Treasury Today Country Profiles in association with Citi

China Benchmarking Study 2009

China Benchmarking Study 2009

Introduction

When Treasury Today in China was established in 2005, treasury practices were so new to the local market that much of the terminology we used did not even have a Chinese translation. How times have changed. With almost 300 participants, the high level of response to this inaugural China corporate treasury benchmarking study makes this the largest of its kind and confirms corporate treasury’s new standing in China.

Addressing the banking, cash management and treasury practices of corporates operating in China, the aim of this study was to provide our readers with a comprehensive overview of how their peers are positioned in the China treasury market. After all, benchmarking is a crucial exercise for corporates wanting to stay ahead of the game in today’s competitive marketplace.

Respondents were polled on all aspects of their corporate treasury, including: responsibilities of the treasury function, bank relationships and satisfaction with bank services, cash management solutions, supply chain, technology and more. In the findings of this study we have drawn comparisons between the China market and treasury operations in developed economies. We have also highlighted, where appropriate, the differences between the treasury operations of international and local companies operating in China. We hope that you will find the results of this study both interesting and informative.

Economically and culturally, this study comes at a time of great change for China. The global financial crisis has been a significant test for China and its resilience. At the same time, it has been an opportunity for the Chinese economy to prove its buoyancy, and for the country to demonstrate its potential as the next superpower.

As the first waves of the economic crisis began to hit Asia towards the end of 2008 and early 2009, analysts downgraded Chinese GDP expectations. In March 2009, the World Bank cited projected growth of 6.5% in 2009, down from the double digit figures that the country had become accustomed to. In June 2009, however, the World Bank released updated figures, with projected growth for the year climbing to 7.2%. Despite this positive announcement, declining levels of global trade still remain a significant obstacle for China going forward into 2010.

The Chinese government has played a key role in attempting to revive the economy, announcing a RMB 4 trillion stimulus package in November 2008. The package – the largest ever designed by the Chinese government – is due to be completed by December 2010 and is intended to stimulate spending from state-owned banks, local authorities and the private sector. In addition, the People’s Bank of China has made several interest rate and reserve ratio cuts in order to revive bank lending.

Whilst heavily involved in the economic changes taking place in China, the banks have also played a large part in the cultural shift that is happening in the country. Retail customers and corporate clients alike are being encouraged by the banks to build up credit records, for example – a practice that has been adopted from Western economies. This move towards a more globalised view of business has been facilitated, if not driven, by China’s accession to the World Trade Organisation (WTO) in 2001.

Under the terms of the WTO accession, China agreed to implement some radical changes in its banking industry: opening up the market to foreign banks, removing geographical restrictions and allowing foreign banks to carry out business with both Chinese companies and residents, as well as to operate in both foreign and local currency. Re-entry of foreign banks into the market and partnerships put in place with domestic banks have helped to raise the bar for Chinese corporate banking, particularly in terms of product sophistication.

The increased availability of products and services, in particular those relating to cash management and trade finance, has allowed China to come up-to-speed with its western trading partners. In turn, China’s reinvigorated, modern business environment has attracted attention from multinational companies. Large corporates have established entities, ranging from regional headquarters to treasury centres, on the China mainland, as opposed to offshore locations that were previously deemed more business-friendly. This has brought with it an increased awareness of treasury practices, advancing the function’s status in the China market, as the results of this study clearly illustrate.

We would like to thank all of our readers who participated in the study and we would of course welcome your feedback.

Contents

  • Introduction

  • Executive summary

  • Respondent profile

  • Cash and liquidity management

  • Bank relationships

  • Investments and borrowings

  • Treasury solutions

  • Challenges and opportunities

  • Conclusion

To find out more, order your copy of the findings today.