Why navigating today’s macroeconomic watershed depends on the treasurer
The world economy is at a defining moment. Think of an accelerated industrial revolution, swept along by rapidly developing new technology and a shift in economic power from West to East. In parallel, governments are redirecting their economies through diversifying and pivoting, positioning them to focus on new growth sectors.
By 2030, China will be the world’s largest economy and India the third largest, according to HSBC research1. The same research predicts that, between now and then, emerging markets will make up about 70% of global economic growth, compared to its 50/50 split with developed markets over the past decade.
As economic change quickens, companies will naturally target the new growth markets and sectors. But doing so requires complying with local cash management and payments regulations, adapting to local practices in terms of how people buy things and pay for them – which may in themselves be changing.
The result? A company entering several new markets might face a jigsaw puzzle of cash management and payments systems. All of these must be established, maintained and monitored, as we explain in our paper ‘How a macroeconomic watershed is leading to microeconomic opportunities’.
Diversifying and pivoting
The United States and China are the highest-profile examples of governments seeking competitive advantage by reorienting their economies, as well as their trading relationships. Both are seeking to foster prosperity, the former through a pivot to protectionist policies and the latter through diversifying into higher-value sectors.
Across Asia especially, economic pivoting and diversification is evident. India’s reformist government is seeking to encourage international companies to manufacture there 2. Meanwhile, Hong Kong aims to be the financing hub for China’s green energy ambitions 3. And in the ASEAN association of 10 Southeast Asian nations, Malaysia and Singapore are both seeking to pivot in their own ways – the former through encouraging digital commerce; the latter through becoming the ‘smartest’ of nations 4, with its ‘smart city’ initiatives.
Turning to Europe, there is less evidence of government policies changing economic orientation, although the UK is seeking to diversify as it exits the EU by boosting trade with countries with younger populations. Germany and France are courting some of the services business that may leave the UK after Brexit, notably banks.
Opportunities for companies
As the global economy’s tectonic plates shift, tapping Asia’s rising economies is likely to be the outstanding opportunity for businesses. Many international businesses are already in China, but countries such as India, Indonesia and the Philippines are populous and becoming more prosperous.
Reaching Asian consumers will require adapting to local practices, especially as societies become virtually cashless. These markets may also pioneer new business models. For example, electricity could be paid for digitally on a weekly basis. Or cars could be paid for over a mobile app, as is the case in Guangzhou, China, where Alibaba Group and Ford Motor Co have unveiled a five-storey high vending machine for cars.
Turning to the redrawing of supply chains, there are opportunities for companies to position themselves for new trading relationships. How far supply chain reorganisation progresses depends partly on whether the US/China trade war escalates and, to a lesser extent, on the shape of any Brexit agreement. For example, the trade dispute might push some China-based manufacturers to move to countries such as Vietnam and Myanmar 5. Similarly, Mexico may attract new manufacturing plants to access the US market.
The future belongs to the flexible
It’s the treasurer’s job to support expansion into new markets by facilitating financial flows. How can payments be made? How can cash be repatriated? How should liquidity be managed? These can be complex questions. We believe that there are three issues for a treasurer to consider:
Adapting to local markets
It is crucial to operate in line with local practices without compromising global standards. By examining a range of options, it could be possible to align local country requirements with the corporate’s risk appetite, controls and governance model.
Anticipating changing payments practices
As the uptake of e-commerce increases, payments will become both real-time and ever more micro. Firms will need to respond.
Partnering with a committed global bank
To access local markets, the treasurer needs a bank that has in-depth knowledge of local business practices and regulations and is committed to the countries.
Like other economic watersheds, this one is likely to reshape the global economy. For corporates, quickly positioning themselves in tomorrow’s markets will determine their future competitiveness. The treasurer has an important part to play in preparing the corporate to adapt. Financial connectivity and flexibility will be key to long-term success in a diversifying, pivoting and converging world.
 The World in 2030; HSBC Global Research; September 2018.
 India’s Growth Story; World Bank’ March 2018.
 How Hong Kong can be the bridge to the world for mainland China’s green bond market; South China Morning Post; March 12, 2018.
 China’s factories eye southeast Asia to avoid tariff threat; FT; July 20, 2018.