Facing the Challenge of Change in Asia
An Interview with Alex Manson, Group Head, Transaction Banking, Standard Chartered Bank
In this interview, Alex Manson, Group Head, Transaction Banking, Standard Chartered Bank talks to Helen Sanders, Editor, about some of the issues in which treasurers in Asia are engaged, and the ways in which the bank is positioning its organisation and activities to support changing client needs.
What do you see as some of the key challenges and opportunities in Asia for treasurers and their bankers today?
The profiles of our corporate clients, and therefore their banking needs, are changing fast, particularly in the emerging markets of Asia, Africa and the Middle East. As a trusted partner bank, we need to anticipate and respond to these needs by taking a cross-border, multi-product approach to cash and liquidity management, providing the solutions they need today with the flexibility to meet their evolving requirements. Cash investment, for example, was relatively straightforward in the past. Today, treasury centres in Asia Pacific are holding unprecedented levels of cash, resulting from both large-scale cash generation and retained earnings, often in highly-regulated countries. This creates significant challenges for treasurers, who in turn look to us for support.
At the same time, corporations continue to extend and deepen their supply chains across Asia. While international trade was traditionally the process of producing goods in one market and selling in another, goods are now produced in multiple places, assembled in others, and sold into many more. As the value chain extends and becomes increasingly complex, trade finance and working capital solutions will continue to play an important role in facilitating, and managing risk in international trade.
To what extent are the cash management challenges you have identified specific to foreign multinationals doing business in Asia, or do the same issues apply to multinationals headquartered in Asia?
As Asia ‘goes global’ with a rapidly growing number of Asian corporations expanding their footprint both more widely across the region and beyond, their needs and aspirations are becoming more consistent with those of western multinationals. However, with the exception of corporations headquartered in more open economies such as Australia, New Zealand, Singapore and Hong Kong, these organisations often face additional challenges due to regulation and potential currency controls in their home country.
Asian businesses have performed well in recent years, but many Asian countries are going through a period of transition politically, which creates uncertainty in the short to medium term, and a potential correction in growth rates, as we are seeing in China. This uncertainty is one of the key factors in encouraging treasurers in Asia to hold more cash than may be required to support the business under more ‘normal’ market conditions.
To what extent are you seeing China’s slowdown impacting on your clients?
We are already witnessing the effects of the slowdown that is taking place in China, which has an impact in every part of the world given China’s pivotal position in world trade. As a bank with a strong focus on Asia and Africa, both regions that are heavily reliant on trade with China, we are acutely sensitive to the evolving economic situation and are supporting our clients accordingly. However, the current slowdown is an inevitable, and necessary market correction, allowing the government and regulators in China to address a number of structural issues that would have become far more difficult to manage in the future had growth continued at the same pace. In doing so, they have the opportunity to build market confidence in the longer term and a sustainable economic model. Furthermore, while growth may have softened, this in no way undermines China’s current and future importance in the world economy, and by addressing internal structural challenges and building a sustainable economic platform for the future, this position is cemented rather than compromised.