Money Market Funds

Bank Relationships & Cash Management in China

Report date: 
7 May 2025

Commentary

China is in the news a lot at the moment. Interestingly, this – well attended - call was very much in line with our usual discussions on the country: not a single mention of trade wars or tariffs. On the other hand, there was a lively discussion about all the usual issues related to pooling cash and managing banking relations – issues which show no sign of going away.

All peers on the call reported that business was strong, with most generating cash. They also repeated a theme familiar to people who know China: contrary to the common perception of a highly rigid and regimented society, there is a lot of confusion as to what the regulations actually are, and there are regular inconsistencies in how they are applied. 

This “summary” is long (the full report is 15 pages of granular detail): a lot of details were discussed, and these are generally appreciated. As always, these are the experiences and views of our peers, (lightly) edited for clarity.

The main topics:

  • Domestic cash pooling: many, but not all, peers practice this. However, they do all come up against limits related to the equity of the pool header. 
  • Cross-border pooling: this is where there is the most uncertainty.
    • There are two main schemes, operating under licences provided by either PBOC (People’s Bank of China) or SAFE (State Administration for Foreign Exchange). These have different quotas, rules and requirements and approval delays. 
    • There has been talk for some time that the two schemes will be merged, but there is little concrete evidence this is happening.
    • It has been suggested that, while existing schemes continue to operate, the approval of new ones has been slowed. Several peers are looking to implement new...
Please LogIn /Register to access the full commentary and a further 150+ similar commentaries. If you receive our newsletter - use your email to LogIn / Request Password Reset
Topics covered in this report: 
Cash Pooling - cross border, Cash Pooling - domestic, Bank Relationships, Bankers Acceptance Drafts, Money Market Funds, Investments
Service providers discussed in this report: 
Bank of America, Bank of China, Agricultural Bank of China, Bank of Ningbo, Citi, JP Morgan, Standard Chartered, HSBC, DBS, China Merchant Bank, ICBC, Union Pay, WeChat Pay, Alipay

Please log in, or create a free account, to read the whole report summary.

Approaches to Investing short-term cash in Corporate Treasury

Report date: 
22 Apr 2025

Commentary

Risk versus reward. 

Treasurers face this eternal trade-off directly when investing short term cash. There is pressure to increase earnings, and a constant search for new solutions, but the priorities remain, in order:

  1. Safety
  2. Liquidity
  3. Yield

Companies put a lot of effort into making money and bringing in cash: the potential downside to losing money outweighs any yield benefit risky investments may bring.

As always, there is a lot of complex detail, depending on the size, the cash balance and the culture of the company.

  • Most companies have a formal investment policy, often approved by the board.
  • One of the benefits of centralising cash is to avoid paying the bid/offer spread of having cash in one place, and debt in another. Several peers used notional pooling (BMG and JPMorgan were mentioned) to achieve this. Both banks offer deposits for the cash in the pool.
  • The most used instruments are bank deposits and MMFs (Money Market Funds). A few peers invest directly in high quality sovereign bonds, as well as repos. The rules can be more flexible in highly regulated countries, such as Turkey and Angola.
  • Some peers used bank deposits as a means of balancing wallet share with relationship banks, but most take advantage of the higher rates provided by MMFs.
  • Others left pools of cash in different countries and regions: in these cases, the short term investments were frequently managed by a team in central treasury.
  • One peer managing Latin America was pleased with the better yield offered by some currencies with higher nominal interest rates, though this was not a common approach. Most of the commonly used instruments are available in...

 

Please LogIn /Register to access the full commentary and a further 150+ similar commentaries. If you receive our newsletter - use your email to LogIn / Request Password Reset
Topics covered in this report: 
Money Market Funds, Investing, Risk - counterparty, Bank Accounts
Service providers discussed in this report: 
Westpac, Bloomberg, JP Morgan, Bank Mendes Gans, spotfire, Blackrock, Cachematrix, FIS, 360T, Santander, Itau, Citi, Bank of America, Deutsche Bank, Credit Suisse, Pictet Asset Management

Please log in, or create a free account, to read the whole report summary.