leading position in market innovation and promote prosperity of the bill market.