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2013 – The year of the renminbiHandbook for Corporates and Financial InstitutionsEconomic and regulatory conditions affectingthe renminbi are unfolding quickly.This document reflects HSBC’s views on howthe development of the renminbi will unfoldas of February 2013, based on research byour team of global experts and our extensivedaily operations in renminbi.

Improve margins onChina tradeMoving an invoicing cycle for Chinese trade into renminbi could boost marginsdramatically by improving terms and reducing forex transaction costs. Did youknow that 41 per cent of Chinese companies are willing to offer better termsof up to 3 per cent to transact in renminbi? (HSBC's RMB Cross Border TradeSettlement Survey, October 2012)Where’s the opportunity?The renminbi is already widely used in cross-border transactions with China, accounting foraround 8 per cent of total goods trade settlement in China in 2012. HSBC projects it will reach30 per cent by 2015. Total offshore cross-border trade settlement in renminbi reached CNH2.9trillion in 2012, representing 40 per cent year-on-year growth.How can HSBC help you seize it?HSBC can help set up the accounts needed to settle China trade in renminbi and set the stageto negotiate better terms and reduce foreign exchange. We can also help back invoices withtrade and receivables finance, all in renminbi.11.8% – China’s year-on-year import growth in December 2012 (vii)6Trade in renminbi with HSBCCross-border settlementInvoicing renminbi for trade with China is now unrestricted.Your business can conduct almost all cross-border tradetransactions with mainland Chinese companies in renminbi,using accounts and documentation support from HSBC.Trade has been fully open since June 2012, when allcompanies in mainland China with import and exportqualifications were permitted to make and receive paymentsin renminbi for goods, services and other account items underChina’s Renminbi Trade Settlement Scheme.Move your trade on to the MainlandAs the largest foreign bank in China, we can help establishand manage operations on the Mainland. HSBC will helpexecute an expansion strategy, providing services to help withcapital injection and reduction, payments, investments, andshareholder loans – all compliant with Mainland authorities.We can help repatriate profits by paying and receivingdividends in renminbi. There is no restriction on the maximumamount of individual renminbi payments you can make on yourtrade or capital accounts.Trade financing and fundingHSBC provides a full range of offshore renminbi tradefinance products in MENA:RMB Export Documentary Credit (DC) AdvisingRMB Export CollectionsRMB Export FinancingRMB Import Documentary Credit (DC) IssuanceRMB Import CollectionsRMB Import FinancingRMB Shipping GuaranteesRMB Guarantees7

Grow onshoreoperationsEnsure your business participates in the growth of the Chinese economy – projectedat an average annual GDP growth rate of 7.5 per cent until 2015 – to the fullestextent by building your operations in China with finance in renminbi.Where’s the opportunity?You can finance your China operations using renminbi raised offshore or on the Mainland.Injections of renminbi into China foreign-invested enterprises, wholly owned foreignenterprises and joint ventures have been permitted since October 2011. In 2012, internationalcompanies, banks and other organisations raised CNH275 billion in renminbi funds using theoffshore Dim Sum bond market in Hong Kong. Or fund operations directly in China – internationalorganisations can borrow from Mainland lending organisations.USD112bn – inwarddirect investment intoChina in 2012 (viii)We’re Chinese in ChinaWe offer a full range of funding for your business in China. HSBC provides renminbi tradefinancing facilities, loans and the capability to raise bonds in Hong Kong, London and otheroffshore markets as they develop. Onshore too, HSBC is there to help with financing solutionsas a registered bank on the Mainland.8Build in renminbi with HSBCOffshore RMB borrowing and fundingWe are the leading underwriter and leadmanager in the offshore Dim Sum market,ranked first in the league table of leadmanagers by Bloomberg in 2012 by amountand number of issues. Additionally, weoffer a full range of short- and medium-termfinancing solutions in renminbi for moreimmediate funding requirements.Alstom, América Móvil, Ford and Tesco areamong the issuers that have raised renminbifunds at competitive rates through Dim Sumbonds. Companies can also raise capitalthrough renminbi-denominated initial publicofferings in London, Hong Kong and otherfinancial centres with HSBC.All working capital, trade and receivablesfinance can be used outside China whilebonds and loans raised offshore can beremitted onshore to finance businessactivities in China subject to approvals bythe Chinese authorities.Onshore RMB financingAs the largest foreign bank in mainlandChina, you can turn to HSBC for loans, bondsand trade financing facilities tailored to fityour requirements. We are the only foreignbank approved by the People’s Bank ofChina to underwrite and clear non-financialcorporate bonds in interbank bond markets,and underwrite commercial paper andmedium-term notes.HSBC also provides full trade and receivablesfinancing in China as well as domestic lendingand cross-border intercompany funds transfers.HSBC is also the leading foreign bank foraccess to China’s interbank bond market.9

Take risks out of ChinaactivitiesManage the costs of hedging your trade and operations on the ground in Chinaby using renminbi foreign exchange forwards, options and swaps in an offshoreregional treasury centre or on the Mainland.Where’s the opportunity?Renminbi foreign exchange markets onshore and offshore have developed rapidly and are nowsupported by risk management tools. About USD8.7 billion in deliverable foreign exchange contractsare issued every day in Hong Kong, while USD3 billion in contracts are traded daily in China.USD3.31 trillion – valueof China’s forex reserves,December 2012 (ix)How can HSBC help you seize it?We provide risk management instruments for trade, financing and investment protection. HSBC isamong the most active participants in the offshore renminbi foreign exchange market and one of onlya few international banks registered to deal on the Mainland as well.10Mitigate in renminbi with HSBCComplete offshore hedging toolsHedge your offshore renminbi trade flows and assets with HSBC.We provide deliverable forwards, options and swaps as wellas access to the active non-deliverable market, which predatesliberalisation of the renminbi. Prices between deliverables andnon-deliverables are converging and deliverables have alreadybecome the tool of choice for many investors seeking to hedgerenminbi volatility.Manage risks on the MainlandWe are the leading foreign bank in the interbank FX spot,forward and swap markets. HSBC provides deliverable currencyand interest rate hedging tools, including swaps, options andforwards. We can help hedge all the transactions and transferspermitted by Chinese regulators, including debt and workingcapital repayment; income and expenses; capital injections andincome remittance.11

Boost global liquidityRenminbi short-term securities provide a new avenue to diversify balance-sheetcash positions and accumulated funds, often offering liquidity at more attractivereal yields than traditional assets in US dollars, euro and sterling.Where’s the opportunity?The rise of renminbi deposits in Hong Kong, London and other centres to more than CNH700billion means you can manage offshore renminbi funds in the same way as other globalcurrencies. Plus, with regulators opening access to key securities markets on the Mainland, suchas China’s CNY22 trillion interbank bond market, there are plenty of options for onshore cash too.How can HSBC help you seize it?HSBC's Global Liquidity Solutions (GLS) connects China to your offshore treasury centresdelivering additional values in optimising internal funding and interest income. We are thereto help you manage onshore renminbi generated by your business in China too as a registeredbank on the Mainland, and an active participant in liquid local securities markets.3.2% – yield on five-year Chinese government bonds in Shanghai (x)12Add liquidity in renminbiwith HSBCDiversify your international cash in renminbiDiversify international cash holdings among a growing range of renminbi-denominatedinvestment products in offshore markets. We can help you invest foreign currency intorenminbi or find a home for existing holdings of renminbi accumulated offshore. HSBC's RMBinvestment products include:Time depositsPrimary and secondary renminbi bondsissued offshoreFX-linked structured notesInterest-rate linked structured depositsEquity-linked structured notesPrecious-metal linked structured notesRMB fundsRMB foreign exchange optionsRMB Equity Index BasketsDiversify your cash holdings in ChinaCompanies that generate surplus cash from operations on the Chinese mainland can turnto HSBC for competitive yields on their funds. Our onshore renminbi fund offers attractivereturns, and we can tailor allocations to meet different liquidity and operating requirements.Manage cross-border flowsOptimise the flow of renminbi funds and mitigate issues of trapped cash in China with HSBC.Our wide range of cash and treasury management solutions help improve working capital andoperational efficiency through cash pooling, netting of intra-group flows, and centralisationof payments processing and risk management. Remitting cash in to and out from China hasnever been more simple and safe with HSBC's online banking system - HSBCnet.13

Financial Institutions strategyin renminbiDiversify fundingInvest in renminbiFinancial Institutionsp1610 January 2013 – firstexchange traded bond fundpermitted in China (xi)Gain exposure to China's growth ('onshore' and 'offshore' investment)Raise finance in offshore and onshore renminbiManage risksRisk management tools in renminbip18p203% – proportion of onshoreequities markets ownedby non-mainland investors,December 2012 (xii)USD37.4 billion – QFIIquotas approved for foreignand offshore investors as of31 December 2012 (xiii) 1514Redback reformOptions to finance and invest in renminbi continue to expand. Growing liquidity and regulatory freedom propel development inoffshore markets. Onshore, easing of rules and expansion of regulatory quotas are broadening investing and financing optionsfor international participants.Market sizeInvestment possibilitiesFinancing possibilitiesOffshore accounts/payments andcash managementMore than CNH700bnin deposits*Offshore unrestrictedOffshore unrestrictedDim sum bond marketCNH275bn issues in 2012,CNH280bn-CNH360bnexpected for 2012**Offshore unrestrictedOffshore unrestrictedRMB IPOs in Hong KongCNH12bn to date fromHui Xian REIT***Offshore unrestrictedOffshore unrestrictedOnshore bond marketCNY50trn issued since2005. 94% of marketis interbank****China Interbank Bond Market (CIBM) eligibleinvestors: foreign central banks or monetaryauthorities, Hong Kong, Macau and Taiwan RMBclearing banks designated by PBoC, overseasRMB participant banks, insurance companies,QFII, RQFII fundsRestrictedChina A-share market(Listed shares, bond and warrants; interbank fixedincome products; funds, and index futures tradedin China)USD3.3trn market, average dailytrading volume of11 billion shares*****QFII RQFII exchange traded funds in Hong Kong*Source: HKMA, City of London, HSBC, Xinhua. **Source: HSBC, Forecast by Crystal Zhou. ***Source: HSBC, RMB market development.****Source: HSBC, RMB market development. *****Source: Shanghai/Shenzen Stock Exchange, HSBC, RMB market developmentRestricted

Diversify fundingThe growing liquidity of renminbi debt capital markets represents new avenues forfinancial institutions to diversify funding.Where’s the opportunity?The Dim Sum bond market has come of age as a way of diversifying funding into renminbi.All categories of issuers are represented with about CNH275 billion raised in 2012 andbetween CNH280 billion and CNH360 billion projected for 2013 according to our forecasts.Onshore funding options continue to broaden with regular announcements of regulatoryeasing by Chinese authorities.How can HSBC help you seize it?We have a leading position for renminbi funding, from offshore Dim Sum issues and IPOs inLondon and Hong Kong through to onshore funding options via our position as the leadingforeign bank on the Mainland.USD101 billion – new loans by banks in mainland China in December 2012 (xiv)16Finance in renminbiwith HSBCDiversify with Dim SumIf you want to raise renminbi offshore, lookto HSBC. We are the top-ranked underwriterand lead manager in the Hong Kong Dim Summarket, holding first position in Bloomberg’sleague table in January 2012, with 130 issuesat CNY42 billion total issuance value. Ourranking reflects our extensive relationships andplacement power among investors who wantto lend in renminbi.Offshore channelsFinancial institutions looking for other offshorefunding channels can work with HSBC to raisebilateral and syndicated term loans, certificatesof deposit, notes and funds. After the launch ofthe Hong Kong renminbi repo market in June2012, HSBC can also help financial institutionsborrow renminbi against a variety of collateraloffshore such as government securities,equities and gold held with Euroclear.After Hong Kong, London is the leadingoffshore centre for Dim Sum issuers and after apioneering issue by HSBC in 2012, the market’sprofile and liquidity has been raised by issuesfrom both international and Chinese banks.Financial institutions looking to raise theirprofile in Asia can also raise capital throughrenminbi-denominated IPOs in London andHong Kong with HSBC.Funding onshore and panda marketAs a registered bank on the Chinese mainland,HSBC offers financial institutions fundingonshore with access to loans and arrangementof intercompany domestic loans. Althoughrates are converging, funds raised onshore aregenerally more expensive than offshore andface more extensive regulatory requirementsset by domestic authorities. We providea tailored solution to fit the needs of yourinstitution.17

Gain exposure toChina’s growthAccess to China’s strong economic growth is available through a growing rangeof renminbi-denominated products from HSBC, available onshore on the Chinesemainland and in offshore markets worldwide.Where’s the opportunity?The growing pool of renminbi held outside China has spurred the development of offshoreinvestment products while the easing of regulatory controls continues to broaden optionsonshore. Offshore deposits now exceed CNH700 billion worldwide while regulators continueto expand access to China’s CNY22 trillion interbank bond market and USD3.3 trillion A-sharemarket. We expect that China’s bond market is likely to double in size in the next five yearsand that the PBoC will gradually create a single interest rate benchmark in the next three years,leaving all other rates to be freely determined by the market.How can HSBC help you seize it?We provide access to the complete range of investments in offshore renminbi in Hong Kong,London and other financial centres, which can be made with no restrictions from Chineseregulators. HSBC is also a leader in onshore investment, which is limited to particular investorsand channelled through the QFII and CIBM regulatory schemes.11,600 – number of participants in China’s interbank bond market (xv)18Build your Chinaportfolio with HSBCInvesting offshoreHSBC provides financial institutions wishing to invest offshore with renminbi deposit products, DimSum bonds, structured products and money-market funds. Renminbi-denominated equities are alsobecoming available in Hong Kong. Our solutions include:Time depositsPrimary and secondary renminbi bondsissued offshoreFX-linked structured notesInterest-rate linked structured depositsEquity-linked structured notesPrecious-metal linked structured notesRMB fundsRMB foreign exchange optionsRMB Equity Index BasketsInvesting onshoreHSBC helps investors take positions in onshore capital markets in a variety of assets through the QFIIand CIBM schemes.We can help a wide range of investors gain QFII status and then support their onshore renminbiinvestment strategy. HSBC provides a one-stop package through our Mainland sub-custodian bankingservices. Our solution includes global custody, FX arrangement, bond trading and execution, andrelated investment services.We also guide and advise financial institutions on the path to gaining CIBM investor status, which allowsaccess to the fixed-income products traded in China’s interbank bond market. The CIBM scheme is opento foreign central banks or monetary authorities, Hong Kong, Macau and Taiwan RMB clearing banksdesignated by PBoC, overseas RMB participant banks, insurance companies, QFII, RQFII funds.19

Develop your renminbistrategy with HSBCWith the renminbi internationalising rapidly, now is the time to make it part of yourbusiness. And at HSBC, we have got the field covered:OffshoreWe are the number one bookrunner in Dim Sumbonds according to Bloomberg (January 2013)HSBC is a key member of the steering groupthat is developing the City of London intoan offshore financial centre for renminbi.In 2012, we launched London’s first everrenminbi bondFirst to provide continuous streaming of FXrates for six direct offshore RMB crosses onan interbank platformFirst to conduct the Tri-party RMB repo withEuroclear (3 Dec 2012)Won RMB House of Year 2012– by Asia Risk(for all RMB products and services)InvestingWe hold QFII and CIBM status and havedemonstrated expertise in Chinesesecurities investmentFirst and only foreign custodian bank forRQFIIsWe work variety of Dim Sum bond issuers toour investors for diversificationOnshoreLeading foreign bank in China, present onthe Mainland since 18651st foreign bank to underwrite Chinesegovernment bondsFirst and only foreign bank allowed tounderwrite commercial paper and mediumtermnotesFirst foreign bank to provide interbank RMBbond clearing / custody services in ChinaFirst foreign bank as market maker of RMB-Ringgit direct quotation in China¥¥¥ – your renminbibusiness opportunityin 2013222013 – your year of the renminbiGet in touchSet out your thoughts on how 2013 will be your year of the renminbi, and get intouch to make renminbi part of your business.Get informedYou can find in-depth views, interviews and news on the state of play for therenminbi at www.hsbc.com/rmbFor all enquiries, please contact your Relationship ManagerRenminbi (“RMB”) is currently not freely convertible and is subject to certain restrictions. The amount of offshore RMB (deliverable outsideMainland China, informally known as “CNH”) may be limited, which may affect the liquidity of offshore RMB products. The market foroffshore RMB is a different market to that of onshore RMB (deliverable in Mainland China, known as “CNY”).Apart from its own supply anddemand, the offshore RMB exchange rate may be influenced by the onshore exchange rate (which currently trades within a band set byauthorities in the onshore interbank market) and the two rates may converge with or diverge from each other.The Offshore RMB market may become illiquid, or offshore RMB may become inconvertible or non-transferable; the standard ISDA provisionsfor offshore RMB incorporated into this transaction provides that RMB payments in this transaction may be delayed until such disruption eventceases, or if it persists, settled by converting and making the payment in another currency.23

Source references(i) Source, HSBC, China's Big Bang, November 2012(ii) Source, World Bank, http://www.worldbank.org/en/country/china(iii) Source, CIA World Factbook, https://www.cia.gov/library/publications/the-world-factbook/rankorder/2078rank.html(iv) Source, HSBC, http://www.chinadaily.com.cn/china/2013-01/09/content_16100021.htm(v) Source, HSBC, http://www.tradefinancemagazine.com/Article/3108100/HSBC-RMB-maturing-as-cross-border-use-grows.html(vi) Source, HSBC, China's Big Bang, November 2012(vii) Source, Bloomberg, http://www.bloomberg.com/news/2012-01-10/china-import-growth-misses-estimates-as-export-gains-slow-surplus-widens.html(viii) Source, MOFCOM, http://www.morningwhistle.com/html/2013/whistle_0116/216672.html(ix) Source, PBoC, http://www.china.org.cn/business/2013-01/14/content_27680256.htm(x) Source, Bloomberg, http://www.bloomberg.com/quote/GCNY5YR:IND(xi) Source, Reuters, http://business.financialpost.com/2013/01/09/china-approves-first-bond-etfs-to-grow-debt-market/(xii) Source, Citywire, http://citywire.co.uk/global/demand-for-china-s-onshore-market-to-surge-says-allianzs-chung/a643805(xiii) Source, Z-BEN, http://www.z-ben.com/zedalerthk/index.php/1685(xiv) Source, Bloomberg, http://www.bloomberg.com/news/2012-01-08/china-december-lending-money-supply-growth-exceed- ists-estimates.html(xv) Source, Chinabond, June 2012(xvi) Source, HSBC Emerging Markets Currency Guide 2012, http://hsbcnet.com/gbm/attachments/rise-of-the-rmb/currency-guide-2012.pdf?WT.ac=CIBM_gbm_pro_rmbrise_pbx01_OnCNH is the name used in the market to refer to offshore deliverable RMBThis document is issued jointly by HSBC Bank plc, regulated by the Financial Services Authority (“FSA”) and HSBC Bank Middle East Limited, which is regulated by the Jersey Financial ServicesCommission. HSBC Bank plc and HSBC Bank Middle East Limited are members of the HSBC Group of companies (“HSBC Group”).HSBC has based this document on information obtained from sources it believes to be reliable but which have not been independently verified. Any charts and graphs included are frompublicly available sources or proprietary data. Except in the case of fraudulent misrepresentation, no liability is accepted whatsoever for any direct, indirect or consequential loss arising from theuse of this document. HSBC is under no obligation to keep current the information in this document. You are solely responsible for making your own independent appraisal of and investigationsinto the products, investments and transactions referred to in this document and you should not rely on any information in this document as constituting investment advice. Neither HSBCnor any of its affiliates are responsible for providing you with legal, tax or other specialist advice and you should make your own arrangements in respect of this accordingly. The issuanceof and details contained in this document, which is not for public circulation, does not constitute an offer or solicitation for, or advice that you should enter into, the purchase or sale of anysecurity, commodity or other investment product or investment agreement, or any other contract, agreement or structure whatsoever. This document is intended for the use of clients who areprofessional clients or eligible counterparties under the rules of the FSA only and is not intended for retail clients. This document is intended to be distributed in its entirety. Reproduction of thisdocument, in whole or in part, or disclosure of any of its contents, without prior consent of HSBC or any associate, is prohibited. Unless governing law permits otherwise, you must contact aHSBC Group member in your home jurisdiction if you wish to use HSBC Group services in effecting a transaction in any investment mentioned in this document. Nothing herein excludes orrestricts any duty or liability of HSBC to a customer under the Financial Services and Markets Act 2000 or the rules of the FSA.This presentation is a “financial promotion” within the scope of the rules of the FSA.HSBC Bank Middle East Limited© Copyright. HSBC Bank Middle East Limited 2013 ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means,electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Bank Middle East Limited.Issued by HSBC Bank Middle East Limited, PO Box 11-1380 Beirut, Lebanon, which is incorporated in Jersey, Channel Islands and regulated by the Jersey Financial Services Commission. CMPADVM 130009