New epoch for finance as trade unbundles …
Rising political tensions and the increasing use of sanctions are making companies think twice about relying on long global supply chains, said John Calverley, head of economic research at Standard Chartered. Firms may decide that rather than hedging their bets with production, they will keep it closer to home, he said during a roundtable session yesterday.
However, while there has been talk about companies ‘reshoring’ (bringing offshored production back onto home territory) there was little concrete evidence that this was yet the case. “Theoretically this could happen; wage rates in Mexico, for example, are now comparable with those of China and it would be easier for some companies in the US to bring manufacturing to Mexico. However, the demand for goods increasingly will come from China and India.”
Caverley is the author of a new report, Global trade unbundled, which examines the increasing unbundling of trade, whereby countries no longer trade in goods so much as in ‘tasks’.
One participant in the roundtable noted how difficult it was for financial institutions to interpret the various sanctions imposed by the European Union and the US. In Europe in particular, there is confusion about exactly what and whom are sanctioned and government agencies in different countries tend to interpret the specifics of the sanctions differently.
Andrey Ivanov, global head of trade finance and correspondent banking, Sberbank CIB, said sanctions have had some impact on the structure of trade finance flows and on the business of Sberbank, geographically and logistically. “However, we consider this to be the start of a new epoch in trade finance as many new partners around the world have shown interest in tapping the Russian market and exploring new opportunities with us to build strong partnerships,” he said.
Sberbank is building partnerships with banks in China, the Middle East and Latin America. There are good trade flows between these countries – for example, $100 billion of business will be done between China and Russia this year.
The bank is continuing to do business with existing partners, although there are some restrictions. For example, exports from Germany have fallen by 20 per cent this year. “This should be taken seriously by German regulators and our banking partners. We are interested in continuing doing business, despite the changes we are facing. The current sanctions regime does not in fact prohibit doing trade finance,” he said.