Supporting MNC business in China takes a dedicated group.
We want to thank HSBC for sponsoring our Asia Treasurers’ Peer Group China Edition pilot meeting last week in Shanghai. Hosted by Cargill, the pilot meeting helped further refine The NeuGroup’s offerings to treasurers in Asia by bringing together MNCs’ China country treasurers along with regional treasurers focused on China. Among the highlights of last week’s meeting:
- China set to recover growth momentum. QU Hongbin, HSBC’s Co-Head of Asian Economics and Chief Economist for Greater China, presented his positive outlook for Asia and, in particular, China’s transition to consumption-led growth coupled with productive infrastructure spending. “There are plenty of useful bridges to be built before China needs to build a bridge to nowhere,” according to Mr. Qu. Slowing growth in the working-age population will also keep wage inflation in check. With all this, HSBC is calling for 8 to 8.5 percent GDP growth for the second half of the year (after slipping below 8% at the end of last year). The continuation of China’s economic dynamism will continue to make it a focal point for MNCs.
- SCF works in China and Cross-Border. The group also discussed supply-chain finance (SCF) and its application in China. Interest in supply chain finance is growing with the shift from L/Cs to open account purchases. The meeting discussion also revealed that there is more flexibility to deploy SCF in China than many corporates realize. While corporates remain wary of getting sales classified as bank debt, HSBC’s Head of Receivables Finance for China Iris Liang said that the Big Four have signed off on these structures as producing trade payables. HSBC won praise for its accounting expertise and will get on the phone with your auditors to help walk through your program and its accounting implications. What’s more, SCF can work both in China and cross-border with Chinese suppliers.
- Talent retention with new generation. Retaining top talent in China’s competitive employment market remains a key MNC challenge, and treasury is no exception. One regional treasurer participating presented on her company’s efforts to counter changing dynamics in China’s labor markets, which feature a new generation with a mindset that there is more to life than their job. Recently, MNCs have seen talent leaving to state-owned enterprises, because younger workers perceive them to be more conducive to work-life balance. MNCs need to respond to these mindset changes by rethinking their incentives and benefits to retain top prospects.
The meeting also featured a discussion of optimal treasury organizational structures and their application to China, including the latest thinking on where to locate a regional treasury center for Asia. Finally, there was a presentation on the latest developments with the RMB offshore pooling and netting pilot programs as well as cross-border RMB intercompany lending. The tax and transfer pricing implications of these schemes were a major focus of the discussion. We thank all of the pilot participants who contributed actively to the knowledge exchange last week.
The Asia Treasurers’ Peer Group – China Pilot represents our second exploratory effort to complement the current Singapore-based Asia Treasurers’ Peer Group (formed in October 2011, for MNC regional treasurers) with one possessing a greater China focus.