Bank of China launched two global commodity centres in Singapore yesterday, making it the first Chinese bank to establish such facilities outside China.
The energy commodities centre is to provide knowledge and technical expertise to the bank's various branches to help them break into the sector. The repo centre serves commodities companies. It will structure what are known as "repo" deals - to buy commodities with agreements to sell back the commodities at a later date.
"We are excited with Bank of China's new initiative in Singapore," said Mr Jay Ng, treasurer of oil trader Vitol Asia.
"In addition to providing more liquidity to commodities companies, it will be an excellent platform for commodities companies to secure financing for their Chinese business through the bank's extensive network in China."
Bank of China chairman Tian Guoli said Singapore's strategic location at the crossroads of South-east Asia's major shipping routes is the main reason it chose to locate the centres here.
The bank said it can now help businesses leverage on Singapore's position as the leading commodity hub to expand into new markets.
Singapore is the world's largest centre for fuel trade, and second-largest for agribusiness trade and oil refining. It is also an increasingly important venue for trade in metals and iron ore.
"With China as the world's largest consumer of commodities, we foresee an increase in business demand for commodity financial solutions and services," said Mr Tian. He was speaking at the China and Singapore Commodity and RMB Summit held at Mandarin Orchard Hotel.
The bank also signed a memorandum of understanding (MOU) with IE Singapore and a cooperation agreement with the Singapore Exchange. Under the MOU, the bank will provide $50 billion of financial services to support companies from China and Singapore that invest in countries along the One Belt, One Road region.
The bank will work with the Singapore Exchange to study the feasibility of developing yuan-denominated commodity products under the cooperation agreement.
The event was jointly organised by Bank of China and IE Singapore, and coincided with the first official state visit of Chinese President Xi Jinping.
Finance Minister Heng Swee Keat said in his opening speech that financial cooperation is "a core pillar" of the close relationship that Singapore and China enjoys.
"Singapore can continue to play a catalytic role to promote the use of the yuan in South-east Asia and beyond," he added.