Treasury trends in Asia: ‘The road ahead for treasurers’

Regulation across Asia, and beyond, is having a profound macro-level effect on corporate treasury activities. In parallel, the ongoing drive for efficiency is triggering some significant changes in the location and deployment of treasury and shared service centres. Mark Troutman, Regional Head of Sales of Global Payments and Cash Management for Asia-Pacific, and Yvonne Yiu, Acting Head of Global Payments and Cash Management for Asia-Pacific, at HSBC, discuss some of the most significant trends in the Asia-Pacific region from the perspective of corporate treasurers who are responding to them.

Trends - Bridge

China liberalisation and Basel III

Clearly, China's progressive liberalisation of its policies relating to its home currency, renminbi (RMB), and foreign currency is an important development[1], and opens new opportunities for corporate treasuries. The recent announced changes bring China a step closer to major western markets with regards to liquidity optimisation by virtue of the relaxation of the rules which apply to intercompany loans, pooling and use of surplus cash. On the efficiency side, the changes open the door to further centralisation of payables and receivables, together with utilisation of such techniques as intercompany netting. This liberalisation is highly important for corporate treasury, but the significance is further enhanced by the significant change in the treasury environment: Basel III[2].

At present, the implications of Basel III for corporate treasurers are unfolding for individual organisations. It is still unclear when, and what, the precise impact will be on different jurisdictions and the interpretation of the provisions of Basel III on banks. For instance, some countries are making faster progress than others in adopting the principles in their local jurisdictions. There is also some variation with what various markets are doing to comply with certain countries' legislation. Some countries are actually exceeding the Basel III guidelines. At the same time, the effect of the regulations on individual banks will vary due to factors such as the funding model they utilise, size and international scale.

Nevertheless, at a high level Basel III will likely reduce the availability of bank liquidity to borrowers, and costs will be increased. On the investment side, it is anticipated to reduce the attractiveness and returns available on certain types of shorter term deposits. Looking specifically at China the timing of regulatory changes is opportune. Corporates, with China operations that have surplus cash, will have the opportunity to reduce the cost of their borrowing. If they are already in surplus elsewhere, they may find it possible to place a higher percentage of their liquidity in longer term instruments that are more likely to attract a better return.

Being precise as to which corporations will fall into which category is not easy. However, it seems probable that much will depend more upon the industry type than corporate size. Capital-intensive industries, such as chemicals, are more likely to fall into the former category and be seeking to use any China surpluses to minimise borrowing costs, while more cash-generative industries such as technology will be looking for opportunities to maximise returns on surpluses.


RMB rising

Asian treasuries have many priorities in common with their counterparts in Europe and the US, yet there are a number of notable differences. Renminbi internationalisation is unsurprisingly a major focus for Asia corporations, based in locations such as Hong Kong. By contrast US treasurers, without significant surplus cash or funding needs in China, remain uninterested.

However, we anticipate that this will change over the next year or so driven by the efforts of Chinese banks actively promoting the renminbi in overseas markets[3]. These banks have been expanding their international franchises to follow their corporate clients overseas. While major international banks have been offering renminbi services for several years, Chinese banks are prompting a growing number of domestic/regional European and US banks to develop their own RMB services and propositions. Meanwhile, the renminbi’s rise as a trade currency continues unabated. The latest SWIFT statistics show that over the past two years, RMB payments worldwide have nearly tripled in value[4]; though still some way behind USD, EUR, GBP, the increase in the rankings in that period is significant.


Intra-Asia developments

Turning to the wider Asia market, there are signs that developments in China may be having an effect on other Asian countries in terms of ‘competitive deregulation’. For instance, Malaysia has introduced various tax incentives for treasury management centres. Qualifying locally incorporated businesses can benefit from measures such as a 70% tax exemption for 5 years on treasury management service income outside Malaysia and a withholding tax exemption on interest payments to overseas banks and related companies[5].


Further, while governments, in countries with high regulatory barriers, may not necessarily be able to respond quickly in this context, there are clear signs of a more general response to the increasing collaboration amongst the forthcoming ASEAN Economic Community among both members and non-members.

Governments, in markets such as Vietnam, are trying to adjust their policies to attract more Foreign Direct Investment (FDI) and project a stable political environment. Vietnam, in particular, is focusing on building the economy by encouraging inward investment: as of 20 July 2014, Vietnam had 16,813 FDI projects with total registered capital of over USD242.4 billion[6], compared with approximately 800 projects and USD450 million 10 years earlier[7]. Other countries are also making progress. Indonesia saw 2013 FDI inflows hit 2.7% of GDP[8], more than any other ASEAN country, while Thailand's 2013 FDI jumped 21% year on year[9].

Mauritius is an interesting example of a country seeking to attract investment, with the government being an earlier mover in establishing taxation treaties with neighbouring countries. This has had the effect of attracting investment into a number of different markets but with the flows being routed through Mauritius. To date treaties have been agreed with Sri Lanka, Bangladesh and India, as well as many African countries where there are additional investment asset protection treaties with 37 African countries[10]. In this way Mauritius is now positioned as an efficient gateway to Africa for international investors.

Some other markets are making similar changes in order to attract investment within the Asia region. At the same time as creating Foreign Portfolio Investors aid to FDIs, the Indian government is also making changes to its financial infrastructure to increase efficiency: a focus that is designed to be attractive to treasurers. Financial inclusion and the reduction of the cash economy are the primary objectives here. However, more extensive support for electronic payments will also encourage a migration from cheque-based payments for suppliers, which will reduce both direct and indirect transaction costs and risk.



At the heart of a treasurer’s need for good cash management is visibility, ideally through a standardised platform, with good connectivity to core its accounting system(s). So, another advantage of improvements to payment infrastructure changes is enhanced financial visibility. Perhaps unsurprisingly, a significant number of corporate treasuries, including those in large companies, are still collecting cash positions from operating units and subsidiaries in spreadsheet form on a weekly or biweekly basis. As underlying payment infrastructures improve, real-time cash position data becomes more easily achievable.

Seen through another lens, in the case of some larger Asian corporates, technology changes are playing a key part in addressing visibility. At a recent HSBC workshop for corporate treasurers in September 2014, all of the treasury attendees reported that their corporations had financial transformation programmes underway, typically including the adoption of Enterprise Resource Planning (ERP) systems. An ERP represents a major investment, one made actively by US and European corporations over the past 10 or 20 years. Asian corporates now have an advantage in that they can implement the latest state-of-the-art technology in a more cost-effective and streamlined manner. The major factor behind this advantage is a relative lack of ‘legacy baggage’, in terms of both technology and processes. This means financial transformation projects, that might have taken a large US corporation significant time to complete, can be executed by a comparable Asian corporate more quickly.

The visibility that both of these developments are providing to Asian companies will transform corporate treasuries’ ability to manage risk.


Treasury and shared service centres

Although payment infrastructure improvements, and RMB internationalisation, are newer trends to which corporate treasurers are increasingly attuned, one trend remains constant – process centralisation. A new ‘Global Disbursements’ angle to this exists now and is being explored by companies across a variety of industries to increase the efficiency of their accounts payable processes. The concept is to use the same basic internal, infrastructural process across a number of countries for transmission of payments, irrespective of value, currency or country. More advanced corporate treasurers look to optimise and leverage their global banks' infrastructure. Again, China's relaxation of regulation is a factor, as the most recent changes will effectively enable Payment On Behalf Of (POBO) and Receipt On Behalf Of (ROBO) practices in renminbi.

This trend is also driving the continued evaluation of the best locations for shared service and treasury centres in Asia where a conclusive regulatory environment is a key factor. As a Shared Service Centre (SSC) is primarily a cost of labour and economies of scale play, even some locations in China are seen as costly. For instance, Shanghai is no longer regarded as inexpensive for SSCs, when compared with emerging cities such as Chengdu, where some western multinationals (such as HP and Honeywell[11]) have moved their back offices. However, for non-Chinese companies that have smaller operations in China relative to their other Asian activities, locations such as India, Malaysia, the Philippines, or more recently Sri Lanka, may be better placed to provide the process centralisation desired.

For treasury centres, Singapore still remains the leading location. However, if Chinese regulations continue to evolve in the same direction, over time, it will be possible for a treasury centre based in China to cover Asia, rather than to just cover domestic operations onshore. In the medium term, this will enable cities, such as Shanghai, to compete effectively with Singapore as a treasury centre location.

While SSCs have seen comparatively low adoption rates among large Chinese corporates, treasury centres are a growth area. In the case of larger Chinese corporates, the trend appears to be the use of Hong Kong for international treasury; these companies' global treasury operations still sit in China but are essentially domestic in nature.

One of the more interesting recent treasury trends, among Chinese corporations is their implementation of treasury operations in Mauritius. As mentioned earlier, Mauritius has completed various double taxation treaties and signed asset protection schemes with numerous African nations. This has encouraged an appreciable number of Chinese companies to register entities in Mauritius and to invest in Africa from there. This is particularly true of Chinese mobile phone technology companies who now have some trading operations there to which they have also moved some of their domestic staff. An additional attraction is that Mauritius is well-serviced as regards to professional services, with a broad range of legal and tax advisers available.



A combination of regulatory change, and a desire to attract inward investment, makes Asia both a highly demanding and a highly rewarding environment in which to operate. The changes to various regulations will take corporates time to research and understand how they would apply to their particular business, whilst the lack of clarification on a number of topics may result in some questions remaining unanswered until further regulatory updates are provided. Approached in the right manner, these changes present global treasurers with an opportunity to make a positive impact on their companies’ business and treasury activities.

The liberalisation of policies in China, which is having a knock-on effect across the region, is enabling corporates to make better use of their cash balances. These funds can then be used to minimise borrowing costs, maximise returns, or as an internal funding engine for future growth.

The advancement in technology, both within the banking industry and within corporates own back-office systems, means that real-time global visibility is now a possibility. By leveraging these developments, cash positions can be fully automated and integrated into an ERP system, whilst eliminating manual efforts, saving costs and improving risk management.

The ongoing drive for efficiency, which has process centralisation at its heart, should lead corporates to consider the establishment of a regional service centre. Centralising accounts payable processes and utilising intercompany netting techniques can generate considerable savings through leveraging the lower cost of labour and maximising economies of scale.

With so many positive regulatory developments, and the increase in the number of locations offering incentives for deploying regional service centres, for those corporate treasurers willing to embrace the challenges within the region, there has never been a better time for corporate treasurers to enter the next phase of their treasury journey.


[1] For more information on the liberalisation of China’s policies, see “The evolving regulatory environment in China”, Nicole Lin, p1-5

[2] For more information on Basel III, see “Basel III, liquidity and value creation”, Tom Schickler, p6-8

[3] “The rise of the redback II”, Qu Hongbin, Sun Junwei, Paul Mackel, Wang Ju, March 2013

[4] “Global adoption of RMB grows by 35 percent”, SWIFT, September 25, 2014,








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