HSBC to Pilot Foreign Currency Cross Border Netting in China

HSBC China has become the first foreign bank to secure approval from the Chinese State Administration of Foreign Exchange (SAFE) to implement a foreign currency netting solution for the trade of goods in China; obtained for a multinational Korean customer.

The pilot foreign currency, cross border netting solution enables multinational corporations (MNCs) to offset their foreign currency payables and receivables between their Chinese subsidiaries and their netting centres located overseas. HSBC said the scheme will see companies benefit from a significantly reduced number of intercompany transactions, lower processing costs and lower currency risk exposure. The transaction follows HSBC’s
foreign currency cross border sweeping pilot
announced last month.

“This new development enables MNCs in China to maximise their operating efficiency and adopt liquidity management structures that are in line with international practices,” said John Laurens, head of HSBC’s global payments and cash management, Asia Pacific.

“Given the fast-moving nature of the Chinese market, and the continued liberalisation of regulations, it is essential that international treasurers remain attuned and responsive to change in China in order to capture the opportunities arising from these recently launched pilot programs.”

The new netting solution is part of SAFE’s recently-launched foreign currency centralised management pilot scheme for MNCs. The pilot scheme, launched to a small group of select Chinese and foreign invested MNCs and banks in Shanghai and Beijing, aims to optimise the management of foreign currency in China. Under this pilot scheme, several new solutions such as centralised collection and payment, netting and automated cross-border cash concentration and intercompany lending transactions will be permitted.  

“These developments represent a critical opportunity for companies to unlock additional liquidity and continue to globalise their liquidity position,” said Kee Joo Wong, HSBC’s head of payments and cash management in China. “We have worked very closely with our client in China to design a netting solution which will enable them to consolidate their foreign currency transactions, reduce foreign currency exposure, lower processing costs and improve operational efficiency.”

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