Bank of China and Fonterra sign deal

By Jim Cornall

- Last updated on GMT

Fonterra says a deal with Bank of China New Zealand will help its Chinese operations. Pic: ©iStock/travellinglight
Fonterra says a deal with Bank of China New Zealand will help its Chinese operations. Pic: ©iStock/travellinglight

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Bank of China New Zealand has signed an agreement with New Zealand dairy cooperative Fonterra that establishes a RMB 1.5bn (NZ$300m, US$213m) multi-currency bank facility including a Chinese currency component.

Fonterra says that the agreement provides greater flexibility in how it funds its Chinese operations.

Bank of China established a branch in New Zealand two years ago and in that time has assisted New Zealand companies in China, as well as Chinese firms and investors entering New Zealand.

Annual trade triples

Bank of China chief executive, David Lei Wang, said annual trade between New Zealand and China had almost tripled to NZ$23bn (US$16.3bn) since the Free Trade Agreement was signed in 2008, and Chinese banking services played an important role in fostering cross-border transactions and investment.

Wang said there are opportunities to develop more renminbi (RMB) products and tap into China’s debt capital markets on behalf of New Zealand financial institutions and government agencies.

Fonterra’s chief financial officer, Lukas Paravicini, said the new debt facility highlighted the company’s focus on building its business in China.

Benefits in Chinese market

He said that Bank of China’s local presence and knowledge offer Fonterra additional benefits in the rapidly developing Chinese financial markets.

“Having local funding arrangements is a natural extension of our activities in China,”​ Paravicini said.

The Bank of China facility did not mean Fonterra was taking on more debt, he pointed out. The move is designed to give Fonterra alternatives and increased diversity in RMB funding sources.

“There is no change to our existing strategy of growing our business in China. This is simply a better way to organize the funding of that strategy,”​ he concluded.

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