Treasury News Network

Learn & Share the latest News & Analysis in Corporate Treasury

  1. Home
  2. Cash & Liquidity Management
  3. Cash & Liquidity Mngm in Asia-Pacific

Optimising cash management in Asia-Pacific: case study & HSBC sweeping service

Lucie Harwood, Group Treasurer at Laird Group, presentation at the Association of Corporate Treasurers Cash Management conference last month reviewed all the stresses and strains of carrying out cash management across the region. Laird have been operating in China since 1996 and now generate over USD 500m revenue from their sites. 33% of total Group costs are in RMB. So they understand how to expoit the new opportunities that the internationalisation of the RMB have brought. She neatly reminded the audience of the distinction between RMB, CNY and CNH:

  • RMB: the official name for the currency:
  • CNY: the Chinese Yuan - the unit of account for ONSHORE trade RMB 
  • CNH: the Chinese Yuan - unit of account for OFFSHORE trade RMB (H because main market is Hong Kong) 

Laird’s cash management and hedging in China

The RMB and USD cross-border pools used to fund cash in and cash out were established in 2008 to optimize liquidity and reduce borrowings. Although there are some restrictions and limits, overall Laird have found that it operates very effectively

Laird have centralised their processing:

  • setting up a SSC in Shenzhen in 2012
  • majority of transactions processed via e-banking and STP with full ERP integration and encryption
  • paperless (as much as they can) FCY transactions processed centrally
  • payments “on behalf of” are possible.

Laird manage their RMB exposures by:

  • invoicing in RMB (since late 2012) with several customers paying non-China entitites in RMB
  • managing offshore exposure centrally via CNH deliverables
  • reducing their spot trading which cuts costs and gives more control
  • hedging forward deliverables
  • holding CNH bank accounts in Hong Kong 
  • centralising their exposure management including a CNH account in their cash pool.

Managing banks in Asia-Pacific 

Harwood finished with advice on how vital it is to:

  1. have local staff so that you understand the local systems and regulations, and to provide help in managing and communicating with banks locally
  2. manage relationships: an annual visit to the banks in China can be very cost effective in ensuring that the banks understand what your company does and what you need, and being able to thank them for supporting your company.

New HSBC automated two-way cross-border RMB sweeping service

Effective RMB cash management keeps getting easier. A recent example is how HSBC in Germany has won a mandate to implement a fully-automated two-way renminbi sweeping solution between China and Germany for Würth Group, the global fastening products group. The solution enables the group, located in more than 80 countries, to sweep funds seamlessly from China to Germany and vice versa, making efficient use of their global cash balances.

With this solution, group-owned accounts are settled beyond the Chinese national border: at the end of a working day, the accounts of Würth’s various national companies in China are settled via the master account of the group's Chinese cash pool. The master account in turn is settled with a German target account via a special cash concentration account. Two-way cross-border sweeping has been possible for the Chinese currency throughout China since July 2014.

However, HSBC stress that, “Irrespective of a company's location, turnover and length of business activity in Europe, renminbi sweeping is subject to approval. Ceilings for capital inflows and outflows, which may not be exceeded, also have to be agreed between the bank and the companies.” (After Hong Kong, Singapore and the UK, Germany is the fourth country in which HSBC has implemented the fully-automated, renminbi, two-way, cross-border cash concentration.)

Like this item? Get our Weekly Update newsletter. Subscribe today

Add a comment

New comment submissions are moderated.