Regulatory changes are something of a recurring theme in the Chinese financial sector, due to the government’s ongoing reform programme. The last few months have been no exception, with the PBOC’s recent introduction of a raft of new rules – the PBOC Six Measures – concerning the administration of foreign currency in China. The measures substantially extend the range of foreign currency activities that companies based in China can engage in. The full implications of these measures for the corporate treasurer are discussed in this quarter’s Treasury & Finance News section.
Cash pooling is an area where changes in banking regulations, particularly regarding foreign currency operations, have been most keenly felt. Many banks in China are now able to offer their corporate clients some form of physical cash pooling service. As the direct consequence of physical cash pooling is the creation of a series of inter-company loans – which are forbidden in China – banks have developed a cash pooling system based on the entrust loan structure. In our article on cash pooling we provide an overview of the various cash pooling techniques and discuss how these have been adapted for the China market. We also take a look at how recent regulatory changes have affected the cash pooling services available.
The rapid evolution of the financial sector in China will continue for some time. Treasurers and other finance professionals need to be aware that their roles will also change and develop in parallel with this evolution. Treasurers working in China need to review their cash, liquidity and risk management practices continuously to ensure that they are taking full advantage of new opportunities presented by changing regulations. Treasurers should not limit themselves to a purely technical role, but should develop a strong set of ‘soft skills’ to enable them to capitalise fully on these developments. Our article on negotiation looks at why treasurers should develop good negotiating skills and takes a look at the various techniques.