Emerging Opportunities in Asia
Q&A with Kaushik Shaparia, Regional Head of Trade Finance & Cash Management for Corporates, Asia Pacific Global Transaction Banking, Deutsche Bank
Emerging markets will continue to drive global growth, particularly China and other parts of Asia. This growth is strongly apparent in trade flows both within Asia and between Asian countries and other markets in Europe, North America, Latin America and Africa, positioning Asia as a dynamic trade partner for the world. Even though 2014 is likely to bring some economic recovery in the US and Europe, Asia remains a powerhouse of growth.
What does this mean for multinational corporations?
Asia’s strong economic potential means that corporations of all sizes need to make strategic decisions about the extent to which they wish to leverage the growth opportunities that exist. Many are embracing these opportunities with enthusiasm, resulting in significant levels of liquidity being placed in Asia, creating a vigorous and motivated trading environment. With intra-Asia trade flows continuing to strengthen, companies that can take advantage of these trade routes will gain a competitive advantage.
As the world’s second largest economy and the pivot of significant amounts of both intra-Asia and global trade, China is the primary focus for many corporations. Despite a softening of growth resulting from the global financial crisis, China’s growth has remained robust, currently at around 7.5%, which is impressive compared with other regions. China has embarked on a journey of regulatory liberalisation to encourage foreign investment, which has been met positively by banks, non-bank financial institutions and corporations across a wide reach of industries. With greater cross-border movement of RMB reflecting steady progress towards RMB internationalisation, and initiatives to facilitate easier cash and treasury management in China, organisations of all types are gaining confidence in developing and implementing their investment plans in China.
In this rapidly changing environment, it is essential to work with a bank that has both a detailed understanding of the financial and regulatory environment in China, and comprehensive market access. In many cases, banks such as Deutsche Bank that offer these opportunities, are actively leading the process of liberalisation through involvement in ground-breaking pilot projects in which a number of Deutsche Bank’s clients have been able to participate.
We are also witnessing substantial growth in India, a market that offers considerable future potential. With inflation stabilising and a strengthening of monetary policy, the conditions are right for increased levels of liquidity. While growth in China is primarily export- and consumer-led, investment is driving growth in India, with infrastructure projects offering opportunities for banks and corporations across a variety of sectors, with an increase in the use of structured finance and trade finance solutions.
ASEAN is emerging strongly as a sub-region within Asia. Many of these countries have seen an improvement in their credit ratings, which is further enhancing their growth potential. A burgeoning middle class is increasing domestic consumption, which is positive for growth sustainability. Consequently, we are supporting a wide range of corporations keen to leverage this growth opportunity through a variety of innovative cash management and trade finance solutions.
What type of solutions would you highlight?
During the global financial crisis, companies became acutely aware of business continuity risk, so they are prioritising efficiency and resilience across their entire supply chain, using techniques such as supply chain financing to support their own liquidity objectives and those of their suppliers and distributors. Although North American corporations were amongst the first to leverage supply chain financing techniques, European and latterly Asian companies are also using these solutions to access new sources of liquidity, re-position their borrowing profile and support their supply chains. In fact, it is not only banks and corporations that recognise the benefits of supply chain financing. Increasingly, we are seeing both governments and export credit agencies (ECAs) supporting supply chain finance solutions, despite their traditional focus on longer-term project financing.
Technology is critical to the success of many of the innovative banking solutions that are emerging in Asia and beyond. Banks that have built strong and flexible front-end platforms early on and have the ability to integrate cash management and foreign exchange services into cohesive solutions are well-positioned to support their clients’ growth ambitions in Asia. No longer is it sufficient to provide individual products and services – corporations now require comprehensive, integrated solutions to meet their operational and financial requirements in each country within the context of a consistent regional and global framework.