What is your role at HSBC?

I’m the Head of Payments and Cash Management for HSBC China. I was posted to China in December 2004 and I’ve been here around 16-17 months. My major responsibility is to oversee the business development, product management and client management functions of the cash management business for HSBC in China.

Can you tell me more about HSBC’s cash management franchise in China?

Basically our mandate is to provide our target customers with the cash management product and services solution suite in China. HSBC has the largest branch network of any of the foreign banks, which consists of 12 branches and 11 sub branches across China. In total, 23 full branches and sub-branches. And we keep on expanding. My job is to provide cash management services within the coverage of this branch network. Basically we are talking about the account management, liquidity management and payments and receivables services – as well as delivering these through our branch network or our electronic delivery channel, which consists of an internet platform (HSBCnet) as well as a host-to-host platform (HSBC Connect).

In terms of the franchise, my target customers have always been the Foreign Invested Enterprises (FIEs) in China involving either multinationals or medium sized corporates – whether they are Wholly Owned Foreign Enterprises (WOFE) or joint ventures. Apart from FIEs, we are also targeting key State Owned Enterprises (SOEs) and Private Owned Enterprises (POEs). These are Chinese enterprises, but they may have specific cash management needs inside China that their local banks may not be able to provide. On top, our experience shows that SOEs and POEs are also looking for cash management capabilities outside of China. Therefore, my role on this is to act as a bridge to bring to SOEs and POEs our payments and cash management capabilities across Asia Pacific or even globally.

What products is HSBC currently focusing on in China?

Let’s start with account structures. Based on our experience, we are in a very good position to provide our customers with all kinds of advice on how to structure their accounts among the groups of companies in China, in order to facilitate the efficiency and effectiveness of their payments and collections. Apart from that, we help our customers streamline their account operations – this includes local currency payments in renminbi as well as cross-border transactions.

The collections suite has been one of the key focuses. Linking into the China National Advanced Payment System (CNAPS) infrastructure as well as the coming new Bulk Electronic Payments System (BEPS) is also part of our payments and collections suite. If some of our customers want to outsource their accounts reconciliation process, we have the experience and the technology to provide this now in China.

On the liquidity management side, everyone knows that in China all inter-company loans have to be effected through the entrusted loan framework. We have a suite of products that address both renminbi and foreign currency funds sweeping automatically inside China. We are able to provide this to facilitate the liquidity management within a group of companies for our customers.

Finally, in terms of delivery platform, we have been at the forefront and are continually encouraging our customers to enjoy the internet banking service that HSBC can provide. Our global platform is called HSBCnet, which applies globally in most of the Asia Pacific countries as well as in China, with all the local language support. Of course, ultimately, it depends on what our customers’ needs are and what priority they have in terms of cash management – it may be collections first, liquidity second and payments last – or any other combination. It all depends on our customers’ specific business imperatives. We work accordingly to support them.

What do you see as the key challenges faced by treasurers in China?

The most important challenge that corporate treasurers need to be very alert to is keeping up with all the regulatory changes, advances and relaxations. Treasurers should do this almost on a monthly basis, adjusting their hedging strategies and cash management practices accordingly, to make sure they get the maximum benefit out of the changes. There have been several developments related to cash management – for example, the Pudong Nine Measures and the recent PBOC Six Measures. Among these measures, there are a lot of opportunities that corporate treasurers need to understand, from US dollar liquidity management inside China, to off-shore accounts inside China, to the overseas wealth management scheme, to a lot of other additional streamlining in foreign currency administration procedures in China. I think it is important for corporate treasurers to feel the pace of the changes and derive from that an expectation of the next milestone, so that they can start positioning themselves accordingly.

One of the other key challenges is collections in China. If any corporate is doing business in China, they need to collect sales proceeds from their customers. This has always been a challenging aspect of the corporate treasurer’s role.

There are two aspects here. The first is how quickly you get the money in – but even more important is the corresponding information about this credit. In China, this has been extremely manual when our customers’ customers remit the funds to our customers’ accounts to pay for goods. Usually they need to fax or verbally advise the corresponding information to our customers. At the same time, our customers need to check whether the money has been credited into the account and need to collect the information – for example, which invoice the customer is paying – in order to do the reconciliation. This is because of historical reasons as well as the infrastructure constraints of the clearing systems in China. This has been a big challenge and all international companies are trying to improve the situation. Progress is being made with the help of corporates, as well as international banks such as HSBC, but there are still ongoing challenges. This will only be remedied through better education to our customers’ customers in order to automate things as far as possible. With the help of the bank, to a certain extent the situation will be improved. But there’s still a challenge here.

What is the best way for treasurers to keep up-to-date with regulatory changes?

Treasurers should make sure that they keep on looking into the announcements that have been in the news, but I think the most effective way of keeping up-to-date is to get a constant feed of information from their bankers. The banks, either local or foreign, have a keen interest in everything that I have mentioned – understanding it, digesting it, and knowing what the implications are. If you get updates from the bank, you get the information and the implications, rather than just the data.

We keep a constant dialogue with our customers. Additionally, HSBC has been hosting a number of roundtables as a result of these measures. There is a fluid dialogue among corporates, banks and regulators to understand first-hand the implications of these exciting changes.

How do you expect cash and treasury management practices to develop in China in the next few years?

I think that with the pace of relaxation and with the coming WTO changes, there will be more and more success stories among multinationals working with foreign and local banks to achieve breakthroughs in terms of cash and treasury management in China. I’m expecting more and more onshore best practice to be evident in China. There have been a lot of centralised Shared Service Centres, regional treasury centres and payment factories in Hong Kong and Singapore. With all the good things happening in China, I expect there to be no more constraints preventing China from having a number of similar success stories.

What is HSBC’s relationship with the Chinese banks?

HSBC was the first foreign bank in China to establish cash management alliances with local banks. At the moment, we have various degrees of alliance with the big five local banks. These are ICBC, Bank of China, Agricultural Bank of China, China Construction Bank and the fifth largest bank, the Bank of Communications. HSBC has a 19.9% equity interest in this fifth bank as well. We have a very good strategic alliance and partnership with these five banks in terms of cash management and we have been using this alliance to service our customers’ cash management needs in China.

What is HSBC’s relationship with the regulators in China?

We have an excellent relationship with the regulators. HSBC supports China’s reform strategy and actively contributes to the development of the banking sector. The fact that HSBC was the first to invest in domestic financial institutions and has the largest branch network testifies the support we have received from our regulators.

How do you expect HSBC’s role in China to change once the restrictions on foreign banks are lifted in December 2006?

By December this year, according to WTO, all the foreign banks will be able to serve Chinese individuals as well for their renminbi business, and this will open up another big business opportunity for HSBC. We have always been ready for this and I think the most important thing is to try to expand our branch network whenever we have the opportunity.

Also by December this year, according to the terms of the WTO agreement, foreign banks will no longer be limited by the core catchment area of our renminbi licence. When dealing with corporates, we will be able to serve any corporate in China with our branch network. It’s another relaxation and we will make sure that we leverage on that.