HSBC has introduced a new treasury solution for multinational technology company Philips in mainland China, aimed at simplifying the company’s management of financial transactions.
This solution consolidates numerous intra-group, multi-currency transactions into a single transaction using the yuan (RMB), China’s official currency.
Philips operates nine entities in mainland China and handles over 4,000 intra-group cross-border transactions annually across seven different currencies. Prior to this solution, Philips’ treasury teams manually processed numerous transactions because the global netting structure did not accommodate them.
Yvonne Yiu, co-head of global payments solutions, Asia Pacific at HSBC, discussed the utility of the new system: “Multinationals’ need for centralised and optimised treasury processes increases as their businesses in mainland China grow.
“Through the adoption of our industry-leading solution, companies can greatly reduce the manual processing of their cross-currency transactions, materially lower the cost of each transaction, and vastly improve the visibility and control of their cash flow.
“Furthermore, this solution creates opportunities for overseas entities to transact in RMB, allowing them to achieve greater efficiencies in FX risk management.”
HSBC and Philips achieved this advance after multiple discussions with the People’s Bank of China, resulting in permission to implement the live cross-currency netting solution under China’s free trade enterprise framework.
Benefits
Each month, Philips consolidates cross-border foreign currency payments and receipts from its entities in mainland China into a single RMB transaction, calculated using its in-house bank exchange rate. These transactions are settled between Philips’ domestic netting center (FTE) and the Group’s overseas netting center, streamlining the process for each division with a single RMB settlement.
Kathy Yu, head of treasury for Asia Pacific at Philips, also noted the strategic benefits: “HSBC has been our longstanding trusted advisor as we expand our business in mainland China.
“This groundbreaking netting solution removes many treasury-related pain points, unlocking our onshore working capital, reducing both the volume and the cost of our cross-border transactions, and improving our FX risk management.”
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