Many Chinese Corporates Don’t Understand Cash Pooling, Finds Survey

Only 43% of participating corporates in KPMG’s inaugural Cash Management in China survey said that they use cash pooling, while 57% of those who don’t (33% of total respondents) said this was because they did not understand the concept of cash pooling. Close to one-fifth don’t use it because they believe the administration of cash pooling is too burdensome.

The property and infrastructure sector, which sees more of an emphasis on large capital based projects, is the most common user of cash pooling, with 61.5% of respondents having used entrustment loans in the past. This compares to an average 43% of corporates from other sectors.

Yet overall, the importance of treasury best practice is gaining traction in China. Close to half (48.3%) of respondents said they plan on increasing their investment in cash and treasury management technology. And despite the fact that 90% of respondents believe that Chinese growth fundamentals are still in place and of those who fall into this category, 94.7% also go on to say that their company is going to expand their cash operations in China in the future, many realise that tough times are still to come: 54.2% of respondents expect to see reduced access to finance, while 41.6% have highlighted the risks of increased bad debt exposure in the coming 12 months.

Fergal Power, partner, cash management advisory services, KPMG China, said: “During the global economic downturn, companies with strong and flexible balance sheets appear to have faired better in adapting to and surviving the crisis. Having visibility and control over cash has gained importance in China during this economic climate. As the de-stocking cycle in the US comes to an end, Chinese export corporates will be faced with the need to raise more capital to finance increased trade. The situation has encouraged many domestic companies to adopt best practice cash and treasury management techniques in order to catch up in terms of improving cash management. In the absence of freely available debt, unlocking cash from within the business is key for continued growth.”

Additional key findings:

  • Companies with higher turnovers are more likely to stress test their cash forecasts – 85.7% of businesses with over US$5bn in turnover do so, compared to just 54.5% of firms with turnovers of less than US$500m.
  • Only 55.4% of PRC-domiciled businesses note that cash/working capital management is a component of executive compensation, compared to 77.6% of multinationals respondents.
  • Just over half (53.1%) of respondents whose turnover was less than US$500m note that cash/working capital management is a component of executive compensation compared to 66.7% of respondents whose turnover was more than US$5bn.
  • 60.3% of multinational respondents have completed a working capital improvement programme in China; 70.5% of PRC-domiciled businesses have also done so. On the other hand, of those who didn’t, only 37.3% also described cash flow transparency as such.

The cash management survey involved interviews with 180 multinational and large corporates based in the People’s Republic of China (PRC). Two-thirds were PRC domiciled and one-third were multinationals from across sectors. Respondents had an average turnover between US$500m and US$5bn.


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