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  • China Corporate Treasury Benchmarking Study 2012

    research | insight | analysistreasurytoday

    in association with

    treasurytoday.com/benchmarking

  • Bank of America Merrill Lynch is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking afliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking afliates of Bank of America Corporation (Investment Banking Afliates), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., all of which are registered broker-dealers and members of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. Investment products offered by Investment Banking Afliates: Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed. 2011 Bank of America Corporation

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  • Ivo Distelbrink - Head of Global Treasury Services, Asia PacificIvo Distelbrink is a Managing Director and Head of Global Treasury Services (GTS) in Asia Pacific. Based in Hong Kong, he is responsible for developing and executing the integrated strategy for the full end-to-end regional treasury business in Asia Pacific, including treasury and trade sales, treasury product solutions, trade and supply chain finance, fulfilment and service, technology and operations and product innovation, development and management. He was named Treasury Cash Management Banker of the Year at the Asset AAA Asian Awards for 2012. Distelbrink also plays a leading role in delivering an integrated global corporate banking plan in conjunction with all his debt, FX and other partners, for building market share in the region. Prior to joining the company in March 2010, Distelbrink had an extensive career at Citibank, where he held various senior positions including Business Head of Treasury and Trade Solutions in Asia Pacific and Japan, Head of Client Sales Management for Treasury and Trade Solutions in Asia Pacific and Japan, Head of GTS in China, CEO and Head of Corporate Banking for Citibank in New Zealand, and COO and Head of Strategy and Planning for Citibank in Brazil. He has a Master of Science degree in Business Administration from the Rotterdam School of Management at Erasmus University. He specialised in international finance at the Graduate School of Business Administration, the University of Michigan, Ann Arbor USA.

    FOREWORD

    Ivo DistelbrinkHead of Global Treasury Services,

    Asia Pacific

    Bank of America Merrill Lynch is proud to sponsor the 2012 China Corporate Treasury Benchmarking Study facilitated by TreasuryToday in China. Now in its fourth year, the survey provides a highly relevant snapshot into the ever-evolving China treasury space, focusing on a diverse range of issues including risk management, supply chain financing, technology and the changing nature of banking relationships. As an organisation, we value the honesty and integrity of the responses and take into consideration the findings and how to best apply the same to our strategic priorities for 2013. I would like to offer my gratitude on behalf of Bank of America Merrill Lynch to all corporates who responded.

    Bank of America Merrill Lynchs footprint spans the Asia Pacific region, with more than 8,000 professionals providing a comprehensive range of products and services. With more than 60 years of experience in the region, Bank of America Merrill Lynch delivers unrivalled solutions with the focus of a local banking relationship and the strength of a global leader. Our Asia Pacific-based client coverage and product professionals, work together to leverage Bank of America Merrill Lynchs global strength to meet clients comprehensive needs including treasury management, trade and supply chain, capital raising and M&A advisory, FX and risk management, investment management and leasing.

    treasurytoday November 2012 | 1

    Bank of America Merrill Lynch is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking afliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking afliates of Bank of America Corporation (Investment Banking Afliates), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., all of which are registered broker-dealers and members of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. Investment products offered by Investment Banking Afliates: Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed. 2011 Bank of America Corporation

    The freedom to see your position

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    CashPro Mobile makes the world your ofce. Providing anytime, anywhere access

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    The power of CashPro to go.

    Taking your opportunity further.

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  • Contents

    3 Introduction

    4 Executive summary and major findings

    6 Respondent profile

    8 Treasury priorities

    9 Key performance indicators (KPIs)

    10 Bank relationships

    12 Counterparty risk

    13 Foreign exchange

    14 Investment policy

    15 Credit

    16 Risk management

    16 Supply chain finance

    17 Technology

    19 China specifics

    20 The future

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    treasurytoday.comNovember 2012

  • IntroductionTreasury Today continues to strive for excellence, providing unbiased insight and analysis of the emerging trends in treasury and best practices being deployed around the globe. We continue to gather rich data from a diverse range of companies and this years China Study is no exception. We are, therefore, delighted to be publishing this fourth Report on the comprehensive findings from the China Study in association with Bank of America Merrill Lynch.

    This Report builds upon the Benchmarking Studies we conducted in 2009, 2010 and 2011 and includes an entirely new Section on Key Performance Indicators (KPIs). The Study again covers a broad array of subjects from bank relationships, credit and risk to supply chain, foreign exchange and technology.

    These results provide a useful barometer on what is going on today and a helpful view on the treasury landscape of tomorrow.

    China is facing the challenge of maintaining strong growth as the world economy verges on recession. With exports forecast to decline as western nations address their debt obligations and the Eurozone continues on its uncertain journey to recovery, companies operating in China have a difficult road ahead. A more intraregional or even domestic approach to growth is now on the cards and such strategies pose additional and potentially different challenges to the corporate treasury function.

    Nevertheless, with the internationalisation of the renminbi, regulations becoming more business-friendly and the country wholeheartedly embracing best practices, the future looks extremely promising.

    We would like to express our sincere thanks to the many corporates who responded to this Study and we would, of course, welcome any feedback from you, our readers.

    About usTreasury Today is an independent publishing house and the leading provider of treasury information. We supply reliable, well-researched information to senior finance personnel including CFOs, Finance Directors, Corporate Treasurers and other treasury practitioners.

    We have been writing about treasury for well over a decade, making us one of the most trusted treasury publications. This positions us perfectly to conduct this fourth China Corporate Treasury Benchmarking Study in association with Bank of America Merrill Lynch.

    Our thanks go to the corporate respondents without whom the survey would not have been possible.

    About the StudyThe combined online, telephone and paper dual-language Study was conducted between May and September 2012. The Study attracted just over 170 responses from companies across China from a diverse universe in terms of size, industry and company structure.

    This Report includes many of the exact comments made by respondents where they were invited to offer additional comments. These quotes are anonymous in order to respect confidentiality.

    Read more at treasurytoday.com/benchmarking

    treasurytoday November 2012 | 3

    China Corporate Treasury Benchmarking Study 2012

  • Executive summary and major findingsThis Study was conducted at a time of continued economic turbulence around the world, uncertainty surrounding the Eurozone, its future make-up and potential impact on China, and pressure on oil prices. Nonetheless, the Study attracted just over 170 responses with a good mix of industries, company structures and size represented.

    The key findings are summarised as follows:

    Treasury priorities

    It appears a back to basics approach is the way the majority of treasury functions are viewing their priorities with cash management and cash pooling structures at the top of the list of priorities.

    Unsurprisingly bank relations and banking group organisation comes second with regulations and compliance next on the list.

    These findings are consistent with the Studies we have conducted in Europe and the Asia Pacific regions.

    Key Performance Indicators (KPIs) The 2012 Study includes a specific Section on KPIs and

    the following table identifies the top measure deployed under each of the key treasury disciplines listed:

    Treasury discipline Number one KPIOverall treasury efficiency. Cash pooling structures.

    Core cash management efficiency. Cash pooling structures.

    Working capital management. Days sales outstanding.

    Liquidity management. Cash flow forecasting accuracy.

    Risk management. Value-at-Risk (VaR).

    Funding/balance sheet management. Net interest expense.

    4 | treasurytoday November 2012

  • Just 8% of respondents said they use scorecards to measure their banks.

    Bank relationships The importance of bank relationships has increased with

    the following points worthy of note:

    Service quality is again the most important factor, carrying the highest number of very important responses at almost 80%. Price has just leap-frogged credit, geographic footprint and relationship.

    The majority (58%) have increased their banking partners. Just 3% say they have decreased the number of relationships.

    72% say the purchasing department has no involvement or influence in the cash management bank selection process.

    Counterparty risk Unsurprisingly, given the current economic climate, almost

    a third of respondents say their focus on counterparty risk has increased over the past year.

    When it comes to assessing counterparty risk, the ratings agencies reports are the most popular measure used to control counterparty risk.

    Foreign exchange Price carries the highest number of very important ratings.

    Telephone remains the preferred communication channel when obtaining multiple bids.

    Investment policy It is no surprise to see security, liquidity and counterparty

    rating as the factors carrying the highest number of very important mentions.

    Vanilla bank deposits are by far the preferred method of investing surplus cash.

    Credit Last year, 63% of respondents said pricing had increased.

    This year, that number has reduced to 34%. 45% said pricing has remained the same.

    28% said it is easier to get credit and 33% said it is more difficult. Therefore credit conditions are still difficult, but not compounding to the extent that some might think.

    Risk management Credit and counterparty risk are cited as having an

    increased focus.

    Supply chain finance There has been no movement at all in the percentage of

    respondents who say it is still not on their agenda at 22%.

    Technology The most commonly used technology today is e-banking

    (92%), with ERP systems in second place (79%), followed by treasury management systems (TMS) (47%).

    Perhaps true eBAM is proving more difficult to achieve than originally thought although it appears to be gaining greater traction in China.

    With the exception of eBAM applications, corporate usage of SWIFT remains lukewarm amongst respondents; the vast majority saying they have no plans to use it within the next 12 months.

    The banks have been investing in their technology too, with improvements seen in treasury portal technology, SWIFT connectivity, eBAM, mobile banking and ERP/TMS integration.

    China Specifics Just over half of respondents see CNH/CNY actively being

    used for inter-company and third-party trade settlements within the next 12 months.

    Shanghai (67%) and Hong Kong (58%) are top of the list as the preferred location(s) for sub/regional treasury centres for the Greater China region.

    The future Technology remains a major stumbling block and the

    banks and vendors must work together with corporates to ensure efficiencies are being realised.

    Notwithstanding the pressure on exports from China, with the internationalisation of the renminbi, regulations becoming more business-friendly and the country wholeheartedly embracing best practices, the future looks extremely promising.

    treasurytoday November 2012 | 5

    China Corporate Treasury Benchmarking Study 2012

  • Respondent profileThe Study again attracted responses from a broad universe of companies in terms of size, industry sector, treasury function and company structure. This year, over 68% of responses were from individuals performing the role of CFO, Group and/or Regional Treasurer.

    Staffing levelsIt is also interesting to note the number of FTEs being employed in the treasury departments (as Chart 1 illustrates), as a far greater number of companies in China employ over 12 FTEs than their European counterparts.

    The vast majority of companies said they have not increased their treasury headcount in the last year. However, those companies that had increased it cited the following reasons:

    Expansion of treasury activities, scope and volume.

    M&A activity.

    35%

    Chart 1: How many FTEs are employed in your treasury department?

    25%

    12%

    28%

    1-4

    5-8

    9-12

    More than 12

    6 | treasurytoday November 2012

  • Respondent universe by sizeAlmost a third of respondents have an annual sales turnover in excess of 1 billion globally. Over 30% have a turnover of above 10 billion.

    The spread of industry sectors was broad with chemicals, software/technology, energy and natural resources and retail sectors particularly well represented.

    Breakdown by legal entityAs Chart 3 illustrates, nearly half of respondents are (centralised) regional treasury centres (RTCs). A further 33% are de-centralised RTCs.

    The number of shared service centres was low at only 2%.

    The most prevalent company structure represented in terms of foreign investment vehicle used is the wholly foreign-owned enterprise or WFOE at 34% as Chart 4 illustrates.

    34%

    Chart 4: Company structures in China - Does your company use any of the following foreign investment vehicles?

    18%

    14%

    13%

    Wholly foreign-owned enterprise (WFOE)

    Regional HQ

    Equity joint venture (EJV)

    Holding company

    Representative office (RO)

    Foreign investment company limited by shares (FICLS)

    Co-operative joint venture (CJV)

    13%

    7%

    1%

    Chart 2: What is your companys annual sales turnover globally?

    7%

    22%

    7%

    30%

    Up to $100m

    $100m to $500m

    $500m to $1 billion

    $1 billion to $10 billion

    Above $10 billion 34%

    47%

    Chart 3: Who are you responding on behalf of?

    33%

    13%

    5%

    Regional treasury (centralised)

    Regional treasury (de-centralised)

    Subsidiary/operating company with head office

    Local company with office located in China

    Shared service centre 2%

    treasurytoday November 2012 | 7

    China Corporate Treasury Benchmarking Study 2012

  • Treasury priorities

    What is high on the treasury agenda?Respondents were asked how important are these responsibilities in your treasury department in 2012? Although the majority of possible responses are key responsibilities for all treasurers, the focus on cash and banking is still paramount for treasurers operating in China. The table below provides an interesting list of where treasurers are currently focusing and how the priorities for treasurers in China compare to their counterparts in Europe and Asia Pacific.

    Table 1: Treasury priorities: a regional comparison.

    Priority China Study 2012 Priority European Study 2012 Priority Asia Pacific Study 2012

    1.Cash management/cash pooling structures.

    1.Cash management/cash pooling structures.

    1.Cash management/cash pooling structures.

    2.Bank relationships and banking group organisation.

    2.Bank relationships and banking group organisation.

    2. Compliance and regulations.

    3. Compliance and regulations. 3. Improving cash flow forecasting. 3. Foreign exchange risk management.

    4.Funding/credit lines.

    4.Counterparty risk.

    4.Bank relationships and banking group organisation.

    5. Working capital management. 5. Funding/credit lines. 5. Improving cash flow forecasting.

    6. Improving cash flow forecasting. 6. Foreign exchange risk management. 6. Counterparty risk.

    7.Foreign exchange risk management.

    7.Compliance and regulations.

    7.Funding/credit lines.

    8. Technology and systems. 8. Working capital management. 8. Balance sheet optimisation.

    9. Balance sheet optimisation. 9. Technology and systems. 9. Technology and systems.

    10. Establishing a shared services centre. 10. Short-term investments. 10. Interest rate risk management.

    8 | treasurytoday November 2012

  • Key performance indicators (KPIs)In our 2011 Study, 80% of respondents cited compliance with treasury policy as the most frequently used measure of treasury performance. This year, we introduced an entirely separate Section on Key Performance Indicators. We have identified six key treasury disciplines and we asked respondents to tick the KPIs they use under each discipline as shown in Table 2 below:

    Table 2: Top three KPIs

    Treasury Discipline No 1 KPI No 2 KPI No 3 KPI

    Overall treasury efficiency. Cash pooling structures. Cash visibility. Costs as % of total treasury costs or revenue.

    Core cash management efficiency. Cash pooling structures. Balance/transaction reporting. Cash flow forecasting accuracy.

    Working capital management. Days sales outstanding (DSO). Days payables outstanding (DPO). Stock control inventory outstanding (SCIO).

    Liquidity management. Cash flow forecasting accuracy. Short-term funding. Short-term investments.

    Risk management. Value-at-Risk (VaR). Mark-to-market. Hedging effectiveness.

    Funding/balance sheet management.

    Net interest expense. Weighted average cost of capital (WACC).

    Net debt/EBITDA.

    The above KPIs are consistent with the performance measures used in other regions although the number of corporates using KPIs is lower among respondents to our China Study, indicating there is still some way to go with regard to measuring treasury performance.

    Scorecarding banksJust 8% of respondents say they use scorecards to measure their banks. This is far lower than corporates in Europe, Asia Pacific and the Middle East where 25%, 24% and 38% of respondents respectively are using scorecards to measure their banks.

    Whilst only a handful of respondents said they use formal scorecards, a number said they do use the following to measure their banking relationships:

    Overall level of banking fees/charges.

    Transaction costs.

    Number of relationships.

    Elsewhere, in contrast to other regions, the issuance of a request for information (RFI) or formal request for proposal (RFP) appears far less prevalent amongst China respondents.

    Yes

    No

    8%

    92%

    Chart 5: Do you use scorecards to measure your banks?

    treasurytoday November 2012 | 9

    China Corporate Treasury Benchmarking Study 2012

  • Bank relationshipsIt is fair to say the importance of bank relationships has increased substantially since the troubles of 2008, as the findings from this Study illustrate only too well see Chart 6 below.

    In our 2011 Study, we asked: outside of credit, what is the SINGLE most important factor when deciding on your bank account relationships? Service quality was the most important factor among 46% of respondents. Relationship was second at 29% and price was less important than product capabilities.

    Service qualityService quality is again the most important factor, carrying the highest number of very important responses at almost 80%. Price has just leap-frogged credit, geographic footprint and relationship.

    Respondents comments:

    Not each factor is equally important for each bank relationship. We distinguish between core banks (those that offer financing, advanced cash management systems etc) and local banks which provide mainly cash and cheque collection services.

    Actually it also depends on the specific product we are purchasing from the bank.

    Chart 6: How important are these factors when appointing a bank?

    56% 36% 8%

    67% 24% 9%

    70% 23% 7%

    54% 38% 8%

    77% 23%

    68% 21% 11%

    50% 34% 16%

    35% 46% 19%

    61% 28% 11%

    54% 39% 7%

    Very important Fairly important Not a priority

    Credit

    Service quality

    Relationship

    Price

    Geographic footprint

    Product capabilities

    Brand reputation

    Quality of cash management personnel

    Cost/potential disruption of changing banks

    Counterparty risk

    10 | treasurytoday November 2012

    China Corporate Treasury Benchmarking Study 2012

  • Number of banking partnersAre treasurers in China increasing or decreasing the number of banks they deal with? The findings suggest the majority (58%) have increased their banking partners. Just 3% say they have decreased the number of relationships.

    Respondents comments:

    Due to the growth of our business, we had to diversify the funding sources.

    Increased counterparties to diversify growing cash portfolio risk.

    Consolidation of bank relationships as a result of treasury project.

    Increasing difficulty of funding; new ERP go-live and increasing demand of automatic operation; variety of the demand of banks products.

    Decision makingRespondents were also asked about the involvement and influence the purchasing department has in the cash management provider selection process. Perhaps surprisingly, 72% say the purchasing department has no involvement or influence in the process. However, this is probably a reflection of the current selection process criteria which relies heavily on service quality. Although with price now a key factor, perhaps the purchasing department will assume increased involvement in future.

    Purchasing manages the selection process

    Purchasing is involved and has some influence in the selection process

    Purchasing has no involvement or influence in the selection process 72%

    21%

    7%

    Chart 8: How much involvement and influence does your organisations purchasing department have in selecting a cash management provider?

    Increased

    Remained the same

    Decreased

    39%

    58%

    Chart 7: Has the number of bank relationships you use in China increased, decreased or remained the same over the past 12 months?

    3%

    treasurytoday November 2012 | 11

    China Corporate Treasury Benchmarking Study 2012

  • Counterparty risk

    Depth of focusUnsurprisingly, given the current economic climate, almost a third of respondents say their focus on counterparty risk has increased over the past year. 66% said their focus on counterparty risk has stayed the same with just 7% saying it had decreased.

    As one respondent commented: With the current economic turmoil in Europe affecting the US and Asia, the world is a much smaller place right now which implies that counterparty risk is ever so important.

    Measuring counterparty riskWhen it comes to assessing counterparty risk, the ratings agencies reports are the most popular measure used to control counterparty risk amongst over 70% of respondents. Credit checks and analyst reports/briefings are also used, but to a lesser extent.

    Increased

    Stayed the same

    Decreased 7%

    66%

    27%

    Chart 9: Has counterparty risk increased, decreased or stayed the same for your company over the past 12 months?

    Rating agencies

    Credit checks

    Information provided by the bank(s) themselves

    Quality of bank executive and management board

    CDS spreads

    Analyst reports/briefings

    Other market risk ratios

    Share price

    73%

    Chart 10: What do you use to measure and control counterparty risk?

    65%

    35%

    17%

    18%

    52%

    15%

    10%

    12 | treasurytoday November 2012

    China Corporate Treasury Benchmarking Study 2012

  • Foreign exchange

    Price does matterUnsurprisingly, price carries the highest number of very important ratings at 62%. Technology doesnt really feature as an important factor but this is due to the telephone being used to obtain multiple bids for FX transactions amongst 71% of respondents (see Chart 12). The fact that the driven by cash management bank option features so prominently again demonstrates how corporates reward their banks with ancillary business, such as FX, where that bank continues to allocate its balance sheet to the corporate.

    Additional factors cited by respondents include:

    Whether it allows flexible actions and a short delay of our payment.

    A clear quotation procedure. Single and familiar traders are also key.

    FX bidsThe telephone remains the preferred communication channel when obtaining multiple bids.

    FXall is cited several times as the preferred FX portal.

    And with over a third of respondents to this question using either Bloomberg or Reuters, these two service providers remain heavy hitters in the FX space. A large percentage of respondents (68%) are also using the banks portals.

    Price

    Technology

    Operational efficiency

    Driven by cash management bank

    Speed of execution

    Transparency 56% 16% 28%

    59% 26% 15%

    29% 39% 32%

    59% 27% 14%

    33% 21% 46%

    62% 18% 20%

    Chart 11: How important are the following factors when awarding FX business to a provider?

    Very important Fairly important Not important

    Telephone

    Bank portal

    FX portal

    Bloomberg

    Reuters 6%

    33%

    47%

    68%

    71%

    Chart 12: How do you obtain multiple bids for your FX transactions?

    treasurytoday November 2012 | 13

    China Corporate Treasury Benchmarking Study 2012

  • Investment policy

    Security, liquidity, yieldIt is no surprise to see security, liquidity and counterparty rating as the factors carrying the highest number of very important mentions at 94%, 81% and 74% respectively. Yield and relationship have taken a backseat since the financial crisis hit.

    MMFs and ETFsEmphasising the focus on liquidity, respondents have taken to short-term investment instruments 31% use money market funds (MMFs) although just 6% are using exchange traded funds (ETFs).

    Vanilla bank deposits are by far the preferred method of investing surplus cash amongst 92% of respondents.

    Liquidity

    Relationship

    Security

    Counterparty rating

    Yield 54% 40% 6%

    74% 26%

    94% 6%

    22% 67% 11%

    81% 19%

    Chart 13: How important are the following factors when deciding upon your investment policy?

    Very important Fairly important Not important

    Chart 14: Are you using the following short-term instruments in China?

    Money market funds (MMFs)

    Exchange traded funds (ETFs)

    Deposits

    Repos

    Commercial paper

    8%

    31% 69%

    6% 94%

    92%

    22% 78%

    48% 52%

    Yes No

    14 | treasurytoday November 2012

    China Corporate Treasury Benchmarking Study 2012

  • Credit

    Price of creditChart 15 offers some interesting findings compared to the 2011 findings in this area. Last year, 63% of respondents said pricing had increased. This year, that number has reduced to 34%. 45% said pricing has remained the same.

    Most countries remained unchanged, except a few whose pricing was increased, summarised one respondent.

    Availability of creditThere appears to be some significant change with regard to the availability of credit over the past 12 months. Last year, 7% said it was easier to obtain credit, 56% said it was more difficult. In 2012, 28% said it is easier to get credit and 33% said it is more difficult. Therefore credit conditions are still difficult, but not compounding to the extent that some might think.

    Does credit really matter?Well, respondents to the Study clearly think so. The granting of credit lines continues to play a vital role in the decision to appoint the cash management bank(s) as Chart 17 clearly shows. 43% say their decisions are highly influenced. This is down slightly on the 2011 Study (50%).

    Increased

    Remained the same

    Decreased 21%

    45%

    34%

    Chart 15: Has pricing changed in the last 12 months?

    Chart 17: How much are your decisions to appoint your cash management bank(s) influenced by their willingness to continue to grant you credit lines?

    Highly influenced

    Partly influenced

    Sometimes influenced

    Not influenced at all

    17%

    29%

    43%

    11%

    Easier

    Remained the same

    More difficult 33%

    39%

    28%

    Chart 16: Availability to obtain credit now

    treasurytoday November 2012 | 15

    China Corporate Treasury Benchmarking Study 2012

  • Risk management

    Top risk concernsForeign exchange risk was the key area of risk management focus in our 2011 Study. This year, credit and counterparty risk are cited as having an increased focus at 57% and 48% of respondents respectively. Foreign exchange risk has become more of a concern for 77% this year.

    This may be a reflection of market volatilities, or could reflect the fact that companies are expanding into new markets to seek growth opportunities.

    Supply chain finance

    Back on the agenda?In our 2011 Study, half of the respondents said the importance of supply chain financing had increased. This time round, that number has reduced to 31% as Chart 19 illustrates. There has been no movement at all in the percentage of respondents who say it is still not on their agenda at 22%.

    Foreign exchange risk

    Interest rate risk

    Supply chain risk

    Counterparty risk

    Credit risk

    Commodity risk

    Enterprise risk

    Chart 18: How has your focus on risk management changed over the past 12 months?

    21% 74% 5%

    57% 43%

    48% 52%

    23% 71% 6%

    43% 57%

    77% 20% 3%

    35% 65%

    More focus Same focus Less focus

    Increased in importance

    Decreased in importance

    Remained the same

    Still not on our agenda 22%

    47%

    0%

    31%

    Chart 19: Has supply chain financing changed in importance over the past 12 months?

    16 | treasurytoday November 2012

    China Corporate Treasury Benchmarking Study 2012

  • Technology

    Current and future usageThe most commonly used technology today is e-banking (92%), with ERP systems in second place (79%), followed by treasury management systems (TMS) (47%).

    In last years Study, eBAM was identified as the system which the majority of respondents were planning to use but whilst the 2012 findings identify 23% currently using eBAM, 34% are still saying they plan to use it. Perhaps true eBAM is proving more difficult to achieve than originally thought although it appears to be gaining greater traction in China.

    TMS vendors would do well to look at the Chinese market for future growth almost a third of respondents say they are planning to use a TMS in the next 12-18 months.

    SWIFT for CorporatesCorporate usage of SWIFT remains lukewarm amongst respondents with the vast majority saying they have no plans to use it within the next 12 months. The exception to this is in the eBAM space as mentioned above, or where SWIFT is of interest in the wider organisation. As one respondent commented: the usage of advanced technology depends mainly on the development in the group treasury. SWIFT is a topic there, so the roll-out may come within the next 24 months.

    e-banking/bank portal

    TMS

    ERP

    Inter-company netting system

    e-Invoicing

    Payment factory software

    eBAM

    Money market portal

    Mobile banking solutions

    Cloud technology

    Card solutions

    Chart 20: Which of the following systems do you use already or plan to use in the next 12-18 months?

    12% 13% 75%

    38% 15% 47%

    35% 3% 62%

    79% 15% 6%

    47% 32% 21%

    92% 6% 2%

    41% 18% 41%

    9% 10% 81%

    3% 15% 82%

    24% 9% 67%

    23% 34% 43%

    Use Plan to use Do not use

    treasurytoday November 2012 | 17

    China Corporate Treasury Benchmarking Study 2012

  • Bank investment

    It appears that banks have been investing in their technology too, with improvements seen in treasury portal technology, SWIFT connectivity, eBAM, mobile banking and ERP/TMS integration. However, the banks should not be complacent as the majority of respondents say there is still work to do. According to one respondent, there is a need to distinguish between foreign and local banks. Whereas local banks offered more services in the last year but still not in a satisfying standardised way.

    Technology barriersThere are mixed responses to the question we asked what are the major technology barriers you face? But the following key themes emerge:

    Lack of systems compatibility.

    Internal blockages/bottlenecks.

    Connectivity.

    Security and firewall issues.

    Cost.

    Lack of standardisation.

    Too many interfaces.

    One respondent cited multiple eBAM as his major technology barrier. In other words, there is no standardised approach.

    MA-CUG

    SCORE

    Alliance Lite

    Third-party bureau services

    eBAM

    Trade utility 11% 89%

    23% 34% 43%

    4% 5% 91%

    6% 94%

    3% 9% 88%

    3% 97%

    Chart 21: Do you currently use or plan to use (within the next 12 months) SWIFT to provide access to your banks?

    Use Plan to use Do not use

    Treasury portal technology

    SWIFT connectivity

    Electronic bank account management (eBAM)

    Integration with third-party TMS and ERP

    Automated financial supply chain solutions

    Multi-banking capabilities

    Mobile banking solutions

    Chart 22: Have you seen any improvement by your bank(s) in the following areas?

    Yes Some, but not enough No

    18% 51% 31%

    15% 44% 41%

    38% 44% 18%

    33% 19%

    32% 39% 29%

    22% 35% 43%

    41% 44% 15%

    48%

    18 | treasurytoday November 2012

    China Corporate Treasury Benchmarking Study 2012

  • China specificsJust over half of respondents see CNH/CNY actively being used for inter-company and third-party trade settlements within the next 12 months. A further 26% believe this will happen in the next 1-3 years.

    This appears at variance with respondents to our recent Study of corporate treasurers in the Asia Pacific region where 31% believe this will not happen at all.

    Respondents views are mixed on the geographies they see emerging as the preferred location(s) for sub/regional treasury centres for the Greater China region.

    Shanghai (67%) and Hong Kong (58%) are top of the list see Chart 24. Respondents to our Asia Pacific Study identified Singapore as the preferred location (51%) with Shanghai a close second (46%).

    Within 12 months

    1-3 years

    3-5 years

    Not at all 6%

    17%

    26%

    51%

    Chart 23: Do you see CNH/CNY actively being used for inter-company and third-party trade settlements?

    Hong Kong

    Shanghai

    Beijing

    Singapore 19%

    28%

    67%

    58%

    Chart 24: Which location(s) do you see emerging as the preferred location(s) for sub/ regional treasury centres for the Greater China region?

    treasurytoday November 2012 | 19

  • The future

    So what do corporates think needs to change to address all of these challenges going forward?

    Better listening skills, more forward-looking to corporates needs, instead of just focusing on their own product strength.

    More customer-centric solutions. More often than not in China, there is a tendency for the rules to change every so often so that our service providers are unable to provide clear solutions, as they themselves are not clear on what the regulators want.

    Efficiency on cash pooling.

    Technology also remains a huge stumbling block and the banks and vendors must work together with corporates to ensure efficiencies are being realised.

    20 | treasurytoday November 2012

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  • 8%

    80%

    58%3%

    72%

    1/3

    63%34%45%

    28%33%

    22%

    92%ERP79%TMS47%

    eBAM

    eBAMSWIFT12SWIFT

    SWIFTeBAMERP/TMS

    12/

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    35%

    1

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    12%

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    1-4

    5-8

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  • 1/31030%100

    /

    3RTCs33%

    2%

    4WFOE34%

    34%

    4

    18%

    14%

    13%

    WFOE

    EJV

    RO

    FICLS

    CJV

    13%

    7%

    1%

    2

    7%

    22%

    7%

    30%

    1

    1 5

    5 10

    10 100

    100 34%

    47%

    3

    33%

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    5%

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  • 2012

    1 2012 2012 2012

    1. / 1. / 1. /

    2. 2. 2.

    3. 3. 3.

    4. / 4. 4.

    5. 5. / 5.

    6. 6. 6.

    7. 7. 7. /

    8. 8. 8.

    9. 9. 9.

    10. 10. 10.

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    KPI KPI KPI

    /

    DSO DPO SCIO

    VaR

    / WACC /

    8%25%24%38%

    /

    RFIRFP

    8%

    92%

    5

    -201211 | 29

    2012

  • 20086

    201146%29%

    80%

    /

    6

    56% 36% 8%

    67% 24% 9%

    70% 23% 7%

    54% 38% 8%

    77% 23%

    68% 21% 11%

    50% 34% 16%

    35% 46% 19%

    61% 28% 11%

    54% 39% 7%

    30 | -201211

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  • 58%3%

    72%

    39%

    58%

    712

    72%

    21%

    7%

    8

    3%

    -201211 | 31

    2012

  • 1/366%7%

    70%/

    7%

    66%

    27%

    912

    /

    73%

    10

    65%

    35%

    17%

    18%

    52%

    15%

    10%

    32 | -201211

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  • 62%71%12

    FXall

    1/368%

    56% 16% 28%

    59% 26% 15%

    29% 39% 32%

    59% 27% 14%

    33% 21% 46%

    62% 18% 20%

    11

    6%

    33%

    47%

    68%

    71%

    12

    -201211 | 33

    2012

  • 94%81%74%

    MMFsETFs31%6%

    92%

    54% 40% 6%

    74% 26%

    94% 6%

    22% 67% 11%

    81% 19%

    13

    14

    MMFs

    ETFs

    8%

    31% 69%

    6% 94%

    92%

    22% 78%

    48% 52%

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  • 20111563%34%45%

    127%56%201228%33%

    1743%201150%

    21%

    45%

    34%

    1512

    17

    17%

    29%

    43%

    11%

    33%

    39%

    28%

    16

    -201211 | 35

    2012

  • 201157%48%77%

    201131%1922%

    1812

    21% 74% 5%

    57% 43%

    48% 52%

    23% 71% 6%

    43% 57%

    77% 20% 3%

    35% 65%

    22%

    47%

    0%

    31%

    1912

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  • 92%ERP79%TMS47%

    eBAM201223%eBAM34%eBAM

    TMS1/312-18TMS

    SWIFTSWIFT12SWIFTeBAMSWIFTSWIFT24

    /

    TMS

    ERP

    2012-18

    12% 13% 75%

    38% 15% 47%

    35% 3% 62%

    79% 15% 6%

    47% 32% 21%

    92% 6% 2%

    41% 18% 41%

    9% 10% 81%

    3% 15% 82%

    24% 9% 67%

    23% 34% 43%

    -201211 | 37

    2012

  • SWIFTeBAMERP/TMS

    /

    eBAM

    MA-CUG

    SCORE

    Alliance Lite

    11% 89%

    23% 34% 43%

    4% 5% 91%

    6% 94%

    3% 9% 88%

    3% 97%

    2112SWIFT

    SWIFT

    eBAM

    TMSERP

    22

    18% 51% 31%

    15% 44% 41%

    38% 44% 18%

    33% 19%

    32% 39% 29%

    22% 35% 43%

    41% 44% 15%

    48%

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  • 12/26%13

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    /

    67%58%2451%46%

    12

    1-3

    3-5

    6%

    17%

    26%

    51%

    23/

    19%

    28%

    67%

    58%

    24/

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