ICBC

China Corporate Treasury Update

Report date: 
13 Nov 2023

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
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Topics covered in this report: 
Cash Pooling - cross border, Cash Repatriation, Bank Relationships, Funding, FX, Dividends, Cash Pooling - domestic
Service providers discussed in this report: 
ICBC, HSBC, Citi, JP Morgan, Standard Chartered

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Payment Platforms & Collections in China

Report date: 
22 Jun 2022

Commentary

Cryptocurrency, digital wallets, virtual everything – there is a huge amount of change. China has been at the forefront of a lot of digital trends, partly due to the fact it had an antiquated banking system which has been thoroughly modernised, and partly because the explosion of internet shopping in the country required a digital payments solution. This is a challenge when there are no credit cards. 

This report is based on a Treasury peer Call which explored how this is affecting members’ companies, and how they are adapting to this brave new, digital, world.

  • Most participants are accepting payment using WeChat Pay and Alipay. None is using these tools to make corporate payments.
  • The collections process using these tools is efficient and effective: you work with a third party (usually accessed via a banking provider), who will transfer the funds to your account the following day. One participant did an RFP, with two Chinese and two foreign banks, and found the service was identical – though pricing was different, and not transparent.
  • There was no mention of billbacks, the excessively high fees and acquirors which blight the use of credit cards in other countries
  • The one complaint all participants had was the difficulty linking this process to internal systems, for the reconciliation of receipts or for compliance purposes in terms of identifying the source of cash. The third party companies do provide detailed lists of payors, but it can be difficult to upload these into the ERP system.
  • There was a lot of discussion about....please sign in to continue
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Topics covered in this report: 
Payments - domestic, Collections - domestic, Bankers Acceptance Drafts, Crypto currency, eCNY, Entrustment loans, T&E Management, Supply Chain Finance, Cash Pooling - cross border, Cash Pooling - domestic
Service providers discussed in this report: 
Alipay, WeChat Pay, Bank of China, ICBC, Deutsche Bank, HSBC, Citi, JP Morgan, Standard Chartered, Concur, Conferma, Kyriba

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Regional Bank Relationships in Asia

Report date: 
2 Jun 2022

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
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Topics covered in this report: 
ASEAN, Bank Relationships, RFPs
Service providers discussed in this report: 
Citi, JP Morgan, HSBC, Deutsche Bank, BAML, Standard Chartered, ICBC, DBS, Bank of China

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Treasury & FX in China

Report date: 
14 Mar 2019

Included in this report: Entrustment pools, cross-border pooling, electronic BADs

Topics covered in this report: 
Entrustment loans, Bankers Acceptance Drafts, KYC, Invoicing, Cash Pooling - cross border, Cash Pooling - domestic, Bank Relationships, Supply Chain Finance, Funding
Service providers discussed in this report: 
SWIFT, ICBC, Bank of China

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Treasury & FX in China

Report date: 
25 Sep 2019

In this report: Netting, pooling, supply chain finance, customs guarantees, cash repatriation, Hedging, Local v International banks and T&E

Topics covered in this report: 
Netting, Cash Pooling - cross border, Cash Pooling - domestic, Customs, Cash Repatriation, Dividends, Hedging FX, Funding, T&E Management, Supply Chain Finance, Bank Relationships, KYC
Service providers discussed in this report: 
Alipay, WeChat Pay, ICBC, Bank of China, China Merchant Bank, Standard Chartered, Union Pay, HSBC, Citi, JP Morgan

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Argentina Treasury & FX update

Report date: 
31 Jan 2022

Commentary

The Argentina saga continues, though there seems to be some evidence of stabilisation.

Inflation continues at about 50% per annum.

It seems to be reasonably possible to get hard currency to pay for imports from third parties, as long as the import has been properly registered and approved, is from a third party, and is more recent than March 2021.

On the other hand, it is very difficult to get approval for intercompany remittances, even if these are for goods. Old outstanding balances are basically frozen, with very little progress on remitting them out.

Currency hedging is difficult to obtain, and prohibitively expensive. Most participants have given up trying to hedge peso/dollar exposures.

Most people are seeing significant build ups of peso cash. It is difficult to earn a decent return on this cash – maximum interest paid tends to be between 20% and 30%, i.e., a net loss of value of 20% after inflation. Some foreign banks, such as Citi, will not accept peso deposits.

This situation can lead to significant P&L exposure, as companies record FX losses on their dollar denominated liabilities – especially the intercompany ones.

Most participants continue to do business in Argentina, because it is viewed as a strategic market. Also, many have to support international customers, who do business there. 

As always, our members are adopting a series of interesting and innovative measures to cope with this situation. There is a lot of detail below – the quick summary is:...please sign in to continue reading

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Topics covered in this report: 
Inflation, Payments - cross border, Payments - intercompany, Cash - deposits, Hedging FX, Bonds - US dollar linked, Cash Repatriation, Contado con Liqui, Blue chip swap, Invoicing
Service providers discussed in this report: 
Banco de la Nacion Argentina, Banco Galicia, BBVA, BNP Paribas, Citi, HSBC, Santander, ICBC

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