Setting up a cross-border treasury center in Hong Kong
We think it is necessary to have an overseas cash pool so that we can raise the overseas fund-use efficiency and prepare for future unexpected FX policy changes
TREASURY TEAM OF THE YEAR, CHINA – TCL LED BY MAGGIE LI
When Maggie Li, general manager of TCL Group Finance, and her treasury team set up TCL’s Hong Kong regional treasury center (RTC) in 2015, almost half of the revenue of TCL, China’s largest TV manufacturer, came from its overseas business.
The fast growth in TCL’s overseas markets required a sophisticated overseas treasury to be set up in the face of changing market conditions. In 2018, the net profit and revenue of TCL increased by 14.7% and 1.6% respectively. With over 75,000 employees globally, TCL is active in over 160 countries and jurisdictions.
Li told The Asset that one major challenge faced by TCL in recent years was the FX control imposed by some emerging countries such as Argentina.
“From 2016, it became difficult for us to collect money from some countries, which makes it very difficult for us to minimize the FX risk and help our front line to expand the business. If we cannot collect money, we have to give up some orders,” says Li.
In 2015, the renminbi depreciated substantially as a result of China’s FX reform, which impacted Chinese and international MNCs. Cross-border cash pools and sweeps were suspended in early 2016 before being reopened later. Restrictions on inflow and outflow were temporarily imposed when processing cross-border renminbi payments.
Although TCL Finance had cross-border cash pooling and cross-border renminbi pooling, to Li and her team, the onshore treasury setup was not enough to mitigate the FX risk.
“We think it is necessary to have an overseas cash pool so that we can raise the overseas fund-use efficiency and prepare for future unexpected FX policy changes.”
Currently, TCL’s Hong Kong RTC, called TCL Finance HK, serves as the group’s offshore treasury management platform and performs various roles including as a multi-currency global cash pool, an in-house bank as target operating model, a payment factory and a tax-efficient corporate treasury centre. With the RTC set up, TCL has full visibility of most of its global subsidiaries.
“We set up a flexible and highly efficient fund management model, which can be called ‘ONE Center, TWO Platforms’. This enables us to improve our capability to serve the needs of our subsidiaries around the world,” shares Li.
Having actively participated in various government-led initiatives, TCL is leading its peers in embracing innovation and adopting international treasury management practices.
Being one of the first Chinese companies to join the Hong Kong corporate treasury center initiative, TCL was also the first company to issue electronic bank acceptance drafts in China and the first Chinese MNC to centralize its foreign currency treasury operation.
In addition to its RTC, TCL Group also made a long-term commitment to reduce the cost of funding within the supply chain ecosystem to establish partnerships and collaboration along the value chain. In September 2015, TCL Group launched an online finance supply chain platform called Jiandanhui.
Jiandanhui acts as an online portal where TCL’s suppliers are able to put their transaction data online. By issuing an e-certificate to its tier one suppliers, TCL allows its suppliers to use the certificates to obtain factoring from banks, hold the certificates until maturity or use the certificates to offset their payables.
Leveraging cloud computing and blockchain technology, TCL was able to provide its upstream suppliers with an efficient, convenient supply chain finance service through Jiandanhui.
TCL started its treasury management in 1997 and obtained the license from China Banking Regulatory Commission to set up its finance company in 2006. Currently, there are 62 people in Li’s team.“Going forward, we will focus more on overseas markets, which means that we have to improve our treasury team to better serve our global expansion,” says Li.