HSBC and Intel Pilot Foreign Currency Cross-border Sweeping in China

HSBC and Intel have secured approval to establish an automated, cross-border, sweeping structure in China.

They said that the pilot scheme, which aims to centralise foreign currency management for multinational companies (MNCs), will ultimately enable businesses to manage their cash more efficiently by connecting their onshore and offshore cash management structures. This new development marks another step in the ongoing opening up of China as an international treasury centre and a recognised global financial centre.

“It’s critical for treasurers to understand that the opening up of China’s financial infrastructure favourably impacts their ability to manage their cash positions and internal liquidity – in all markets and in all currencies,” said Diane Reyes, global head of HSBC’s payments and cash management division. “If they get it right, it will help deliver earnings per share (EPS) growth and deliver efficient treasury and financial management processes to support revenue growth; get it wrong and companies risk being left behind.”

MNCs sweep their excess cash, held in various major trading currencies from around the world, into one liquidity basket to enhance their return on excess liquidity and optimise their cash management structures. There are exceptions in markets where cash is held locally, which means that it has essentially been restricted. HSBC’s execution of this landmark transaction signifies a shift in the cash management landscape, both in China and globally.

“We are pleased to participate in this pilot transaction and believe that it has tremendous benefits for treasury management as a whole,” said Robert Yenko, treasurer of Intel, Asia. “This development opens up many more options for cross-border liquidity management, which is very important to us.”

The pilot scheme was launched to a small group of selected Chinese and foreign invested MNCs and banks in Shanghai and Beijing. While it is being carefully managed by the Chinese authorities, companies may eventually be able to include their Chinese operations in their liquidity structures and realise the value of their cash.

This is an important step for two reasons: MNCs with operations in China can manage their cash more efficiently because of greater onshore to offshore flow; and this is a crucial step in helping China to establish global financial centres, as it gradually opens up to the rest of the world.

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