Regional Focus

Treasury in China: challenges, trends and opportunities

Published: Sep 2019
Shanghai skyline, Huangpu river during dusk

Multinational companies continue to take advantage of opportunities in China. But there are many factors that treasurers need to be aware of when operating in this market. From seizing the opportunities brought by regulatory change to harnessing new technologies and digitalisation, what are the top developments and trends currently affecting corporate treasury?

As the world’s second largest economy by GDP – and the world’s largest by purchasing power parity – China has long been a major focus for companies operating across APAC.

It’s also something of a moving target. China’s double-digit GDP growth at the beginning of the decade may have slowed considerably in recent years, dropping to a 28-year low of 6.6% in 2018. Nevertheless, domestic consumption is a powerful driver of growth. A 2019 report by McKinsey, China and the world, points out that while China’s exposure to the world has fallen in terms of “trade, technology, and capital”, the world’s exposure to China has increased – reflecting “the rebalancing of the Chinese economy towards domestic consumption.”

Meanwhile, other initiatives currently under way are helping to drive growth – such as China’s ambitious Belt and Road Initiative (BRI). The initiative, which was first launched in 2013, spans over 130 countries, with the World Bank estimating investment in BRI to be worth US$575bn. BRI projects include rails, roads, bridges and ports as well as energy projects and free trade zones. Alongside these major developments, another notable initiative is Made in China 2025, a ten-year plan launched in 2015 that aims to promote manufacturing and develop high-tech industries.

Against this backdrop, China continues to present attractive opportunities for multinational corporations. But while these opportunities are considerable, companies also need to be aware of the challenges they may encounter in this market. As a white paper published by executive search and recruitment firm Odgers Berndtson in 2018, the challenge for multinationals in China, notes: “All MNCs have to do to crack this giant market is adapt to a completely foreign culture, understand a plethora of different but connected consumer groups, and move at breakneck speed to keep up with technological developments and changing demand. Easier said than done.”

China: growth rate of real gross domestic product (GDP) from 2011 to 2024

China: growth rate of real gross domestic product (GDP) from 2011 to 2024

*IMF estimate
Source: Statista

China’s treasury landscape

Where treasury is concerned, there are a number of considerations to be aware of, from China’s complex and rapidly evolving regulatory climate to the opportunities brought by digitalisation. While not exhaustive, the following are five challenges, trends and opportunities that treasurers should be aware of:

  1. Regulatory change


    For treasurers in China, the country’s complex regulatory climate is one notable consideration. “It’s no secret that China’s complex regulatory environment has posed challenges for MNCs,” says Rani Gu, Head of Treasury Services, China at J.P. Morgan. Gu says that interpretations of regulatory rules can vary between different cities and provinces of China. As a result, treasury activities may be governed differently across different cities under the same rule. According to Gu, this could prove challenging for MNCs looking to centralise their treasury operations across China. “At J.P. Morgan, we take a proactive approach by staying close to regulators on the ground to help clarify as necessary and in turn communicate with clients to help them navigate accordingly,” she comments. But regulatory developments can bring opportunities as well as challenges – and Gu says that continued efforts by the Chinese government to open up financial markets and push for renminbi internationalisation “are all positive developments for corporate treasurers.” A case in point is a change in regulations by the State Administration of Foreign Exchange (SAFE) earlier this year, making it easier for foreign companies to set up cross-border liquidity and payment structures. “This means treasurers can now set up cross-border sweeping arrangements and POBO/COBO as well as other netting schemes,” says Gu.

  2. Navigating trade tensions

    Aside from regulatory considerations, the last year has brought numerous headlines focusing on trade tensions between the US and China. To date, the US has imposed tariffs on US$250bn of Chinese goods, while China has imposed tariffs on US$110bn of goods from the US. Despite ongoing talks, President Trump indicated in August that a further round of tariffs was forthcoming, with a 10% tariff proposed on a further US$300bn of Chinese goods, including smartphones and clothing – although a subsequent announcement indicated that these tariffs would come into effect from mid-December. Companies have begun to feel the supply chain impact of these developments, which could lead to some shifts in terms of trade corridors. A recent poll by Baker McKenzie found that 93% of Chinese companies were considering making changes to their production and supply chains in light of trade tariffs, with 18% carrying out a complete transformation. Nevertheless, Gu says the bank has not seen a material impact on clients in China as a result of trade tensions. She says that while some clients have expressed concerns about the situation, they are also aware that China represents one of the largest opportunities for businesses globally. “Most are staying cautiously optimistic and we will continue to support them fully as their banking partner,” she adds.

  3. Treasury 4.0

    Meanwhile, companies in China are taking advantage of opportunities to increase the efficiency and effectiveness of their treasury operations. “We believe the trends in corporate treasury evolution in China correlate with those on a global level,” says Patrick Zhu, Head of Global Liquidity and Cash Management for HSBC in China. “This is known as Treasury 4.0.” According to Zhu, Industry 4.0 “combines the skills of humans and intelligent machines to drive innovation and deliver process efficiencies, data-driven insights, and new growth opportunities across all sectors, including financial services.” He adds that this is particularly applicable to China, where the market is at the forefront of global technology advancement – “providing a vibrant test ground for corporates to explore new technologies, new strategic partnerships and even new ecosystems.” Zhu adds that the global interest environment is another driver behind treasury transformation, noting that this is driving both cost controls and efficiency gains – a trend that he says is also becoming more prevalent in China. “A solid reflection of this is the fact that treasury centralisation, among numerous routes to achieve the efficiency goal, prevails,” adds Zhu. He explains that the execution of treasury centralisation can employ a wide range of means, from well-known models such as shared service centres (SSCs) and regional treasury centres (RTCs) to robotic process automation (RPA).

  4. Digitalisation and e-commerce

    Likewise, technology continues to be a major driver for treasurers around the world – and China is no exception. Gu cites the increasing need for treasurers to digitalise their operations to adapt in the shift towards e-commerce – a trend that she says applies not just to pure play e-commerce companies, “but also traditional brick and mortar firms like automakers looking to migrate their commerce activities online.” At the same time, the growth of e-commerce continues apace. A report by McKinsey, Global payments 2018: A dynamic industry continues to break new ground, noted that global digital commerce volume exceeded US$3trn in 2017, with this figure set to more than double by 2022. The report notes that Asia Pacific already comprises over half of the US$3trn – “and, due to the fast-growing Chinese market, will increase its share to nearly 70% by 2022.” “In this context, helping our clients in their digitalisation journey remains our key focus here in China,” says Gu. She notes that many corporates in the country still rely on spreadsheets, or have standalone treasury functions that lack the capacity to handle the speed and volume of online transactions across a multitude of payment methods. “At J.P. Morgan, we invest heavily in innovation to this end; a good example is the E-Customs Payment Solution we recently launched in China, which was developed as a direct result of specific needs of our clients,” says Gu. “The solution is a first by a foreign bank in China that allows corporates to fully digitise and automate cross-border payment of goods, solving common problems associated with the manual nature of such transactions.”

  5. Embracing emerging technology


    On a related note, treasurers also need to consider the role played by emerging technologies. Zhu notes that China “is at the forefront of global technology advancement, providing a vibrant test ground for corporates to explore new technologies, new strategic partnerships and even new ecosystems.” He adds that this is also evidenced by “booming digital platforms and payment tools in China and their penetration into the economy, as well as the application and impact of other new technologies such as artificial intelligence (AI), cloud computing and robotics.” Consequently, he says, “corporate treasury management is expected to evolve.” Indeed, new technologies have the potential to increase the efficiency of treasury processes in the future. “For example, with the sheer amount of data being created in payments today, solutions leveraging machine learning will likely become common treasury tools in the near future as treasurers look to interpret the data to identify inconsistencies in their processes or strategise through predictive analytics to optimise liquidity and mitigate risks,” says Gu. “Likewise, for robotics which is used to automate treasury processes, or application programming interface (API) which is becoming widely used for greater connectivity.” The opportunities presented by some of these technologies are reviewed in PwC’s 2019 Global Treasury Benchmarking Survey, Digital Treasury – It takes two to tango. The survey found that 19% of respondents see RPA as ‘highly relevant’ for treasury in the next two to three years, with a further 45% judging the technology to be relevant or somewhat relevant. Where the application of RPA is concerned, the survey saw payment execution as the top candidate, followed by deal confirmation, accounting and monitoring of payments. Meanwhile, the areas of treasury in which AI is seen as most relevant included exposure forecasting/analysis, monitoring of payments, payment execution, and liquidity management.


While China certainly has its challenges – both from a treasury perspective and in light of ongoing trade tensions – treasurers in the country have much to be excited about, from harnessing the potential offered by RPA and AI to taking advantage of favourable regulatory changes.

As Zhu concludes, “The challenges to treasurers in the current market are obvious. How corporate treasury management adapts to the changes and evolution trends, implements and leads the transformation through strategic partnerships with wider scope of services providers will define its success.”

Understanding business culture in China

Business culture can vary considerably between countries and regions, affecting everything from communication styles to decision making processes. For any company operating in overseas markets, it’s therefore important to understand the nuances of local business culture. A clear understanding can lead to productive relationships – but equally, cultural misalignment can sometimes hinder the effectiveness of those relationships.

As Benny Koh, Southeast Asia Leader for Deloitte Global Treasury Advisory Services, explains: “Business culture is one of those funny things where one realises something is wrong and it’s usually too late – ie a transaction is called off, senior external relationships are soured, complaints are raised by employees or a poor performance appraisal is given by the CFO.”

For overseas treasurers operating in China, a clear understanding of the country’s business culture is therefore essential. “If you really want to create a strong, robust and long-term business relationship with China, then it’s absolutely critical that you understand the culture,” says Neil Payne of Commisceo Global Consultancy. “By learning about the culture, you learn to behave in certain ways and carry out certain actions that all help you become part of the local business fabric.”

For example, Payne says that one significant consideration when doing business in China is the concept of ‘face’. “As a foreigner you need to learn the rules around protecting people’s face as well as enhancing it,” Payne says. “Once you work out how to give face, you soon see a huge difference in how you are treated.”

Another feature of Chinese business culture is the concept of Guanxi – in other words, the ability of an individual to harness their personal connections.

What do treasurers need to know?

Where treasury is concerned, Koh highlights a couple of cultural factors that treasurers should be aware of. “One is internal – team dynamics and management,” he explains, noting the importance of understanding “how one’s staff perceive authority and where the treasurer may be expected to lead/give explicit instructions vs adopting a more ‘laissez-faire’ or consensus-building approach like in the West.” He adds that deliberate consensus building “may be taken for indecisiveness and weakness.”

In addition, Koh says that externally the treasurer may be seen as the key decision maker and buyer of banking services. “In cases where he or she is not the ‘boss’, ie the CFO is actually the real decision maker on most treasury matters, it is better to be clear upfront with external parties to avoid commercial, and sometimes social misunderstanding which may be awkward,” Koh says.

Local business culture may also have implications for the way in which intermediaries and subcontractors are viewed, notes David Blair, Managing Director of Singapore-based Acarate Consulting. He adds that where local banks are concerned, risk management tends to be “less data driven”, while regulation is typically written in a way that “allows directional changes when expedient.”

Beyond China

Of course, China is not alone in having a unique business culture. Koh notes that in Asia generally, “hierarchical levels and authority matching are important”, noting that this can determine how bankers perceive the authority of the treasurer. This, in turn, can determine “who the treasurer interfaces with and can get access to in a bank, for example.”

When it comes to successfully navigating business culture, Koh says it’s important to have an open mind while being able to adapt quickly. “To be successful when navigating in a different environment, one’s sense of self awareness and sensitivity to social cues are required and that’s not taught in school,” he concludes. “Perhaps it’s part experience and part humility that make it work.”

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