ICBC

Commentary

With recent events, there has been less media focus on China. The news related to China has been about trade tensions with the US, the extent of China’s relationship with Russia, and the issues related to the real estate sector. Even COVID has tended to fade into the background, with the economic impact of the extended lockdowns and the disappointing pace of the recovery.

The purpose of this call was to find out how our members are finding the business and regulatory environment in China, and the extent to which their operations and treasury management are being impacted.

The overwhelming response was that it is very much business as usual – both in the good and bad respects. Participants on the call come from a variety of industries: while some, especially those facing the consumer, are seeing a significant slowdown, some continue to see growth. Everyone saw current difficulties as being transient, and nobody was looking to reduce their presence. The call quickly got into the operational challenges China presents – it was the familiar scenario of regulations which are always changing, are often not totally clear, and surprises.

• Chinese banks. One participant reported that one local bank, ICBC, had proved to be very proactive in helping their company automate several processes, using new technology. This is a big step forward, as Chinese banks have traditionally preferred to avoid this kind of engagement with foreign companies. 
• At the same time, there was a feeling that, as their traditional real estate lending activities have come under pressure, several Chinese banks are now more willing to lend to foreign companies.
• At the same time, most participants prefer to limit their relationships to the core foreign banks: this is becoming easier, as foreign banks are now able to provide services, such as the basic account, which used to be reserved to local banks. Several participants are reducing their banking relationships, usually focusing on core – international – banks.
• Also, participants reported that FX payments are being approved more quickly, and regulations seem to be easing – there was a lot of discussion about the requirement to bring the balance

Commentary

The way treasurers manage banking relations provides a key insight into how they approach their job. This session was no exception – and we had the additional benefit of input from senior banker in Asia and Advisory Board member John Laurens, who shared his view from the other side of the fence.

• Nearly everyone had the same goal: try to get the most efficient banking structure.
• This nearly always involves a general preference for dealing with core international relationship banks over having many local relationships
• However, one participant commented that local banks in Asia often have excellent technology and services – but it is difficult to get HQ to agree to go with them
• In any case, there are many situations where local banks are still required, to support tax payments or local payment systems. China, India, Korea and Japan were the countries where this was most frequent.
• In awarding business to banks, most companies tend to give a preference to the institutions who participate in credit facilities. Exceptions were made when justified by a specific service, but this could become an issue when credit needs increased.
• Several participants have either recently restructured their banking relationships, or are currently doing so. Comments:
  • It is very important to get the local team on board. They will usually accept the outcome and help if they own the decision, and can see clear benefits.
  • The RFP process is useful, but it is important to carefully check the responses. One participant found that banks often tried to sell capabilities they did not yet have – it is important to focus on what they can deliver today. They also found it was beneficial to use...please sign in to continue reading