China Awards

China's transaction banking awards of 2019

As part of our China Awards series, FinanceAsia reveals the rationale behind the awards for Best Transaction Banks and Solutions this year.

To decide our winners for this coveted category, we launched a unique joint research initiative with East & Partners Asia. This involved East & Partners Asia in directly interviewing more than 1,200 corporate treasurers and CFOs across the Asia Pacific region.

FinanceAsia and Corporate Treasurer focused in on both scale and overall service quality in China during the review period of July 1, 2018 to June 30, 2019.

The winning solutions reveal excellence in good treasury management:

Best Transaction Bank: ICBC

Best Corporate FX Bank: Bank of China

Best Cash Management Bank: ICBC

Best Trade Finance Bank: ICBC

Best Treasury & Strategy Solutions

CSPC / C2FO: Automated invoice discounting platform to support CSPC’s suppliers working capital management strategies

Established in 2000, CSPC is a 50:50 petrochemicals joint venture between Shell and China’s CNOOC. It operates a petrochemical complex (known as Nanhai) in the Daya Bay Economic and Technological Development Zone in the Guangdong Province which began operations in 2006.

CSPC was looking to improve financial returns from temporary surplus cash. When CSPC first learned about C2FO, it offered up two key benefits to the company: financial benefits gained from discounted invoices offered by its suppliers and CSPC’s funding costs; and an automated web-based platform which requires minimal work on behalf of both client and suppliers.

In the past, CSPC offered early discounts to suppliers under a labour-intensive system that required case-by-case approval and manual adjusting of discounted amounts, resulting in few transactions getting signed off.

This is when it opted to work with C2FO, a technology vendor that offers an open marketplace where suppliers can list approved invoices at discounted rates in order to receive early payment to ease working capital concerns. Buyers, in turn, get some savings that boost the balance sheet while also reducing days payable outstanding metrics.

Under the new system, CSPC has been able to extract a host of additional benefits.

First, it is able to enhance its relationship with small and medium-sized suppliers without any additional costs and by ensuring that key suppliers do not suffer major liquidity squeezes.

Second, the C2FO platform also acts as an indicator of market liquidity. Strong demand for early payment may indicate when liquidity is getting tighter, a useful data point for treasurers to have. 

In August, C2FO obtained fresh funding worth $200 million from Softbank’s Vision Fund. That injection comes 18 months after it received $100 million in private capital from a group of investors that included Singapore’s government-owned venture capital firm Temasek.

 

TCL / Standard Chartered

TCL Corporation is a Chinese consumer electronics company, primarily engaged in the manufacturing and distribution of electronic and telco products, as well as internet application services. It serves markets in more than 160 countries and manages approximately 75,000 employees worldwide. TCL has more than 50 banks on its books.

Global expansion always comes with teething pains. Treasury management outside China became decentralised, processes were non-standardised and, at the group level, it had limited visibility and control over its cash positions.

TCL decided to set up a regional treasury centre (RTC) in Hong Kong to re-assert control over its global operations. The centre would centralise liquidity and, in doing so, would improve visibility and control over cash balances.

The Chinese manufacturer mandated Standard Chartered to support its vision. The solution was to ensure that payments and collections were executed by TCL’s in-house bank through centralised clearing accounts on behalf of subsidiaries.

This was, in part, managed through the creation of a single currency master account linked to a series of sub-accounts that could be managed online – allowing for more immediate fund allocation, through sweeping, and faster reconciliation. It also allows for interest to be earned on an aggregated basis and for a redistribution of interest of sub-accounts.

Inward collections are made into the sub-accounts from the subsidiaries. The sub-accounts are tied to the master account which allows greater visibility and control from TCL’s main treasury unit. The unit has full control to sweep between master and sub-accounts.

“Cash is king in every business… In a global business, TCL has to manage foreign exchange volatility and pooling of cash across multiple jurisdictions,” said Maggie Li, chairman of TCL Finance. “The RTC provides the right platform for TCL to achieve centralisation of treasury and risk management so that each business group can focus on their own operations with all treasury processes supported by it.

 

GLP / DBS: API-based real-time payments strategy for suppliers, balance and account range enquiries

GLP is a provider of modern logistics facilities with more than $60 billion in assets under management across real and private equity. It owns or operates almost 3,000 completed properties within 1,200 logistics parks across the world.

In 2016, GLP established a supply chain financial service company – GLP Financial Service (GLP FS) – with the intention of setting up a supply chain network with its partners and suppliers. Given the large number of buyers and suppliers with which it works, oversight of its payments practices is critical and extremely time-sensitive. The company needs to check for receipt of funds before it can release goods.

As such, GLP was keen to change its paper-intensive processes and find a digital solution using application programming interface technology to improve efficiency while enabling near-instant payment but controlling the risks.

Working with DBS, GLP connected to the bank’s IDEAL Connect host-to-host solution to enable the logistics company to centralise its daily finance operations within its own ERP system.

For example, a buyer orders fresh produce to its supplier through its internal system. GLP informs the buyer’s supplier to deliver to GLP’s warehouse and make a payment via API (DBS IDEAL RAPID). The buyer is notified that the goods have arrived and it then makes payment to GLP, again via API. GLP finally delivers to the buyer upon receipt of payment.  

“With DBS’ help, cutting-edge technologies have been introduced into daily operations, document processing has become more efficient and order processing faster,” said Ellen Yang, treasury head of GLP.

“While guaranteeing the accuracy, we have been relieved from the tedious processes of off-line reconciliation and account cancellation. We get to check the balances of our accounts on-line on a real-time basis, thus saving a heavy load of time and energy,” she added.

 

Suning.com / DBS: Streamlined supplier payments onboarding service

Suning.com is a Fortune 500 Chinese company which operates a B2C e-commerce platform and operates more than 5,000 physical stores in Greater China and Japan.

It also had some key treasury and cash management demands.

Suning needed to improve its cash conversion cycle and to improve supply chain management operations. It also required supplier credit terms to match its cash conversion cycle, to better its trade conversion cycle and to limit its trapped inventory days. To do so it was prepared to finance its suppliers’ account receivables, improving their cash flow while improving key suppliers’ relationships.  

It had also more recently launched Suning Commercial Factoring, a subsidiary focused on providing accounts receivables (AR) services. As such, the company was keen to build up its assets and compel any AR financing conducted to the factoring business.

Working in partnership with DBS, a supplier payment services solution was found that onboards suppliers efficiently. Suning provides DBS with a recommendation letter containing preferred suppliers and basic bank account information. The letter will allow those suppliers – both those based in China and abroad – to join the payment programme without any further paperwork. This contains an unadvised facility to support early payment requests. No corporate guarantee was required from Sunning.

A bespoke re-factoring tool was also created. Where Suning Factoring purchases ARs from Suning suppliers and, assuming they are happy to do so, DBS can purchase those ARs from Suning Factoring.

As was required, the supplier payment services improved suppliers’ cash flows, it positively affected its supply chain and provided a single focal point in DBS to manage payments.

"DBS provided us with a very efficient way to onboard suppliers for supply chain financing… I was [also] impressed by DBS’ quick action in responding to a client’s new request,” said Suning Factoring chief financial officer Shi Minfei.

 

The Schindler Group / DBS / SWIFT: A multi-currency account handling domestic and cross-border payments strategy with enhanced tracking ability

The Schindler Group (Schindler) designs and manufacture elevators, escalators and moving walkways. It has more than 1,000 branch offices in more than 100 countries including production sites and research and development facilities in the US, Brazil, Europe, India and China, of which the last accounts for a significant portion of global sales.

In step with many within its peer group, Schindler’s treasury management team wanted to get to grips with its bank account management, reducing the number it was operating both to save on costs and to reduce risks. Cross-border payments from China were also a concern given the large volumes of paper-based supporting documents which slowed the actual payment delivery itself.

Schindler opted to work with DBS and SWIFT to find a pragmatic solution. The company now uses a single multi-currency account which is able to handle both domestic and cross-border payments and collection in 11 major currencies.

For collection, the buyer only requires details of this one account number to make the payment to Schindler, irrespective of currency. In turn, Schindler is not required to conduct FX conversions if it hasn’t opened an account in the currency of the received funds. This is because the funds will automatically be credited in a new foreign currency wallet that sits within the multi-currency account. When it comes to payments, Schindler can decide which wallet it wishes to use.

The company is also able to use a digital solution to make cross-border payments allowing payment instructions and regulatory documentation to handle online.

The SWIFT portion of the solution is tied to the payment cooperative’s global payments innovation service. This allows Schindler to track cross-border transactions in near real-time and provides much-needed confidence that its suppliers are getting their payments in an orderly manner.

As Schindler manager Dean Wu said: “We have been able to save considerable time and effort in a process that would have otherwise been extremely manual and frustrating.”

 

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