HSBC and Intel are the first foreign bank and foreign company that have been approved to establish an automated, cross-border, sweeping structure in China.
The pilot scheme, which aims to centralise foreign currency management for multinational companies, will ultimately enable businesses to manage their cash more efficiently by connecting their onshore and offshore cash management structures. This new development marks another step in the ongoing opening up of China as an international treasury centre and a recognised global financial centre.
Commenting on the transaction, Diane S Reyes, Global Head of HSBC's Payments and Cash Management division, said "It's critical for treasurers to understand that the opening up of China's financial infrastructure favourably impacts their ability to manage their cash positions and internal liquidity - in all markets and in all currencies. If they get it right, it will help deliver earnings-per-share growth and deliver efficient treasury and financial management processes to support revenue growth; get it wrong and companies risk being left behind."
Multinational companies sweep their excess cash, held in various major trading currencies from around the world, into one liquidity basket to enhance their return on excess liquidity and optimise their cash management structures. There are exceptions in markets where cash is held locally, which means that it has essentially been restricted. HSBC's execution of this landmark transaction signifies a shift in the cash management landscape, both in China and globally.
Robert Yenko, Treasurer of Intel, Asia remarked, "We are pleased to participate in this pilot transaction and believe that it has tremendous benefits for treasury management as a whole. This development opens up many more options for cross-border liquidity management, which is very important to us. We selected HSBC as our banking partner for this transaction for their international network, expertise in liquidity management and understanding of the treasury landscape in China. This positive development was the result of extensive collaboration between Intel and China's foreign exchange regulators to support the Chinese government's move to advance and further internationalise liquidity management in China."
This pilot scheme was launched to a small group of selected Chinese and foreign invested multinational corporates and banks in Shanghai and Beijing. While this pilot scheme is being carefully managed by the Chinese authorities, companies may eventually be able to include their Chinese operations in their liquidity structures and realise the value of their cash.
This is an important step for two reasons: multinational companies with operations in China can manage their cash more efficiently because of greater onshore to offshore flow; and this is a crucial step in helping China to establish global financial centres, as it gradually opens up to the rest of the world.
Kee Joo Wong, HSBC's Head of Payments and Cash Management in China commented, "Our ongoing working relationship and dialogue with the regulators in China means HSBC is well placed to understand the changes taking place in the financial market. Chinese operations can now be part of a treasurer's armoury to reduce external borrowing and improve returns by consolidating cash centrally to eliminate or reduce FX exposure. Treasurers can now have more confidence knowing that their excess cash held in China can be used for daily funding needs in their business."