An Eye on the Ball, Not Just the Headlines

An Executive Interview with Bruno François, Head of Transaction Banking, BNP Paribas China

With China experiencing a market correction and shift from an investment to a consumer-led economy, it is easy to take a negative view of the market, and the opportunities that exist. In reality, even with revised growth forecasts, China is still the world’s second largest economy with growth rates far in excess of most western markets. In this edition, Bruno François, Head of Transaction Banking, BNP Paribas China talks to Helen Sanders, Editor, about how corporate treasurers and their banks should respond to recent market events.

Some treasurers have been worried that the RMB liberalisation agenda has been derailed by the recent shocks to the Chinese economy. To what extent are these concerns justified?

Over the past five years, treasurers have become accustomed to good news in China. Almost every month, new opportunities for cross-border trade, domestic and cross-border liquidity, investment and process automation have opened up, which has set an expectation that RMB and wider market liberalisation will continue on a linear path. In reality, small steps, unpredictable timing and the use of pilot projects before wider market rollout has emphasised that the pace of change is defined by market conditions rather than a set agenda. However, when RMB started to depreciate in August 2015, some people were surprised at the interruption to the liberalisation journey and backward steps in some respects. These need to be seen as a response to changing market conditions, specifically to encourage inflows rather than outflows of capital, not the end of the liberalisation agenda.

Furthermore, the reduction in quotas and restrictions on outflow is not an assault on foreign corporations, but a means to avoid speculation that risks damaging the Chinese currency and economy. Treasurers therefore need to take a longer view, and see individual measures as steps along a winding liberalisation journey, even if some of these appear to be backward steps in the short term.

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