The People’s Bank of China (PBOC) announced on June 11 that it will allow multinationals to pool renminbi cross-border for Chinese entities throughout the country. However, the regulator has not yet announced when the effective date and to give detailed requirements of the new rules.

Multi-national cash pools will be possible

Last month China’s State Administration of Foreign Exchange (SAFE) announced that companies based anywhere in China will have the opportunity to set up centralised cash management programmes. Requests only need to be made to the local SAFE branches. This is announcement coupled with the cross-border RMB pooling announcement means that corporate treasury departments will be able to fully integrate China into multi-national cash pools in the near future.

The PBOC’s guide (provision five) which describes the new arrangement gives more details:

• multinationals are allowed to implement centralised renminbi cross-border collections and payments nationwide, in theory ending the distinction between onshore and offshore renminbi in terms of how treasurers mark them in their internal systems.
• multinationals’ headquarters will soon be allowed to delegate one of its China-registered companies as its renminbi cross-border cash pooling entity, which:

1. can be a corporate or a finance company, but has to be a legally registered China company and be responsible for a group company’s pooling activities.
2. will be able to net cross-border settlements when conducting renminbi cross-border centralised collection and payments, according to the release. However, multinationals implementing renminbi cross-border cash pools will still have reporting obligations under international balance of payment reporting standards.

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CTMfile take: This is the key relaxation in regulations that treasurers, bankers, and consultants have been waiting for as it opens the door for really efficient cash management across the region.