"Zhejiang has a deep business tradition, people attach importance to business, have a strong sense of business and entrepreneurial spirit. The people here are hardworking, intelligent, adventurous and able to adapt quickly to changes in the market and environment. Over the years, with the advancement of globalization, Zhejiang enterprises have been 'going out' and actively participating in international competition and cooperation, which has laid the industrial foundation for the company to develop international business." Recently, Luo Xufeng, chairman of Nanhua Futures, accepted an interview with Shanghai Securities News and talked about his practice and thinking on the deep integration of Zhejiang enterprises going to sea and futures international business.

Zhejiang enterprises go out to integrate industrial chain resources

"The most important resource in this region is people." Rooted in Zhejiang for nearly 30 years, Luo Xufeng has unique insights into the spirit of Zhejiang merchants. In his view, Zhejiang has "seven mountains, one water and two fields", which means that most of the area is mountainous, and the natural conditions are not superior. However, Zhejiang people have developed a profound business culture since ancient times, whether it is the Yiwu merchants who "exchange chicken feathers for sugar" or the description of the prosperous scene in Hangzhou in Marco Polo's Travels, it is the true portrayal of Zhejiang's mercantilism.

In recent years, the changing global economic and political situation has prompted more and more Zhejiang enterprises to expand their business overseas. Luo Xufeng believes that this aspect stems from the positive response of enterprises to the "Belt and Road" initiative, through investment and cooperation in countries and regions along the line, and then expand the international market. On the other hand, it is also a measure to cope with international geopolitical risks and rising labor costs. Zhejiang enterprises, especially labor-intensive industries, disperse risks and enhance their global competitiveness by "going out".

In the process of "going out", the characteristics of Zhejiang entrepreneurs who are good at integrating industrial chain resources have been given full play. Luo Xufeng said that Zhejiang enterprises are very good at giving play to the synergy of the industrial chain, such as local advantages of chemical enterprises, in the past may simply do trade, but later will gradually extend up and down, involved in oilfield exploitation, oil storage, and eventually achieve full coverage of the entire industrial chain.

"Better be the head of a chicken than the tail of a phoenix." People in Zhejiang tend to operate independently and are willing to be the leader of their own business, even on a small scale, rather than playing a small role in a big enterprise, which makes the individual private economy in Zhejiang very active." Luo Xufeng said, "A large number of small and medium-sized enterprises constitute a solid foundation of Zhejiang's economy, but also achieved the rapid development of Zhejiang's financial institutions such as Nanhua Futures."

18 years of international business forward-looking layout

In the process of Zhejiang enterprises "going out", the price fluctuation of bulk commodities always tests the enterprise's anti-risk ability. In addition, geopolitical risks, exchange rate risks and even cultural differences pose challenges to overseas companies. It is concerned about the risk management needs of these enterprises, as early as 18 years ago, Luo Xufeng began to lay out the international business of Nanhua Futures, creating a number of pioneers in China's futures industry.

In 2006, with the approval of China Securities Regulatory Commission, the first batch of mainland futures companies set up branches in Hong Kong, and Nanhua Futures (Hong Kong) Co., LTD., a wholly-owned subsidiary of Nanhua Futures, was formally established. In 2014, Nanhua USA Co., Ltd. was established as the first FCM subsidiary in China's futures industry in the United States. In 2017, Henghua International Financial (Singapore) Limited opened, which is the first Chinese-funded futures company established in Singapore.

In October 2023, Nanhua American Limited obtained clearing membership on the Minneapolis Grain Exchange (MGEX). In March 2024, Nanhua USA was officially approved as a clearing member of the Intercontinental Exchange (ICE-US). At this point, Nanhua Futures has 11 global exchange clearing member seats.

"After 18 years of international development, Nanhua Futures has basically completed its global layout, and has now formed a comprehensive financial service platform with derivatives trading, clearing and services as the core across Asia, the United States and Europe, covering the global 24-hour trading hours." At present, the company's overseas branches already have the clearing membership qualification of most of the international mainstream exchanges, and will further integrate the clearing advantages in the future and make greater breakthroughs in the clearing business." Luo Xufeng introduced.

Under the background of Chinese enterprises accelerating to the sea, Nanhua Futures has achieved differentiated development advantages in the increasingly fierce industry competition in recent years with its forward-looking international business layout. In 2023, Nanhua Futures achieved a net profit of 402 million yuan, an increase of 63% year-on-year, of which wholly-owned subsidiary Henghua International achieved a net profit of 359 million yuan, a year-on-year increase of 190%.

Luo Xufeng said that the complete advantages of various business licenses, global clearing layout and talent reserve have laid the foundation for the development of the company's overseas business. In addition, in recent years, the company has continued to deepen the transformation of customer structure, improve the ability of service institutions and industrial customers, and the overall business structure has also adapted to the development needs of opening up to the outside world, which has boosted the company's overseas business revenue and profit scale.

Deep integration with the development of Zhejiang enterprises

The reporter can obviously feel in the research, Zhejiang local enterprises for futures and derivatives and other financial instruments, whether it is the ability to understand or application, are significantly ahead of other regions in China. Financial institutions in Zhejiang, represented by Nanhua Futures, are also constantly upgrading their business layout and service system, providing diversified financial products for local enterprises to meet the financial needs of enterprises in different stages of development.

Specific to the practice of Nanhua Futures, Luo Xufeng combined with cases to elaborate the company's business development and the deep integration of Zhejiang enterprises.

First, Nanhua Futures takes advantage of global clearing to serve Chinese enterprises together with its peers and manage the order risks faced by real enterprises overseas. Nanhua Futures currently has 11 global exchange clearing membership seats, and Nanhua Financial (UK) Limited is actively pursuing the process of applying for ICE-EU clearing membership. In the future, the company's clearing advantages and capital security will be further improved. For popular futures contracts such as energy (crude oil, natural gas, electricity, etc.), agricultural products (grains, sugar, coffee, etc.) and metals (gold, silver, etc.), the company will take advantage of global clearing advantages to provide Chinese enterprises with cross-border trading, settlement, physical delivery and other services to realize rapid and safe closing of positions. Reduce exposure risks in import and export trade.

Secondly, Nanhua Futures gives full play to its professional advantages to serve national energy security and food security. According to reports, chemical enterprises are advantageous industries in Zhejiang and important customer groups of Nanhua Futures. According to the specific needs of energy enterprises, Nanhua Futures overseas business line provides customized hedging solutions to ensure the price stability and information security of energy enterprises. As a Chinese-funded background liquidator, Henghua International can also effectively reduce the hedging cost of chemical enterprises. In terms of food security, Nanhua Futures Overseas Business Line, as the first Chinese-funded CME (Chicago Mercantile Exchange) clearing member, can assist enterprises to carry out agricultural product forward cash trading (EFP), help enterprises to expand the procurement channels of soybeans, corn, cotton and other agricultural products, and serve national food security.

Finally, Nanhua Futures continues to respond to the country's "Belt and Road" initiative. With the support of the Shanghai Futures Exchange, the overseas subsidiary Henghua International Futures Co., Ltd. helped overseas rubber industry customers successfully carry out the "Fengyu Operation" project, by helping corporate customers to use the Shanghai International Energy Exchange (INE) 20 rubber futures contract for pricing, effectively avoiding the risk of price fluctuations. It has enhanced the viability and market competitiveness of natural rubber enterprises, and further enhanced the international influence of "Shanghai Price".

For the next development of the company, Luo Xufeng believes that it is necessary to adhere to the development goals of "strengthening global clearing business, expanding futures brokerage business, and building compliance risk control dam", constantly consolidating the advantages of overseas business development, and continuing to expand the scale of clearing business as a key direction. "Against the backdrop of changes in the global economic environment and intensifying market competition, we are willing to work with Zhejiang enterprises to jointly cope with challenges and improve the overall anti-risk ability and market competitiveness through cooperation." "He concluded.