Best Liquidity Solution Highly Commended: Sany Group Co Ltd

Published: Feb 2022

Cross-border RMB settlement helps mitigate US dollar volatility in ASEAN

The challenge

Sany urgently required professional consultancy, guidance and help to support the company’s entry into local markets in the region, especially due to the high degree of capital controls in ASEAN countries.

Given US dollar volatility, Sany wanted to establish a RMB internationalisation initiative to reduce its FX exposure. The Sino-American Trade War further intensified the concerns of China’s ‘Go overseas’ enterprises with regards to the sustainability of cross-border settlement channels that rely heavily on the US dollar via the SWIFT network. Thus, when choosing its banking partner to work with, Sany needed to focus on the RMB capabilities of offshore banks.

The solution

Leveraging the strong connectivity in the ASEAN market, the chosen bank, UOB, provided professional and detailed advice to Sany, as the company pursued its entry to certain ASEAN countries.

“Even after the successful implementation of the deal, we leveraged our bank’s franchise and full suite of product capabilities to continue meeting our changing requests with regards to business expansion and the dynamic external environment, especially fulfilling cross-border RMB settlement in ASEAN,” says Li Chao, Finance Manager.

The solution implemented comprises:

  1. Direct THB purchase of CNH in Thailand to achieve RMB cross-border settlement. Traditionally, Sany Thailand, as a country level distribution centre, has been responsible for negotiating and signing business contracts with Thailand domestic customers. Cross–border settlement has been conducted through USD. In these circumstances, Sany Thailand (THB to USD) and Sany China (USD to CNY) were subject to FX exposure concurrently. Given this, the bank proposed the solution of direct THB purchase of CNH in the Thailand Market to achieve RMB cross-border settlement via cross-border interbank payments system (CIPS). Under this arrangement, the solution eliminates FX exposure of Sany China via offshore USD being converted to CNH and cross-border RMB settlement.
  2. RMB connectivity between regional accounts with UOB. As a strategic customer to UOB, Sany Group has accounts across five regions, each with various facility support, including long-term ARP facility, short-term trade finance facility, letter of credit (L/C)/guarantee issuance and FX swap facility. The bank also facilitated the five regions with CIPS as well as RMB settlement capability. To enhance the visibility of China HQ, the bank also offered BIBPlus which provides a global view and regional host-to-host (H2H) services. Furthermore, the conversion of the ASEAN currency to RMB is also supported by the bank’s Thailand and Indonesia branches, aligning with the RMB cross-border payment solution to ensure the RMB connectivity.

Best practice and innovation

Sany has leveraged the bank’s excellent capabilities of integrating products and its franchise across ASEAN markets which cater well to China leading enterprises’ strategy of ‘Go Overseas.’ An accurate grasp of Sany’s evolving needs in a dynamic environment enabled a collaborative effort to develop solutions that addressed the identified pain points in a timely manner.

Key benefits

  • Increased standardisation and seamless communications.
  • Improved visibility.
  • RMB connectivity between China HQ and overseas subsidiaries.
  • Avoids multi-currency FX charges.

The Adam Smith Awards Asia is the industry benchmark for best practice and innovation in corporate treasury. The 2021 awards attracted a record-breaking 497 nominations. To find out more please visit treasurytoday.com/adam-smith-awards-asia

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