FX Markets Asia Awards 2020: FX House of the Year, China – China CITIC Bank

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For Chinese yuan trading, many investors are still wary of the two-way fluctuations in the market. Following the currency reform in 2015, foreign investors could rest assured that threatening volatility is in the past. China CITIC Bank has a strong belief that China, the renminbi and the rapidly growing market could present tremendous opportunities for the next decades

Expanding influence

Zhang Jie, China CITIC Bank
Zhang Jie, China CITIC Bank

Zhang Jie, division chief, financial markets department, currency and rates division at China CITIC Bank, believes the critical reason for the bank’s industry-leading position in the ever-evolving renminbi FX trading scene and its competitive advantage is its FX dealer team. 

In particular, China CITIC Bank’s success hinges on its consistency in service quality. A prime example emerged as the Covid‑19 pandemic began to take hold. Like many other banks, China CITIC Bank needed to empty some of its physical trading floors – either entirely or partially – at the initial outbreak early in 2020. To ensure seamless trading, the internal infrastructure team at China CITIC Bank brought all its regular services online.

“Our remote services swiftly resumed after the Chinese New Year. We managed to avoid any disruptions in market-making for our corporate clients,” says Zhang. In addition to an unprecedented shortage of on-site traders, he added that sustaining regular trading activities was arduous when market liquidity contracted drastically, and the bid/ask gap widened to historical levels. 

FX traders at China CITIC Bank believe some values they uphold remained relevant through the crisis to differentiate the bank from its peers. Zhang says: “On the premise of satisfying our clients’ needs and wants, we promised to provide the best solutions, and – despite the pandemic – we continued our regular market quotations and market‑making.” 

China CITIC Bank’s success is well documented in its track record for 2020: the bank absorbed 10% more in the market share of China’s total FX transaction volume than previously reported, although the pandemic has severely shocked global demand and supply chains and heavily battered international trades and logistics. Zhang reports that the remarkable expansion in market share was enabled by internal controls and stringent compliance to regulatory requirements, as well as the stability of transaction services. 

Needs from onshore and offshore

The bank has strategically placed the sophistication of over-the-counter trading and fluency in Chinese markets knowledge at the forefront of its long-term plans. These lay a solid foundation for China CITIC Bank to tap into overseas renminbi needs. 

To that end, the bank enhanced its trading system and infrastructure, risk management and clearings over previous years to best position itself for multiple opportunities. In terms of infrastructure, the bank is among the first group of market-making banks in the Bond Connect programme. Most recently, the bank brought on board the Murex system, integrating the procedures in front, middle and back offices, and harmonising the infrastructures used in risk management across the firm. 

In August 2019, its subsidiary, China CITIC Bank International, joined with market solutions provider CLS Group in significantly reducing the implementation of solutions, settlement risk and transactions. These enhancements have fostered the foundation for the future addition of clients and businesses from markets abroard. 

“Our goal is to utilise resources and morph the bank’s process in the most efficient manner. By offering world-class services to clients, we hope to ultimately expand our institutional and massive-scale corporate client base,” says Zhang. With progressive enhancements internally, China CITIC Bank’s efforts yield some encouraging outcomes. In 2019 alone China CITIC Bank posted a total FX transaction volume of more than 10 trillion yuan ($1.5 trillion), among the top three banks in the arena of market-making for the spot market. 

Long-term strategy

On a global level, the bank continued to establish its footprint in the global markets, expanding beyond Hong Kong, Macao, New York, Los Angeles and Singapore. Amid the pandemic, the bank opened its branch in London – its first foothold in Europe – aiming to become a one-stop shop for renminbi investment and other services for cross-border clients, and to seize the opportunities for broader adoption of the Chinese currency in trades on the ground. 

Last year, leveraging the Belt and Road Initiative, the bank also explored the avenue of facilitating co‑operation with countries in central Asia. The bank presence and network are well estimated, with timezones covering Sydney to London to Los Angeles to ensure a global network and 24/7 renminbi trading capability. 

China CITIC Bank has practised this strategy, which is unique to mainland China-based banks, for years, trailing the footsteps of the country’s accelerated opening-up and the currency’s internationalisation. 

Zhang foresees China’s first-in, first-out recovery experience from the pandemic will ensure its capital markets are a clear winner by geography in 2020, and the strong foundation and visibility of China’s economic situation will be supportive of positive economic growth in 2021. This would buoy optimism for the currency and interests in Chinese assets, creating a structural demand to allocate to the country. Under these changing dynamics, China CITIC Bank is confident its teams and stringent risk management framework are well positioned to capture this opportunity and identify plenty more. 

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