On the back of the People’s Bank of China announcing measures it will take to support the expansion of RMB cross-border usage in the Shanghai Free Trade Zone (SFTZ), earlier this week; two banks have announced they will be among the first to offer cash management solutions in the zone.
HSBC and Citi have launched a centralised renminbi (Rmb) cross-border transaction scheme for their corporate clients in China. HSBC will service France-based construction and building material company, Saint-Gobain; while Citi will provide services to Swiss healthcare provider Roche. Both companies will be using the services through their subsidiaries in the SFTZ.
The newly-launched schemes will allow banks to offer services that include centralised payments and collections to help manage account payables and receivables. This will allow Saint-Gobain and Roche to lower costs associated with cross-border transactions, intragroup financing, and foreign exchange.
Kee Joo Wong, head of global payments and cash management of HSBC China, says: “Centralised Rmb cross-border payments and collections will bring significant benefits to our clients by simplifying their payment processes, reducing the number of transactions and unlocking additional liquidity.” He adds that the scheme will reduce funding costs and foreign exchange risk.
Citi’s Amol Gupte, region head, treasury and trade solutions, Asia Pacific says: “Regional treasury centres are the most sophisticated form of treasury management structures and they provide enormous benefits to companies in terms of visibility, increased working capital efficiency, and better risk management.”
In December 2013, China unveiled a series of financial policy guidelines under which companies in the SFTZ can conduct centralised payments and collections between associated onshore and offshore entities. The PBOC’s move is a significant part of badly-needed financial reform in the SFTZ, which included lightening financial regulations. Reform in the SFTZ has so far been focused on easing the path for foreign investors looking to do business in China and for Chinese companies going abroad.