The Export-Import Bank of China (China Exim Bank) said yesterday it would help domestic companies to hedge market risks brought about by reforms in China's foreign exchange rate regime.

Bank President Li Ruogu said that all firms, especially those engaged in the foreign trade business, are facing new risks following China's recent adjustments to its forex policy.

On July 21, the government scrapped the reminbi's peg to the US dollar and reformed the exchange rate regime. It moved to a managed "floating" exchange rate regime based on market supply and demand with reference to several currencies.

The country also strengthened the exchange rate of the renminbi to 8.11 to the US dollar, from 8.28.

The changes were likely to cause many companies to suffer losses because they borrowed renminbi but earned US dollars, Li said.

"Domestic companies need to learn how to deal with a more flexible exchange rate mechanism," he said.

China Exim Bank, a strong supporter of China's foreign trade companies and firms which invest in foreign countries, will work with domestic enterprises to design mechanisms to counter risks, said Li.

The bank will also help them to train people who are good at figures and develop suitable financial products.

"We must design financial products for the sake of domestic companies and China's economic development," added Li.

This means China Exim Bank will have to diversify.

Officials from government departments including the People's Bank of China, the China Banking Regulatory Commission and the Ministry of Finance have already reached common ground in this regard, Li said.

They believe the bank should not only engage in policy-related business but also practice market-oriented functions.

They also believe the government should inject more money into the bank.

The China Exim Bank was established in 1994, with the aim of supporting the export of the country's machinery and electronic products.

The bank has issued 400 billion yuan (US$49.3 billion) in loans since then, with 85 per cent of them used to fund the said exports.

During the first half of this year, the bank approved loans totalling 95.5 billion yuan (US$11.8 billion), an increase of 136 per cent from the same period last year.

By the end of June, the bank's outstanding loans stood at 162.8 billion yuan (US$20.1 billion).

As China's economy develops, the bank will also give key support to imports, Li said.

"If we do not do that, the China Exim Bank will become the China Export Bank," he said.

The bank will help import foreign resources, technologies and key equipments demanded by China's economic development, Li added.

It will also explore ways to support the country's agricultural development, he said.

The Chinese economy has grown at an average annual rate of more than 9 per cent over the past decade, which has aroused much attention from the rest of the world.

Domestic companies have also become more and more interested in international co-operation and competition.

This situation provides enormous business opportunities for the China Exim Bank, which also helps domestic companies which invest overseas, Li said.

"We have to reform to seize these opportunities," he urged.

The bank must set up an internal control system to hedge risks and reform its branches and internal structures, Li said, without giving further details.

The president paid great attention to staff members. "We rely on talent to develop our business."

The human resource department needs to take measures to make sure talented people are willing to work for the China Exim Bank, he said.

(China Daily August 10, 2005)