In this interview, Wen Jin Xiang, general manager of corporate banking at China Citic Bank talks to us about China’s nascent cash management business.

Wen Jin Xiang graduated from the University of Shanghai Finance and Economics with a Masters degree. He was appointed as the deputy president of Suzhou branch and Dalian branch of China Citic Bank, and he is currently the general manager of the corporate banking department of China Citic Bank.

With 15 years of work experience in the commercial bank industry, he has a very good knowledge of bank management and has experience of working in many bank departments including corporate banking, retail banking, international business, treasury and capital market, financial planning and risk control, etc.

Can you give us a brief introduction to China CITIC Bank?

China CITIC Bank is the first emerging national commercial bank established since China’s reform and opening up policy and is also the first bank to launch a dual-listing on the Shanghai and Hong Kong Stock Exchanges. Since its establishment in 1987, CITIC Bank, leveraging the comprehensive financial service platform of CITIC Group, has achieved excellent business performance through growth by striking the right balance between profitability, quality and scale and by pursuing risk-free profits, steadily-growing market value and constant expansion and innovation.

Up to the end of 2006, CITIC Bank has ranked 7^th in China’s domestic commercial banking industry in terms of total banking assets, and topped the list in domestic small and mediumsized joint-stock commercial banks with corporate deposits. According to the 2006 ranking of the British magazine ‘The Banker’, CITIC Bank comes 160^th out of the world’s largest 1000 banks for tier one capital, and ranks 127^th in terms of total assets.

Since the founding of the CITIC bank, corporate banking business has always been one of our core businesses. Its competitive edge and service features have helped CITIC bank maintain its leadership among small and medium-sized domestic commercial banks in such aspects as corporate financing, international business, and funds and capital market business. In recent years, thanks to the continuous focus on financial product innovation, our corporate banking business has launched a great number of products and services with CITIC features, contributing to our healthy social image and wide acknowledgement from our clients.

How do you understand the cash management business?

In recent years, the cash management business has gained broad recognition in China. On the one hand, corporations are facing an increased need to use cash management to lower financial cost, quicken cash turnover and gain cash income. On the other hand, cash management can bring considerable fee-based income to the banking sector, and help the bank and the corporate forge a closer relationship. Therefore, cash management becomes one of the focuses in the future competition between foreign and domestic commercial banks, driven by the need of the corporations to improve their management and that of the bank to grow its business.

Though different banks have various interpretations for cash management, there is a common understanding that cash management is a customised comprehensive solution combining a series of traditional financial products including settlement, investment and financing and account management, the main aims of which have been to help the clients maximise their cash operation efficiency and minimise financial exposure while at the same time maintaining the necessary cash flow required by day-to-day operation.

In our view, cash management in its broad sense, should include products and services such as collection and payment management, account management, liquidity management, investment and financing management and risk management, while in its narrow sense, cash management mainly involves account management, collection and payment management and liquidity management.

We think that all corporate clients will need cash management products. Among them, general clients primarily need account management and collection and payment management, while group clients require more services in multi-account cash pooling, centralized cash control and value-added cash investment services.

What are the characteristics of your cash management business?

We have always considered cash management as an important financial service. The characteristics of CITIC cash management business are as follows:

• A perfect organizational architecture.

  We have set up a separate department at our head office, responsible for rule-making, brand-building, product design and infrastructure development for the corporate cash management business of the whole bank. This department is also charged with the responsibility of helping our branches target key accounts with our marketing efforts and designing tailor-made solutions for them. Dedicated product managers in each branch are in charge of the marketing and promotion of cash management businesses in their territory.

• A consistent brand.

  CITIC Cash Management service brand is well-established in the market, so our uniform brand image and service standard based on brand management norms has been accepted by the market.

• Strong product functions.

  Our cash management solution includes collection and payment management, account management, liquidity management, investment and financing management and risk management, providing all-round product support based on customer demands. Especially in the area of group client cash management, CITIC bank can develop different forms of cash centralisation solutions in response to different customer needs.

• Advanced system support.

  Cash management can not be implemented without the support of an advanced information system. Our efficient payment settlement network provides real-time intra-system payment transfer through online banking. The inter bank transfer system, which has established seamless links with the payment system of the People’s Bank of China, is enabling quick funds transfer. At the same time, our back office system supports the setting-up of a range of cash pools, satisfying various needs of group customers in terms of the sweeping and assignment of funds, quota allocation and overdraft.

• Rich service experiences.

  Through designing cash management solutions for hundreds of large corporations and group customers, CITIC bank has accumulated abundant practical experiences.

• Professional service teams.

  Based on the comprehensive financial service platform of CITIC group and equipped with talents from all areas of the financial world, CITIC Bank is able to offer clients professional services and comprehensive financial solutions.

What benefits can customers gain from the bank cash management business?

We have designed several forms of cash management solutions for a number of large group customers. Generally speaking, before implementing cash management solutions, subsidiaries of the same group tend to open accounts at several different banks. At one point in time, some of the subsidiaries may have cash surplus in their accounts, which they deposit in the bank only to gain relatively low interest income, while others may suffer from a shortage of cash and have to get loans from the bank. The inability of the group headquarters to collect information in relation to the subsidiaries’ cash position in time and co-ordinate cash surplus and shortage in a centralized fashion results in inefficient utilization of internal funds and high financial cost.

We have designed tailored intra-group cash pools which enable physical or notional sweeping of funds. Through flexible sweeping, assignment and internal quota management, they provide centralised management and deployment of intragroup funds. With a nationwide network and an efficient online banking system, we help group customers transfer the funds from their subsidiaries to an account designated by the group headquarters in real-time or at certain intervals, thus enabling the quick centralisation of the group’s originally dispersed funds. In this way, we have helped the customers turn ‘3 highs’ into ‘3 lows’ – from high deposits, high loans and high cost to low deposits, low loans and low cost – because now the headquarters have better control over the cash position of all subsidiaries and make better decisions about the allocation within the group.

We believe that in choosing our cash management solutions, the customer will benefit from higher cash liquidity, efficiency and return, and lower financial cost as a result of better internal information sharing and cash allocation.