These and other pertinent issues were covered in-depth in the second event in HSBC’s Corporate Treasury Forum series to support Chinese enterprises ‘go-global’ in partnership with KPMG and the Hong Kong Monetary Authority (HKMA). Held in Hong Kong, the event featured insights on market trends, technology driving treasury operations, Treasury 4.0 and transfer pricing considerations for Chinese enterprises and Corporate Treasury Centres (CTCs).
Risk management and regulatory issues are topical for Chinese enterprises going global and HSBC is actively supporting our Chinese clients to navigate their way through complex treasury challenges.
Kee Joo Wong, Regional Head of HSBC Global Liquidity and Cash Management, Asia
Technology such as bots were identified as crucial to drive change. Bots are software-based solutions that perform repetitive tasks independently. Once configured and connected, they are completely automated and only require human intervention in exceptional cases. Besides saving resources, bots can be built within already existing system environments without the need for change to the underlying technology architectures. They are thus vital in supporting the introduction of a treasury management systems (TMS); fraud detection; forecasting of currency and interest rate risks and their hedging strategies.
Besides saving time and money, the advantage of using bots when introducing a TMS is that the treasury team can focus on non-automated processes, such as the conceptualisation and configuration of new systems or the strategic dimensions of using a TMS. It should also be noted that bots do not make employees superfluous but allow them to concentrate on the important things, thus generating added value.
Other topics covered at the event by senior management and experts from the HKMA, HSBC, and KPMG included:
- Treasury’s role and framework
- Impact of technology on treasury operations – Treasury 4.0
- Selection criteria for Regional Treasury Centres set-up including tax and transfer pricing considerations
- Global RMB’s role, offshore RMB liquidity management, RMB currency risk management and market outlook
- Regulatory requirement for Treasury departments
Several Asia-Pacific countries have restricted currencies that limit the extent of cash centralisation because they preclude certain activities, such as pooling. Hong Kong is popular as a regional treasury centre base for Chinese enterprises looking to expand their operations. Apart from a pool of suitably skilled labour, the jurisdiction offers tax incentive packages to encourage corporates to choose Hong Kong as a location for treasury centralisation. Corporates are advised to have a sound understanding of tax and transfer pricing rules to maximise commercial interests – e.g. the potential tax deduction from 16.5% to 8.25% in Hong Kong, as the rules deem certain interest income and other gains as Hong Kong sourced and taxable and allow deductions for interest incurred on certain intra-group lending transactions. The CTC regime provides Hong Kong with an opportunity to compete with other treasury centre initiatives offered in the region, most notably Singapore. A typical Asia-Pacific centralisation model is a treasury centre in Hong Kong or Singapore, accompanied by a Shared Service Centre in India, Philippines or Malaysia.
One attending Chinese technology client said: “We were amazed by the depth and breadth of the topics covered in the event. We were able to deepen our knowledge around treasury management from different perspectives.”
Chinese corporates which are able to take advantage of China Government initiatives such as the Belt and Road Initiative, Greater Bay Area blueprint, and RMB internationalisation strategies, find themselves in a good position to grow outwards. At the same time geo-political tensions and US-China trade wars are issues that cannot be neglected.