Treasury Verdict China

Transcription

1 Sponsored by Treasury Verdict China The viewpoint of corporate treasurers on up-to-the-minute issues. INTRODUCTION Treasury Verdict is the electronic voting and panel discussion held at EuroFinance events worldwide. This report is based on the votes of corporate treasury professionals, bankers and other vendors and advisers who attended EuroFinance s 12th annual conference on Cash, Treasury & Risk Management in China, held in Shanghai, on 18 and 19 vember KEY FINDINGS Nearly four in every 10 treasury and finance professionals in China () feel more confident about their business prospects in the next year. This makes treasurers in the region marginally less positive than recent polls of their peers in Southern Africa (46%) and Europe (41%), but more positive in terms of business confidence than their peers in Brazil (28%). [Question 1, see Global Context below] Over three-quarters of Chinese treasurers (77%) believe that their cash visibility will improve in [Question 3] Approximately two-thirds of treasury and finance professionals in China (66%) say that they expect to spend more time on compliance in 2015 than they have done in [Question 4] Topic: Current issues facing treasury and finance professionals in China Date: 18 vember 2014 Location: EuroFinance s 12th annual conference on Cash, Treasury & Risk Management in China, held in Shanghai Respondents: Senior treasury and finance professionals of domestic and foreign-owned multinational companies operating in China Commentary was provided by the following panellists: Xizhen Wang, Chief Executive Officer - China, Euler Hermes, China Indrajeet Maitra, Head of Cash Management, Transaction Banking Asia, BNP Paribas, China David Blair, EuroFinance Tutor & MD, Acarate, Singapore (conference chair) A big majority of Chinese treasurers (82%) say that they are not looking at the cloud for treasury. [Question 9] Page 1

2 RESULTS BUSINESS & ECONOMIC CONFIDENCE 1. Compared to last year, do you feel more confident about your business prospects in the next year? Same 34% 27% Some of our customers are still feeling positive, but are moderating their targets slightly lower, maybe 10% down but still optimistic. It is a mixed bag. Manufacturing and auto companies are likely to be feeling optimistic. However, the real estate and commodities industries are not faring as well. From the quiet confidence that Chinese corporates demonstrated at this event last year, there has definitely been a cooling off. Considering this, I think feeling more optimistic is frankly a good number. 2. Compared to last year, do you feel more confident about China s economic prospects in the next year? Same 24% 53% The recent news about a GDP slowdown seems to have shaken people up. In this room last year, the outlook was 48% positive. We are predicting a reduction of GDP growth from 7.4% to 6.8%. This is still quite good given the size of the Chinese economy, but when you are used to a growth rate of over 7.5%, 6.8% does look like a cooling off. There has been an increase in the amount of overdue payment situations in China. This makes a change - even during the economic crisis this was not seen in China. We saw this starting in the second half of last year, and it has really increased in Economically China is still in a comparatively strong position compared to other regions. However, for individual corporates there are increasing defaults. CASH VISIBILITY 3. Will your cash visibility improve in 2015? 77% When it comes to how many of your goods are stuck in the sales conversion cycle, I can t honestly see that improving. However, the ability of banks to showcase the cash that the corporate is holding across the various banking entities has developed hugely. Demand for cash pooling is on the rise, and you cannot do cash pooling without full visibility, so this is a driver for improving visibility over cash and cash flows. This can depend on the type of corporate that you are talking about - is it foreign owned, a joint venture, state owned or a private company? The sector a company is in can also influence the visibility it is able to achieve. Page 2

3 REGULATIONS / COMPLIANCE 4. Do you expect to spend more time on compliance in 2015 than 2014? 34% 66% 5. Do recent regulatory changes make it more or less likely that you will use the Shanghai FTZ? More Less t applicable to me 20% 41% We have internal controls and auditing processing, and even these are taking more time. Companies that are largely domestic, for example in the cement sector, are under one regulator within China. Overall they may face a little more of a burden but I don t see them being too concerned by this. However, other companies that operate in industries with large imports and exports, such as aviation and shipping, face challenges. Companies with exposures to the US dollar, or to Russia, for example, may have to spend a huge amount of incremental time working on this. The result at the International conference in Budapest a month ago was even higher, with 73% of treasurers expecting to spend more time on compliance next year. We are looking at the benefits to Chinese corporates that the FTZ as an international trading centre will have, such as greater international servicing from banks. However, we are still waiting for greater details around that. Talking to our corporate clients, some are already opening operations here and are positive that they can benefit from how the FTZ allows them to operate. But it is only just starting. Given the way that the compliance regulations are effecting the US dollar, corporates that were on the fringe of invoicing in RMB may now take a front seat here. It could also impact the way that corporates use cash pooling to make it seamless, particularly with intercompany flows. TREASURY DEPARTMENT GROWTH / RESOURCES 6. Will your treasury department s resources be measurably bigger in 2015 than 2014? 63% 37% This is a trend that we have seen for a number of years - sales teams are increasing, other resources are increasing, but the finance and treasury departments are generally not getting that sort of support. This could perhaps lead to even more centralisation and more of an accent on systems. If they make the sales budget target more moderate then the costs would also be moderate. In Budapest only 25% said yes, so perhaps there is a little more investment in China than in Europe. Page 3

4 SUPPLY CHAIN FINANCE 7. Is treasury the main driving force for your SCF Programme? t applicable to me 38% There are a variety of SCF programmes to consider which can influence this answer. Apart from the logistics, this can also depend on the key performance indicators of the treasurer. If a treasurer s KPI is net finance charges, there is a way they will look at the SCF. But if you go to the marketing finance team, who are pushing the channel and increase sales, they look at it in a very different way. It is a different ball game for different corporates. Initiatives like this may originate from treasury, but often it will be managed jointly by the treasurer and then the credit team or the sales manager, for example. It is not just a treasury issue. BANKING RELATIONSHIPS 8. Do you know how much share of wallet each of your key relationship banks has? 48% 52% Multinational corporates have a very clear view on their banking relationships and on the wallet share. If you look at deposits, if you had a good local relationship then you could get the deposit. But increasingly there is a format that if you are part of the banking group then you could bid for the deposit, but if you are not part of the banking group your chances are significantly diminished, even if you have a good local relationship. Counterparty risk management is much more centralised. INTEGRATED TREASURY / TECHNOLOGY 9. Are you looking at the cloud for treasury? 82% 18% Regulators are increasingly sceptical of data moving from one point to another, and this isn t limited to the issue of data secrecy. Location of data is a big issue. Cloud vendors will draw up contracts so that you can specify that your data is in China, or in Germany, for example. We don t really use this for treasury. Our sales teams may use the cloud for cross-selling, but it isn t applicable for treasury at the moment. Technology companies do technology better than anyone else, so those voting no may want to consider that someone like Amazon web services probably has better security and more regular updates and patches than your own IT department. Page 4

5 10. Can you run your treasury from the beach? 54% 46% The result was more the other way around in Budapest. Perhaps the result depends on the weather where we are when this question is asked. The question that comes to my mind is if I go to the beach, do I want to do treasury? GLOBAL CONTEXT ABOUT EUROFINANCE EuroFinance has recently run Treasury Verdict sessions in Brazil (São Paulo) on 12 vember 2014, Southern Africa (Johannesburg) on 11 vember 2014 and at its flagship international conference in Budapest on 16 October To see these results please go to: /treasuryverdict EuroFinance is the leading global provider of conferences, training and research on cash management, treasury and risk. Running more than 50 events worldwide, EuroFinance enables treasurers and CFOs to exchange innovative strategies, best practice and expert opinion. EuroFinance has a unique insight into the trends and developments in cash management and treasury, and an unrivalled global viewpoint. EuroFinance is an Economist Group business. COMMENTS OR FEEDBACK? Have your say on the EuroFinance LinkedIn page or our editorial team at editor@eurofinance.com Copyright 2014 EuroFinance Conferences Limited Disclaimer: While every effort has been taken to verify the accuracy of this information, EuroFinance Conferences Limited does not accept any responsibility or liability for reliance by any person on this information. Page 5