HSBC plans to pilot FX netting in China
A small group of banks and corporates in Shanghai and Beijing are involved in the pilot
HSBC is to pilot a foreign exchange netting system in China after getting approval from authorities there – the first foreign bank to get such approval.
The programme is part of the Chinese State Administration of Foreign Exchange’s recently launched Foreign Currency Centralised Management pilot scheme for multinational companies.
This scheme, launched to a group of Chinese and foreign invested multinational companies and banks in Shanghai and Beijing, aims to optimise the management of foreign currency in China. Under this pilot scheme, a number of new solutions such as centralised collection and payment, netting and automated cross-border cash concentration and intercompany lending transactions will be permitted.
The HSBC foreign currency, cross-border netting solution, operated on behalf of a multinational Korean company, enables multinational companies to offset their foreign currency payables and receivables between their Chinese subsidiaries and their netting centres located overseas. This reduces the number of intercompany transactions needed, resulting in lower processing costs and lower currency risk exposure.
This is the second pilot programme the bank has made in China in recent weeks: at the end of December it announced it would pilot an automated foreign currency cross-border sweeping pilot with Intel.
“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 programmes,” said John Laurens, head of HSBC’s global payments and cash management, Asia Pacific. “This new development enables multinational companies in China to maximise their operating efficiency and adopt liquidity management structures that are in line with international practices.”
Netting is a common cash management technique that reduces the number of inter-company payables and receivables transactions and, in turn, the associated costs.
