Nation to expand cash-pooling service to more MNCs

China's monetary authorities are planning to expand the cash-pooling service of integrating domestic and foreign currency accounts to more multinational companies after one year's smooth pilot operation.

The policy was launched in March 2021 in Beijing and Shenzhen, Guangdong province. The cash-pooling service can unify a group company's domestic and foreign currency accounts, as well as the bank accounts of their subsidiaries, into one primary account, and make currency allocation and exchange more flexible.

By the end of April, the business volume of the five pilot enterprises in Shenzhen had reached $27.96 billion, according to the Shenzhen bureau of the State Administration of Foreign Exchange. These firms welcomed the new financial management channel because it can help save costs, control risk and improve capital efficiency.

"In the past, our subsidiaries had to deal with forex trading themselves respectively and allocate overseas funds within each one's receivable balance, so the quota is limited and more manpower was required. What is more problematic is banks in various locations have very different audit procedures and document requirements," said Xiao Yonghui, chief financial officer of smartphone-maker Transsion.

The Shenzhen-based company provides some of the most popular smartphone brands and applications in Africa and has set up several manufacturing and research centers across the globe, resulting in a large demand for frequent cross-border currency exchange and transfers.

"After 90 percent of our subsidiaries join the integrated capital pool, we can deal with all of their tradings through one primary account, using the same set of processors and saving a lot of paperwork and labor," Xiao said.

"The time needed for cross-border transfers is shortened from days to just minutes, and related staff who do the work is reduced by about 45 percent," he added.

In addition, the executive said that the quick transfer empowered the firm to invest funds in financial products with higher interests that are timely for them to handle.

Yan Hongbo, general manager of the finance management subsidiary of Chinese television maker Skyworth Group, agreed and added, "The policy allows us to choose the time and amount of purchasing foreign exchange at will within a certain limit so we can adjust financial plans according to the factor of exchange fluctuation, thus further reducing exchange costs."

Yan said 70 percent of the group's subsidiaries have been included in the group's primary account, which carries more than 95 percent of its total cross-border settlement business.

"Taking the opportunity of the account integration and upgrading, we streamlined our financial management system and our international development ability has achieved great improvements," he added.

Fan Linyao, vice-general manager of the Global Transaction Banking Department at Shenzhen Branch, Bank of China, said the innovative arrangement also helps alleviate management burdens for banks.

The authorities are planning to expand the service to more multinational companies with relatively high credit ratings and continue to help the local companies to go global, Fan added.

Meanwhile, she mentioned they are also pushing forward the digitalization of the integrated capital pool management step-by-step in hand with pilot enterprises.

She said that during the week in March when most employees were required to work from home in Shenzhen to contain the epidemic, the volume of Transsion's financial activities continued and even exceeded the total of the previous two months, thanks to digital upgrades.