While most interest among foreign banks is in developing export factoring, the deal that did most to publicise factoring in China last year involved slow moving receivables on the domestic market. In fact, the transaction did not actually represent a true factoring deal.
Jiangsu-based joint venture Nanjing Ericsson had repaid US$240m-worth of loans borrowed from the local branches of Bank of China, Bank of Communications and the Industrial and Commercial Bank of China.These loans were replaced by loans valued at US$100m from the Shanghai branches of HSBC and Standard Chartered Bank.The transactions were described in the local media at the time as a transfer of factoring deals from local to foreign banks, generating complaints that Chinese banks were losing out to their foreign competitors.
This deal was a big exception to the rule, in that the account receivables were not
receivables from exports but related to domestic trade yuan receivables due to Nanjing
Ericsson by China Telecom and China Mobile. It was also not true factoring in the sense
that the debts related to ï¿½chunkyï¿½ one-off payments and the structure was different.