The Next Chapter in Regional and Global Treasury Management
by Emmanuelle Fischer, Head of Cash Management Marketing and Product, and Benoit Desserre, Global Head of Payments & Cash Management, Societe Generale
Changing patterns of international trade are having a profound impact on the way that corporations across all industries manage cash, liquidity and risk. Not only are new trade routes emerging, such as between Asia and West Africa, but changes in regulation and business culture are resulting in new opportunities for managing cash in countries such as China. By engaging the solutions, services and expertise of the right banking partner in key growth markets, treasurers can leverage these new opportunities to enhance visibility, efficiency and control over cash and risk.
Changes in regulation and business culture are resulting in new opportunities for managing cash in countries such as China
There are a number of important developments taking place in Asia Pacific that are prompting corporations to re-evaluate their cash and treasury management strategy, and consequently, the way that we at Societe Generale support their evolving needs. The rapid and transformational changes in China are one such example. During the early stages of China’s liberalisation programme, many companies decided to ‘wait and see’ as new opportunities for using RMB to settle cross-border trade, and manage cross-border liquidity unfolded. Furthermore, given the restrictions and need for authorisation by PBoC (People’s Bank of China) or SAFE (State Administration of Foreign Exchange) for a wide range of activities, many companies continued to manage cash and treasury management in China separately from the rest of the group, excluding it from regional or global cash management strategies.
A catalyst for change
For many companies, however, the launch of the Shanghai Free Trade Zone (SFTZ) in 2013 was a significant milestone in the process of regulatory reform that has been taking place over recent years, signposting a number of new opportunities. For example, domestic and cross-border cash pooling has been challenging in the past, and while early changes to regulations enabled various workaround solutions to be developed, cash pooling is now far easier, not least as it is now officially recognised. While initially these opportunities are being made available in the SFTZ, they are rapidly being extended more widely, such as the ability to include onshore RMB as part of a regional cash pool.
These changes are proving a catalyst for many companies to review their cash and treasury management activities in China, both in foreign currency and RMB. In particular, treasurers are seeking to establish cash and treasury management policies, processes and technology solutions that are consistent with a wider regional or global strategy. For example, some treasurers are including cash and treasury management for China within centralised structures, such as regional or global treasury centres and shared service centres. Increasingly, these centres are being established in Chinese cities such as Shanghai, emphasising that China is becoming a central part of treasury management strategies. To support these changing requirements, we have continued to develop our solutions and services for both onshore and offshore RMB, as well as foreign currency activities.
Societe Generale was also one of the early banks to apply for a licence to operate in the SHFTZ and we successfully got CBRC’s approval. SHFTZ branch was opened officially on January 21 2015.
South-south trade routes, both within Asia, and cross-continent, such as between China and West Africa are becoming increasingly important.
From west - east to south - south
When considering the changing dynamics of international trade, it is not only the more established trade routes, such as between China and Europe and North America and China, through which growth in international trade is being channelled. South-south trade routes, both within Asia, and cross-continent, such as between China and West Africa are becoming increasingly important. For example, more than half of Mali’s exports are now to China, with a further 20% to Malaysia, Indonesia and India (source: CIA World Factbook, 2012 figures). Similarly, China is also the biggest partner for Cameroon both for imports and exports, with India becoming an increasingly important trading partner. Given that around half of the countries in West Africa are French-speaking, and the long history of international trade between France and West African countries, the region is a key market for Societe Generale. Consequently, we are seeing a growing number of companies, including European, Asian and African companies, seeking to leverage our experience in facilitating cross-border trade between Asia and Africa, as well between Asia and Europe.
A cohesive experience across diverse markets
Changing patterns of global trade have a considerable impact on treasurers’ needs from their cash management banks. One such requirement is to continue extending the number of languages in which our solutions and services are offered. Mandarin, for example, is a requirement not only for doing business in China, but also in countries in other regions where Chinese companies have established a strong presence, such as Cameroon. Therefore, we have based Mandarin-speaking support personnel in West Africa, as well as delivering our cash management platform in multiple languages, including Mandarin.
Furthermore, again in response to changing customer needs, we have upgraded our cash management platform in Asia, leveraging state-of-the-art technology to provide rich functionality and a cohesive, integrated experience across regions. This includes support for XML formats to facilitate customers’ regional and global cash and treasury management strategies. Customers have welcomed this development, as with diverse regulations, payment infrastructure and payment culture in each country, particularly in regions such as Asia and Africa, it is reassuring to be able to rely on the same tools across all regions, and it supports a consistent approach to reporting, processes and controls.