Published: October 10, 2014
Doing business internationally is an imperative for companies of all sizes, fuelled by economic growth and emerging consumer population in regions such as Asia, and opportunities that e-Commerce offers for sales and sourcing worldwide. For a European company accustomed to the relative ease of doing business in its home markets, expanding into new territories, particularly in a region as diverse as Asia, can be an intimidating experience. Similarly, for an Asian company, expanding into Europe is equally challenging, with diverse market practices, regulations and business culture. To bridge these gaps, UniCredit has extended its successful European franchise into Asia, offering European and Asian customers alike a consistent experience in every country in which the bank operates.
Asia remains a growth engine for the world, largely driven by China, which is predicted to become the world’s biggest economy within 2014, far earlier than previous projections. As China’s economy matures, it becomes more inclined towards cyclical growth adjustments, which we have seen recently, but this should not be allowed to obscure the fact that growth rates continue to be strong.
Doing business in Asia is not without its challenges. Varying degrees of financial and market maturity, regulatory constraints, and political instability in some areas means that treasurers are typically faced with greater complexity than in Europe or North America. However, foreign direct investment (FDI) into China in particular, and continuing growth in consumption levels, suggest that economic decline in the region is highly unlikely. Strengthening domestic markets are contributing to longer-term stability; for example, while China was considered the factory for the world in the past, production is now targeted at the domestic consumer market just as much, if not more so, than for export. The automotive industry is a good example, with the number of cars in China growing at around 65,000 per day. When comparing this figure to global annual sales of major car producers of say, 1 to 2 million vehicles each year, it becomes clear that China is pivotal to growth.
As a result of the enormous growth potential in China and more widely in Asia, doing business in the region is essential for UniCredit’s customers headquartered in our home markets in Europe. China is already Germany’s third largest trade partner, for example, and all the indications are that this trend will continue. Consequently, an essential objective for UniCredit is to support the cash, trade and liquidity needs of our customers in Asia as they embark upon, or develop their business strategy in Asia. To achieve this, we have developed considerable breadth and depth of skills in the region to support customers’ cash and treasury needs on the ground as well as their wider regional and global liquidity strategy. For example, we have branches in Singapore, Hong Kong and Japan, with two branches and a representative office in China and representative offices in India, Vietnam and Korea. We have a mature, sophisticated electronic banking platform that supports our services throughout the region, including both cash and trade.
Our European customers doing business in Asia have welcomed the investment in skills, solutions, our local presence in key markets and innovative, robust technology. These companies already value our relationship in Europe and recognise the benefit of working with a trusted partner as they expand into Asia. Consequently, we aim to offer a fully integrated ‘one stop shop’ for cash, trade and working capital solutions and advisory services to simplify their banking business in Asia and benefit from a cohesive experience of doing business with UniCredit across our footprint.[[[PAGE]]]
UniCredit’s Asian value proposition is not restricted to European companies doing business in Asia. We are proactive in leveraging our local presence in key locations in Asia to work with Asian companies that are expanding into Europe, particularly Central & Eastern Europe which is often a key destination for Asian multinationals. For example, Poland is a popular manufacturing destination for Korean and Japanese multinationals. By working closely with both head office executives and those based in Europe, we understand the business practice and culture in Asia and can support the same approach when supporting their operations in Europe. This is imperative in building trust and confidence, whilst enabling customers to take advantage of the scope and depth of UniCredit’s European solutions and services.
One of the most considerable market developments in Asia in recent years has been the gradual liberalisation of RMB, with considerable implications for companies doing business in China. RMB is already the second most popular currency for cross-border trade between Hong Kong and China, with rapid growth in its use by trading partners both in Asia and Europe. We are playing a key role with our customers in helping them to understand and take advantage of the opportunities that doing business in RMB presents.
Initially, we started to offer cross-border RMB payment services to our financial institution customers headquartered in our home markets, particularly Central & Eastern Europe, who wanted to take advantage of our presence in the region and direct access to the clearing system in China. Today, we are supporting customers across all industries, including cash, trade and working capital solutions with a wide range of solutions. For example, trapped cash is a particular concern for our customers. While complex cash repatriation solutions are emerging as regulations change, we help to find simple solutions that achieve customers’ objectives without requiring considerable change to their operational and liquidity frameworks. This is proving very attractive to both our European and Asian customers who appreciate the simplicity and transparency of our solutions that can be adopted easily, achieve rapid results and meet compliance and risk management requirements.
Trade is another area in which RMB liberalisation is having a considerable impact. Sixty-five per cent of letters of credit (LCs) with counterparties in China are denominated in RMB. In the past, these LCs were converted into a foreign currency such as USD on settlement, but increasingly they are settled in RMB. Customers are attracted to UniCredit as their trade partner, not least due to the strength of our European network. For example, a customer can open an LC from our Milan branch which can then be confirmed and discounted at a UniCredit branch in Asia.
As a new world economy emerges that is very different from the one of only a few years ago, UniCredit is playing a key role in supporting customers, with a focus on strong, trusted relationships, robust processes and transparent, simple and effective solutions. Cash, trade and liquidity management services are still a major part of our business in Asia, a trend we expect to continue as new trade corridors emerge and strengthen, such as between Asia, including China, and Central & Eastern Europe. UniCredit Global Transaction Banking (GTB) is playing a significant role in supporting both European customers to leverage the opportunities that doing business in Asia offers, and Asian customers as they expand into Western, Central & Eastern Europe. Doing business globally is no longer the remit of the largest corporations, but business as usual for companies of all sizes. UniCredit is here to facilitate and simplify that business.
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