Digitisation is driving change in payments in China and J.P. Morgan is positioned to provide real support. Rani Gu, Head of Wholesale Payments for China & Head of Treasury Services Product for Greater China, explains how.
Cash and liquidity management/payments and collections
Since its first foray into China in 1921, US bank J.P. Morgan has established a suite of investment and corporate banking services in the country. Of these, payments and cash management are front of mind for treasurers in the region and areas Rani Gu, Head of Wholesale Payments for China & Head of Treasury Services Product for Greater China, explains are rapidly changing and growing.
Cross border payments
Speaking in an interview from the bank’s Shanghai offices, she says digitisation is driving change in payments and that J.P. Morgan is positioned to offer real support, like helping clients navigate strict Chinese regulation around manual document requirements, which can make cross border digital payments complicated. Solutions include the firm’s E-Customs Payment Solution where clients are no longer required to provide supporting documents to their banks prior to making payments to overseas suppliers. The process is now completely digitised via API connection between the bank and Chinese customs, she says.
Elsewhere, the bank has successfully secured the first official permission to waiver supporting documents in favour of a KYC process and post transaction monitoring. “J.P. Morgan was the first bank to be confirmed and approved by the China Central Bank in Shanghai to launch a digital solution to specifically support e-commerce cross border business,” she says. This progress was recently recognised with the bank scooping local authority awards for its work in simplifying payments. “We really are in a leading position regarding cross border payments,” she enthuses. Key milestones for sure, but Gu says much more lies ahead as the bank strives to keep up with China’s pace of deregulation, technological developments, and client demand.
Real-time treasury
Alongside this, her team is increasingly focused on meeting client demand around real-time treasury management, data analysis and broad digital solutions accelerated during the pandemic. On one hand companies have more staff working from home, many of which want to review their contingency plans and incorporate lessons learnt. “Working from home is the new normal,” she says.
On the other, she notes how corporate clients are ramping up integrating digital processes to meet their own customer demands around e-commerce. Many businesses moved online during the pandemic and e-commerce export volumes have spiked sharply alongside the emergence of new direct-to-consumer business models. “Our e-commerce clients are looking at us and checking for solutions to support the expansion of the business,” she adds.
Connectivity
Strategy is also focused on connectivity, with corporates seeking “plug in, plug out” access to the bank’s services. It is leading to more demand for API connectivity beyond payments to include balance and transaction real-time capabilities, and other key data analysis informed by APIs. “Clients want to capture all the available data and want help with their cash flow forecasts. These are the types of new solutions we can provide,” she says.
Supply chain review
In another trend, she notes demand amongst clients to review their supply chains with a focus on “sustainable” partners. Elaborating, she says more firms are seeking to diversify their supplier base alongside a new focus on relocating supply chains within Asia. “There is a new trend to source within the region – we are seeing a new regionalisation,” she notes. For the bank, this means finding financing solutions to new upstream and downstream suppliers.
Sweeping
Centralising cash via sweeping strategies is a key priority for many treasurers managing liquidity. Now J.P. Morgan has developed multi-currency (dollar and renminbi) cross border sweeping solutions to facilitate working capital management. It involves corporates installing a centralised process to manage their funding needs, using tools supported by the local regulator.
“Last year has been historical in terms of the number of structures we have put in place to help our clients implement cross-border sweeping,” she says, adding sweeping is possible in dollars and renmimbi and easiest to set up for entities located in China’s Free Trade Zones. “If clients have dollar and renminbi flows, they can set up new currency structures to support their funding management. As long as there is reasonable inter-company cash flow management you can move funds in and out.”
For companies operating outside Free Trade Zones, case-by-case approvals require even more bank support. “We are in regular communication with the regulator. We know what documents are required and have the templates. We know the regulatory touch points and have the knowledge to help clients navigate approval processes,” she says.
Looking to the future, she notes particularly exciting client growth amongst local Chinese corporates, both SOEs and private companies. “We are a good bridge, connecting local Chinese corporations wanting to expand their global business,” she says, concluding that these business export “all over” from LatAm to the US, EU and Asia.
