Published: March 01, 2010
The global financial crisis has had adverse effects on many aspects of business operations, in both internal and external business environments. On one hand, market demands have shrunk to some extent, which led to a substantial decline in sales, increases in companies’ inventory levels, and more operational challenges. On the other hand, the liquidity shortage is very severe, and the absence of effective capital operation may well give rise to problems with the ‘capital chain’. Changes in the external environment have made it more difficult for companies to sustain healthy operations for some time, and if a business fails to take effective measures accordingly to meet the challenge, it is highly probable that these operational difficulties could threaten its very viability.
What is the impact today?For businesses, the toughest period of the financial crisis has passed, and the issue facing each company is how to recover from this crisis quickly. With the introduction of an economic stimulus package from the central government, the demand in some market segments is on its way to recovery. How to capitalise on the opportunities the recovering economy has to offer is a major concern in current business operations. From another perspective, in the aftermath of the financial crisis, the damaged financial capability is unlikely to be able to meet the needs of company development. As a result, how to restore healthy operations, especially capital operations, and improve operational efficiency, are among the most urgent issues that a company has to address.
At present, more and more companies agree with the concept that ‘business management should focus on financial management, while financial management should have treasury management as its core’. As the business environment improves, an increasing number of Chinese corporations are beginning to attach more importance to enhancing treasury management. China’s cash management market is developing rapidly. On one hand, large corporations are speeding up the upgrading of their own treasury management system, and strengthening their co-operation with large commercial banks in the area of cash management; on the other hand, a large number of small and medium enterprises (SMEs) are also beginning to leverage the cash management products provided by banks to improve their capital management and capital utilisation efficiency, in order to guard against external environment risks more effectively. Therefore, payment and collection management, and liquidity management will become the priority tasks in corporate treasury management.
Ever since our cash management service was launched, the Industrial and Commercial Bank of China (ICBC) has been consistently taking a customer-focused approach and aiming to meet customers’ needs. We endeavour to meet individual clients’ specific requirements for cash management by familiarising ourselves with the characteristics of their business processes, management patterns and capital movements, incorporating their internal management systems, and providing them with tailor-made integrated cash management solutions, backed up with advanced technology platforms and a wide variety of cash management products.
Meanwhile, we do our utmost to ensure the effects and efficiency of cash management project performance through globally uniform, standardised service and efficiency in organising and executing business operations. Based on our many years of experience, we continuously improve our cash management services to meet our clients’ requirements for liquidity, security and profitability. Supported by a robust global technical system, ICBC provides clients with full-featured, flexibly-arranged cash management services, including account management, collection, payment and liquidity management, short-term investment and finance, and risk management products, etc. We have also developed ‘10 Cash Management Solutions’ to meet clients’ different requirements. In addition, we have derived ‘11 trade Cash Management Solutions’ for different industries. Meanwhile, we may also tailor our products and services to clients’ needs, and expand our service range to include global cash management service, financial outsourcing service, and supply-chain finance service etc, so as to provide a better and more comprehensive service to our high-end clients.[[[PAGE]]]
Cash management has always evolved around customer requirements. We believe, when the business environment for the enterprises has changed, enterprises will have more demanding cash management requirements. Therefore, cash management services provided by the banks will need to follow the market demand closely and innovate continuously. Firstly, banks need to improve the ability to provide personalised cash management services. The speed of development of cash management in China is very fast; however, the products available in the market are all more or less the same. Although all major banks have launched their own branded cash management services, in order to achieve competitive advantage and gain market share, differentiated services must be provided according to clients’ individual needs. Secondly, banks have to provide really comprehensive cash management service solutions.
We continuously improve our cash management services to meet our clients' requirements for liquidity, security and profitability.
Cash management has become a comprehensive financial service for the enterprises provided by the banks, which cover an increasingly rich set of contents. In the future, comprehensive cash management will become the core of corporate finance service to provide one-stop-shop treasury management solutions for enterprise clients. Thirdly, there is a requirement for globalised cash management. As the globalisation of economy deepens, future cash management will become cross-border, cross-bank and cross-currency. Recently, many Chinese enterprises have begun expanding overseas. They invest and build factories overseas, explore foreign markets and compete internationally. This will create many cross-border cash management requirements. As a result, globalised cash management business is the way to go.
In order to develop our cash management business further, we launched the brand as our key product for the market in 2005. In 2006, we successfully listed on the Shanghai and Hong Kong stock market simultaneously. In the same year, we became the first bank in China to set up a dedicated Settlement and Cash Management Department, which has elevated the status of the cash management business to that of a bank-wide core strategic business. In 2007, we consolidated and reinvented our cash management business, focusing on specific business requirements and the individual needs of different sectors, with the ‘10 Cash Management Solutions’ and ‘11 trade Cash Management Solutions’ referred to previously. In 2008, ICBC speeded-up the upgrading of the cash management service model and further improved cash management service quality by introducing a wide range of competitive products such as the Domestic & Foreign Cash Pool, Supply Chain Finance and Group-Wide Banking Account. In 2009, ICBC developed its own new generation global cash management system and became the first Chinese bank to provide global cash management services and offer comprehensive cross-border, cross-bank and cross-currency cash management solutions for Chinese enterprises who are pursuing an international expansion strategy.
After the global financial crisis started, we have seen an increasing pace of RMB regionalisation. The Chinese government introduced a series of relevant policies to drive such development, notably the ‘Administration of Pilot RMB Settlement in Cross-border Trade’ of 2 July 2009. The announcement of the scheme signified that RMB regionalisation has moved from the policy level onto the level of actual operation. From our objective view, we see that the Cross-border Trade Settlement Pilot Scheme will have positive effects for Chinese foreign trade enterprises. I believe such positive effects are three-fold: firstly, it helps these enterprises to avoid foreign exchange risk, reduces foreign exchange losses and stabilises the cost of finance. Secondly, it helps companies to reduce the cost of forward settlement and sale of foreign exchange transactions, and thus to reduce operational costs. Lastly, it helps firms to adopt simplified cross-border remittance procedures and reduce remittance cycles, which increases the efficiency of capital utilisation and improves financial management level. [[[PAGE]]]
Recently, the Chinese government introduced four new policies for cross-border RMB trade settlement. For example, it no longer restricts the foreign regions where cross-border RMB trade settlements can be carried out; all enterprises in the domestic trial cities, as long as they have a foreign trade licence, can participate; trial enterprises are allowed to price and settle the provision of services; etc. I believe such deregulation policies will bring about positive effects for the future development of RMB cross-border trade settlement. It is likely that along with the increase in the number of countries and enterprises that participate in the scheme and the increase in business coverage, demand for RMB settlement will continue to increase. Meanwhile, systems and procedures will also continuously improve.
The prospect of RMB cross-border settlement and the acceptance of it by the Chinese and foreign trading enterprises will of course eventually depend on the RMB exchange rate movements and the trading parties’ confidence in RMB. As a commercial bank, we will continue to perfect our business flow and create innovative product types in order to provide excellent service to Chinese and foreign trading enterprises and their cross-border trades.
As the pace of overseas expansion of Chinese companies increases, cross-border cash management has become an important topic for corporate finance management. Over 12,000 enterprises have been set up in foreign countries by the Chinese firms adopting the expanding overseas strategy. As the proportion of overseas revenues continue to rise, it becomes the driving force behind the import/export trades and the globalisation of the Chinese economy.
As the pace of overseas expansion of Chinese companies increases, cross border cash management has become an important topic for corporate finance management.
When companies manage their business across borders, they face the challenges of finance and taxation regulation differences in different countries and regions, which creates the need for cross-border finance management. By talking to companies, we understand such needs include cross-border account management, information access, fund transfer, and setting up a cross-border account management system through different platforms such as electronic channels and branch networks. Based on such understanding of the needs, we launched our ICBC global cash management services.
Because of the regional, cultural and supervisory differences that exist among different countries, multinationals when operating in different countries/markets usually look for one or more indigenous commercial banks as cash management partners. For instance, in the Chinese market, the multinationals should, on one hand continue to work with foreign banks and incorporate China into their global cash management network; on the other hand, they should also set up cash management partnerships with Chinese banks to reduce cross-border operational risk.
As the largest commercial bank in China, providing quality cash management services is always high on our agenda. We can utilise our strengths, including a network of more than 16,000 branches in all the provinces and cities throughout the country, an advanced domestic and foreign currency clearing system, a rich set of investment and fundraising tools, sophisticated fund management and so on, to provide multinationals with fully comprehensive cash management services. We can of course also partner with foreign banks to utilise each other’s strengths to provide international companies with the strongest support in global cash management.
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