Currency conundrum: how manufacturer Walsin added RMB to its SAFE cash pool
Published: Feb 2025
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Walsin Lihwa
Chen Lei
Head of China Finance
Walsin Lihwa
Established in 1966 and headquartered in Taipei, Taiwan, Walsin Lihwa (Walsin) is a leading manufacturer of wires, cables and stainless steel in the Greater China region.
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The challenge
Walsin’s HQ Treasury in Taipei manages a USD cross-border cash pool between its entities in Hong Kong and Mainland China. The liquidity structure has been instrumental in supporting the working capital needs of Walsin’s new manufacturing plant in Yantai City in Mainland China, where funding is provided to its Shanghai entity in the form of intercompany short-term USD loans. However, with the increase in USD interest rates over the last few years, intercompany borrowing costs have surged for Walsin’s Shanghai entity.
The company sought a quick and simple solution that delivered more cost-effective funding in alternate currencies to meet Walsin’s urgent working capital needs in the mainland, while ensuring compliance to China’s cross-border regulatory framework.
The solution
Walsin, together with banking partner, HSBC, innovatively navigated China’s regulatory framework, leveraging Walsin’s existing cross-border pool between Hong Kong SAR and mainland China, to deliver new internal funding efficiencies via lower-cost currencies, in a quick and compliant fashion.
Given strict controls around cross-border funding, Walsin relied on its bank’s expertise in navigating China’s regulatory landscape. As Walsin’s existing single currency cross-border pooling structure was setup under China’s State Administration of Foreign Exchange (SAFE) regulation no. 7, the framework permitted the addition of new currencies (such as RMB) into the pool, without having to undergo additional regulatory approvals.
Walsin’s multi-currency cross-border pool structure between Taipei and mainland China
Best practice and innovation
The company has added RMB into its existing single-currency cross-border pooling structure, allowing it to make intercompany loans in RMB to replace more costly USD funding.
The approach, which is permitted under China’s SAFE regulations, allows Walsin to implement the addition within a quick span of just two months without having to go through additional regulatory approvals, to meet the urgent needs of its new manufacturing plant in China’s Yantai City.
The new multi-currency cross-border pooling structure also opens up new liquidity optimisation and cost saving opportunities for Walsin at both the HQ and entity levels, including converting the RMB funds into USD to repay existing loans, while Walsin’s HQ can also invest the surplus USD from loan repayments to yield higher returns.
Key benefits
Cost savings.
Headcount savings.
Process efficiencies.
Increased automation.
Risk mitigated.
Improved visibility.
Errors reduced.
Manual intervention reduced.
Future-proof solution.
Exceptional implementation (budget/time).
Patrick Zhu
Head of Global Banking Corporate Sales, Asia Pacific, Global Payments Solutions, HSBC
Walsin’s innovative multi-currency cross-border pooling solution stands out as a testament to strategic agility in a complex regulatory landscape. By integrating RMB into their existing structure, Walsin not only mitigated rising borrowing costs but also significantly enhanced liquidity management and operational efficiency.
This bespoke solution delivered by HSBC exemplifies our commitment to helping clients navigate regulatory frameworks and deliver tailored financial strategies to optimise internal funding and achieve sustainable growth. Walsin’s success highlights the vital role of adaptive treasury practices in navigating the evolving dynamics of global finance.
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The Adam Smith Awards Asia are the industry benchmark for best practice and innovation in corporate treasury. The 2024 awards attracted 406 nominations. To find out more please visit treasurytoday.com/adam-smith-awards-asia
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