The challenge
With the company’s rapid global expansion, it encountered new challenges relating to centralising treasury management. Xiaomi Corporation discovered that cross-border payments eliminated the efficiency of its capital flows and an increasing number of accounts around the world burdened the company’s control and visibility over global treasury management. At the same time, multi-currency settlements emphasised the company’s foreign exchange risk management ability.
The global liquidity tension caused by COVID-19 made liquidity management particularly challenging.
As a fast-growing Chinese technology, media and telecom (TMT) leader, Xiaomi’s treasury team knew they had to broaden their financing channels to adapt for global expansion, especially in emerging markets, as well as resolve tight liquidity issues brought on by the pandemic and macroeconomic uncertainties.
The solution
Xiaomi treasury team focused on building up a ‘One Strategy Centre’ and Multi-Managed Platforms in treasury management globally. For infrastructure, they preliminary set a treasury management system aimed at centralising Xiaomi’s global treasury management function with single entry. The platform links Xiaomi’s accounts all over the world and proceeds all transactions, enhances safety and realises effective and efficient treasury management globally.
They integrate their systems with banking partners; utilising virtual accounts and the credit control system has achieved not only accurate and automated reconciliation but also effective evaluation of Xiaomi’s clients and suppliers as well as management of tenors and turnovers. The company acquired the necessary approvals from the People’s Bank of China (PBOC) and China’s State Administration of Foreign Exchange (SAFE) for both local and foreign currency cash pools which is a robust and stable cross boarder channel that helps the company to improve the flexibility and efficiency to allocate excess funds and balance cash position in multiple markets.
Treasury worked closely with the business team to design solutions on FX, liquidity and credit control management of the overseas businesses. Meanwhile, a dedicated FX team was mobilised to support overseas operations with responsibility for FX.
Xiaomi successfully issued its first one-year RMB1bn Panda Bond in China’s domestic inter-bank market, National Association of Financial Market Institutional Investors (NAFMII), on 2nd April 2020 with a coupon rate of 2.78%. This was a high-profile issuance, making Xiaomi the first tech-internet company to issue a Panda Bond in China as a pilot case. It also markets the debut of the company’s return to the domestic capital market.
On 23rd April 2020, Xiaomi issued a ten-year US$600m bond with 3.375% coupon rate. This final coupon rate was not only the lowest among USD bonds with the same rating and tenor, but also the lowest ten-year coupon rate for a Chinese TMT company.
On 13th May 2020, the company issued a US$1.2bn club loan. Despite the impact of COVID-19, the club loan attracted overwhelming interest from the market, resulting in the company upsizing the original deal from US$1bn.
In April 2020, the financing team issued the first RMB300m tranche of N+N+N supply chain ABS plan utilised the RMB10bn Shelf Registration ABS Programme quota which can be used to finance the whole Xiaomi eco-system via the supply chain platform offered by Airstar Digital Technology.
Best practice and innovation
This was a significant undertaking which the treasury team was able to build quickly. Working with a number of partners, the team established a strong financial system that encompassed a cross-border channel, credit control system, treasury management system and multicurrency, multichannel, multi-term global funding channels to achieve comprehensive, systematic and informative management on group funding.
Key benefits
- Improved processing efficiencies.
- Automated reconciliation.
- Low cost diversified funding.
- Supported suppliers during the COVID-19 outbreak.
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