Sunday, 12 December 2010

Dutch derivatives

Holland is now China's second-largest trading partner in the EU, which has spurred direct financial investments in both directions. Because Rotterdam is the main port for Chinese goods entering Europe, many Chinese companies are setting up distribution centers in Holland to manage the flow of goods across the continent.


"We can only compete on expertise," van Pabst said. "The fact is that China is in the process of reforming its capital markets and it needs innovative products to make capital markets more efficient. It is welcoming foreigners to come in with their experience."

For Rabobank, this expertise is in the food and agricultural wholesale sector. In June, the Dutch lender formed a partnership with Agricultural Bank of China (ABC; 601288.SH, 1288.HK) to expand its financing arm in China to reach small- and medium-sized wholesale businesses that are seeking to go abroad. To secure the deal, Rabobank invested US$250 million in the Chinese lender's US$22.1 billion initial public offering, the largest IPO in history.

Rabobank already has a representative office in Beijing, which it plans to upgrade to a branch in the next few years. But rather than build up an extensive branch network across the country, it wants to use ABC's existing network of 24,000 branches to make connections with farmers and small businesses outside cities.

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