This checklist describes the vital analysis and the questions that need to be answered to prepare for being ready to move to RMB payments. It includes the questions you should ask internally, and the questions for your banks and other suppliers.
1. Identify the scope of internal changes
- Should I re-negotiate sales terms or pricing with my trade counterparties?
- Should I ask my suppliers for a dual currency quotation (RMB & USD) or a single currency quotation (RMB only)?
- Which of my trade counter-parties are more likely to accept re-denominating into RMB?
- Will I gain any benefits at a cost level if I re-denominate in RMB?
2. Internal awareness and education
- When USD is entrenched as the standard payment currency, how can I introduce a new currency to my internal stakeholders?
- What are the key aspects about paying in RMB that my internal stakeholders need to know?
- Who would I need to involve in a cross-departmental work stream on RMB?
- Who can provide in-depth training / workshops for various stakeholders within my organisation?
- Which rules and regulations related to the RMB do my stakeholders and I need to keep abreast of?
3. Systems and operational procedures
- Can my current EDI / ERP infrastructure support transactions in RMB?
- How can I fulfil the physical third-party documentary requirements while using a paperless electronic platform?
- How can I reconcile the CNAPS and SWIFT standards to make RMB payments?
- Receiving Bank: SWIFT BIC code vs. CNAPS Bank Code
- Beneficiary Name: How can I input Chinese beneficiary names?
- Remittance Cost: BENEFICIARY / SHARED / OURS codes are not applicable on CNAPS
- Intermediary Bank: CNAPS does not recognise intermediary banks
- Purpose of Payment: CNAPS has different CMTs for different purposes of payments, while this concept is not
- applicable in the SWIFT environment
- What kind of test payments do I need to make?
- How can I achieve straight-through processing with RMB payments?
- What are the key changes in operating procedures for RMB payments?
- What are the key operational risk areas and how can I mitigate these risks?
- Will my bank be able to support me in all the countries where I have RMB payment needs?
4. Receivables and payables management
- How will the differences in permissible trade tenors between currencies affect my receivables and payables management?
- How can I manage the FX risk derived from the onshore and offshore exchange rate differentials for transactions with a
- long trade tenor (especially for payables above 90 days)?
- How will I be able to manage my inter-company receivables and payables if I am unable to net my RMB transactions?
5. Accounting, financial reporting and cross-border reconciliation of RMB exposure
- Since IFRS require the same internal RMB FX booking rate for both onshore and offshore subsidiaries, which booking rate should use (e.g. CNY rate or CNH rate)?
- If I reflect my onshore RMB position using offshore RMB exchange rates (CNH rate), will it be in line with the requirements of China Corporate Accounting Standards?
- What are the possible balance sheet implications when reflecting exposure in a CNY rate and in a CNH rate?
- As most of the China Corporate Accounting Standards were created before the internationalisation of the RMB, how
- should I reflect my RMB receivables / payables from offshore counter-parties?
6. Tax implications of RMB re-invoicing and re-denomination
- From a tax angle, which transactions should be re-invoiced as cross-border payments?
- How do I handle the Export Tax Rebate for RMB transactions?
- What are the possible VAT (Value Added Tax) implications for re-invoicing?
7. Offshore Regional Treasury Centres (RTCs) for RMB payments
- Where should I set up a RTC or re-invoicing centre?
- How do I set up a RTC to facilitate RMB payments?
- How will a RMB RTC affect the way my existing global treasury management is set up?
This checklist was developed by Joe M.K. Ng, Asia Pacific Head of RMB Payments Product Management, Global Transaction Banking at Deutsche Bank. It is taken from Deutsche Bank's 'The Renminbi: 2014 and beyond'. Source & Copyright©2014 - Deutsche Bank