ING: Chinese Enterprises Reduce Costs by Borrowing in RMB

The continuous lowering of interest rates in Mainland China, coupled with recent weakness in the RMB exchange rate, has made RMB financing more attractive. James Poon, country manager, Mainland China and Hong Kong at ING Bank, shared during an interview that due to low domestic financing costs, Mainland Chinese enterprises prefer RMB financing, including bond issuance and loans, as well as lean towards short-term financing. According to data from Dealogic, onshore bond issuance in China surged by 67% in 2024, reversing the downward trend of the past two years. The number of issuances also increased by nearly 90% year-on-year, reaching a six-year high. 

Regarding this year’s investment and financing trends, James believes that the Central Government will gradually introduce stimulus policies to support the recovery of the overall economy. In the process, both client financing and investment needs will gradually increase. When the Federal Reserve lowers interest rates further, it is expected that clients will increase their foreign currency financing and investments. ING will be observing the market developments following the inauguration of US President-Elect Donald Trump.  

Furthermore, the increasingly complex geopolitical situation is another factor driving clients’ investment and financing demands. James cited examples such as EV battery and EV manufacturers establishing bases in European countries such as Hungary, a move aimed to make supply chains more globalized in response to the current global situation. Establishing manufacturing facilities elsewhere can greatly assist the strategic considerations of the entire company. When clients see opportunities that align with their strategic development, they will size it. ING Bank also provides hedging tools to help enterprises manage risks such as interest rate fluctuations.  

Clients are leading enterprises, not seeing bad debts 

However, Mainland China’s economy recovery has fallen short of expectations, will this affect clients’ business and future development? According to James, ING’s clients are mainly concentrated in state-owned enterprises, China Central SOEs, and Hong Kong blue-chip companies. These entities are strong, large in scale, and more internationally oriented. Even if their business records only single-digit growth or even decline, they will continue to invest in the market and seek opportunities to sustain growth. ING places a strong emphasis on cash flow, loan purpose, repayment source, fund source during approval, all of which are scrutinized with transparency. ING is also well aware of the client’s global deployment and developments, with confidence in these leading enterprises.  

ING has not recorded any bad debts since the beginning of the COVID-19 pandemic due to its client selection strategy. James mentioned that ING has long foreseen that the financing models of some real estate companies in China were not sustainable amidst the industry’s debt troubles in recent years, and problems will arise once the market turns. Therefore, ING was very cautious in screening real estate clients. Currently, its clients are limited to leading central SOEs and SOEs, which no defaults recorded. James added that the EV industry shares similarities with the real estate sector. Both industries are seeing intense market competition, with many operating at a loss, requiring very diligent client selection.  

Hong Kong property developers have a solid foundation and are overall stable 

On the Hong Kong property industry which has attracted a lot of attention and interest, James described Hong Kong’s property developers have a solid foundation, and that their financing approach is currently stable and cautious. He noted that large enterprises have experienced various business cycles, and are observing the landscape to determine when the next cycle will return, hence he trusts their judgement. James believes that is overall real estate industry is stable and will not encounter issues.  

Another trend is the growth of ING’s sustainability-linked products. James mentioned ING’s landmark sustainability-linked derivative for Ant Group in 2023 and the HKD1.4 billion sustainability-linked credit facility for CIMC Enric. If the company achieves the set targets, the interest rate can be reduced as an incentive. James believes that this trend is irreversible, and in the future, more industries and companies will join in on the trend. This is a key area of focus for ING. 

Originally published in Hong Kong Economic Journal: Opens in a new tabhttps://www.hkej.com/dailynews/finnews/article/3976877/ING