Tips on Using Letters of Credit

International letters of credit play an integral part in facilitating foreign trade while providing a secure and reliable means of payment. In simple terms, a letter of credit is a financial guarantee of payment separate from the sales or other contracts on which it is based. It is a way of reducing the payment risks associated with the movement of goods across borders.

When PMF Bancorp provides trade financing, letters of credit come with the territory. With the letters of credit, we also make sure your clients are reliable and creditworthy. Naturally, letters of credit and credit checks go hand-in-hand. The goal is to provide the financing you need to complete the deal and help your business.

The need for a letter of credit is a consideration in the course of negotiations between the buyer and seller. When the seller has doubts about the credit-worthiness of the buyer and wishes to ensure prompt payment, a letter of credit allows the deal to happen. If the seller is shipping to a foreign country, a letter of credit issued by a financing institution can ensure the safety of the goods and the completion of the exchange.

Letters of credit open doors to international trade by providing a secure mechanism for payment. Financing opportunities, such as pre-shipment finance secured by a letter of credit and/or discounting of accepted drafts drawn under letters of credit, are often available. The expertise of a company like PMF Bancorp with extensive international expertise and experience in financing global trade makes this type of transaction simple for the typical business owner.

If you are moving forward with an international trade deal, PMF Bancorp has many years of experience in issuing letters of credit for businesses to securely finance their trade needs. By obtaining international letters of credit and doing a background check on your trade partner, PMF helps to ensure both the deal and the accounts receivable financing needs as well. With an international letter of credit, what appeared at first to be a risky venture can turn out to be a profitable expansion for your company.

US Jobs & Unemployment figures a Sham...Where are the jobs?

It’s funny how the media only shows you one face of the coin when their our political motivations involved...here is part of 'the Sham': July '2012 Job's Report was up 163,000 according to the Labor Department from the Obama administration; however, the Household Survey reported 150,000 people dropped out of the job market?!  According to Ellen Zenter, Senior US Economist at Nomura, "This (latest jobs report) showing the economy expanded at a greater pace in July than in June, but households are still telling us they're in pain."

The 'Sham' is much worse than this, one can see our youth under-employed in many areas of the economy so our government reported 8.3% Unemployment figure is probably more like 12% if the under-employed, job market quitters, and structurally unemployed were added to the actual reported unemployment figures.  I was eating dinner at a diner called "Norms" just last night in Southern California and overheard to youths strategizing on getting a waiter position at the restaurant...it sounded from their conversation like we were in the 'great depression' (which just might be...we are just in denial still based on fundamentals).  Not that I am really pro Romney, but over the last four years Obama should have been busy creating sustainable jobs (not road jobs) to improve our infrastructure such as our failing electrical grid and aging aqueduct systems which could have led to a whole new generation of engineers and jobs for our economy....  Creating jobs take experience and work, ChinaMart USA is a platform that been attracting investment to the US and creating US jobs for years.  I explain more in my book, "Book: Dancing with the Dragon" on working with China to help our economy if this is an interest to any of my readers.

Stephen Perl, CEO of 1st PMF Bancorp, a leading U.S. commercial lender specializing in providing loans to business for working capital and trade finance.

The Truth on the US-China Economic Relationship....

I have just read  Mr. Stephen Roach, Academic CEO of Morgan Stanley and it hits a home-run in bringing the quintessential issues of US-China relations to the table.  It removes the economic smoke that our government has painted for election purposes and logically drives home the overwhelming need to focus on the market opportunities that exist in China for the US. With China being the US’s third largest export market with  US exports to China up 53% since 2007, I think your point is made well on the importance “access to the China market”;  however, on the same note, my book that I published in February of this year, “Doing Business with China: Dancing withthe Dragon” focuses on the next logical issue…”How to Access the Chinese Market”.  One of my chapters, “Creating Your Own Access to China” tells owners how to do this, but stresses that our real opportunities in China cannot be achieved unless our Federal and local government start working closely with business to create real long-term strategies to support this effort.   It’s funny…after all my years of doing business with China, I see the Chinese government putting in these supportive functions in their government to assist their businesses to expand to the US (and other markets!) and their efforts have really worked…why are we not doing this too in the US? (I see small glimmers of this but no real strategy). 

If Washington could just stop running for the next election and pandering to every special interest group, and start being proactive and focusing on implementing long term strategies instead of being so reactive...then we could drive a whole new export market to create jobs and opportunities for the US… my book goes into great detail on this matter as well.  This article should be placed in the Wall Street Journal for free… as it could serve as a real public service announcement to wake our country up…Great article.  

Article: America's renminbi fixation, by Stephen Roach, Academic CEO of Morgan Stanley Asia

Is China becoming too Expensive?

The answer is not simple...but it can be answered.  We have to look at some foundational information first to understand the full picture....

China has seen a paradigm shift from a 14.8% GDP annual growth in 2007 (and plus 10% growth  annually for the previous 30 yrs)  to 7.6% GDP annualized growth based on 2012 second quarter numbers.  This is a 50% GDP drop in the last five years.  China's GDP could be a lot higher based on all the infrastructural investment that is lined up...but it's not happening.  This is all related to the cost of doing business in China...the expense.

China is and has been suffering for the last five years from massive shortage of labor.  Simple economics tells us that when supply is limited, then demand and prices go up.  Labor costs have risen more than 13% in just the last year.  Boston Consulting states that the real wages in China will exceed that of Mexico this year most likely.  Imagine if Mexico could get its act together and could start producing something else beside oil... they would have a terrific shipping, time and geographical advantage over China.  It also appears that the US TV manufacturers in Detroit will also continue to enjoy an increasing advantage along with other new factories in the US due to the current economic environment (for a host of reasons); however, is China really getting more expensive in real dollars is the question?  PMF Bancorp has had offices in China since 2004 providing factoring and finance to Chinese companies and their management has reported inflationary increases in the double digits for many business services as well as labor on a yearly basis.

I would argue that China is becoming more comparable in costs to many other developed countries, and therefore is getting more expensive in real terms.  Its impossible for a country with an increasing quality of life such as China to maintain low wages.  It is a benefit to the Chinese and to us in a way that China become gradually more expensive so each country can compete based on its true competitive advantage.

Therefore, imported products that are made in China have been and will continue to get more expensive naturally which has been the general economic prediction for a long time. This will mean our government's vendetta to appreciate the Chinese currency will disappear, and our government will have to find another reason to point to our poor economic situation (could it be the management?!).   For now a stable China through higher wages is not a bad trade off for slightly higher prices at Walmart.  Happy shopping.

Is the US Govt over-reaching on China’s purchase of AMC?

I am all for protecting our National Security interests in the USA…the CNOOC Oil deal needed oversight, especially since oil is a national interest and Unocal 76 Oil was publicly traded.

But, why is the US Government’s approval needed to sell AMC to the Chinese, Dalian Wanda Group…AMC is a private company held by an equity fund and it is certainly not a matter of “National Security” in anyway!  The billionaire Chinese tycoon, Wang Jianlin simply stated that our theaters are cheaper to buy than in China and it made sense from an investment standpoint.  Why does a billionaire need to have US-Sino synergy or approval from the US government to buy a regular company?  This could only help maintain property prices, expand the theaters’ capabilities, add value to exist malls in the US, etc….  The US Government is over-reaching in this and many other business cases... I see an unfortunate trend or Parental-ism and Socialism pervading our country and its not a good sign.

In this day and age, our politicians should not be wasting our tax payer’s money and time with AMC…we need to be focused on fixing real issues like our Social Security System and our Medical System which are arguably the two largest threats to our country’s safety today. For more info on my blog visit: PMF Bancorp Blog Website.

China's Economy in Trouble?

Is China's economy in trouble?


Central Bank of China made announcements last week that it would be reducing the reserve requirement ratio for commercial lenders to maintain the liquidity for China's financial system.  This move is seen by the global markets as a reaction to the first quarter GDP results for China that showed a slower growth rate of 8.1% annualized verses the expected 8.4% that analysts were expecting.  Zhang Zhiwei, Chief China economist at Nomura Holdings Inc. was quoted by Bloomberg as saying that the Central Bank had "sent a message that further loosening measures will be rolled out".

Actually, the results from the Chinese economy and all of these steps that their Central Bank is taking are quite expected from a free market economy which the Chinese government has been moved towards in the last decade.  The US and the world economies have demanded it and now we should expect natural ups and downs...we cannot have a everything.

“The Hunger Games” was banned in China...Why not in the USA too?

I went to see the movie, “The Hunger Games” by Suzanne Collins this weekend and was shocked. I knew it had been banned in China, but did not think too much about it; however, after I saw the movie, I came away thinking, “How could so many people ($152 million in the first Weekend box office) want to watch such gratuitous physical and psychological violence”. I then actually became scared when I learned that the book version won the California Young Reader’s Medal Award which is voted by our children in California as their favorite book of the year for 2011.

It became more clear when I learned that Ms. Collins was inspired to write this book from a combination of the Iraqi War and US Reality TV shows. Is this what are children should gravitate towards?

Now it’s clear to me why the Chinese said “No” to this movie…the Chinese have been working very hard in the last ten year to re-instill civilized way of life back into the mainstream public in China. It was not long ago that China suffered from lack of food and violence like this movie. Now, with new found stability and economic prosperity, the Chinese government realizes that many of its citizens have forgotten to be courteous to others and other basic civilities. Therefore, now one literally sees many signs to be polite, messages played in public places like elevators not to push, etc…. One also sees many statues of Confucius being placed in cities all over China to reinforce moral conduct. It is obvious that the Chinese are trying to raise the quality of life in China (not only the economy). I discuss many of these cultural points of change in my book on Doing Business with China as well.

It is no surprise that this novel has also been very controversial in the US; it ranked in fifth place on the American Library Association's list of frequently challenged books for 2010, the reasons being it was unsuited to the age group, and violent.”

This is definitely a case where we should take China’s lead and not allow our youth to be exposed to such violence so that we desensitize their emotions to such tragedy, even if the story might have a twisted ending that has some glimmer of hope.