FTZ’s cross-border cash pooling policies lauded
The number of financial reform policies introduced in the China (Pilot) Shanghai Free Trade Zone (FTZ), in particular those that involve cross-border cash pooling, have resulted in substantial benefits to companies located within the Zone, said Zhang Yuepeng, president of Dover Asia Pacific.
Dover Corporation from the United States, which had redesignated its China headquarters in Pudong New District as its Asia Pacific hub in 2011, was one of the first companies to carry out crossborder two-way renminbi cash pooling in the FTZ, and Zhang said that the new policies have greatly enhanced efficiency and saved the company much in currency conversion.
“Before cross-border cash pooling was available, every sum of money needed to go through a very strict approval process, which might take a week or even a month. This included a lot of human and financial costs. At present, the cash pooling works like an internal bank within the corporation, with which we can efficiently manage the circulating capital,” said Zhang.
Because of China’s foreign exchange policies, Dover Corporation used to have two different capital management methods — one specially for China
Zhang Yuepeng, and another for the rest of the Asia Pacific region — and Zhang said that the implementation of the policies solved this problem as the company can now better manage its capital. Earlier this year, Dover China was able to use its renminbi capital to acquire a company in Italy.
“It was easy for capital to enter the Chinese market but much harder to exit. As a result, the regional headquarters in China used to have less say at the corporate level,” said Zhang.
Because of these policies, Dover is now planning to promote renminbi as the third reserve currency within the corporation, in hope of encouraging overseas corporate companies to accept renminbi.
Zhang added that they will consider issuing bonds within the FTZ in the future when capital accounts are opened and when the company is planning a large investment. He is also hoping that authorities will unveil further policies that can facilitate the acquisition of companies outside the FTZ, saying that the current approval perio d of several months is still too long.
The financial industry in Pudong has experienced rapid growth ever since the FTZ expanded in April. In the first three quarters of this year, the added value of the financial industry in Pudong reached 146.1 billion yuan ($22.88 billion), up 27.2 percent yearon-year, accounting for up to 51.1 percent of the total added value of the city.
By the end of September, the total number of financial institutions located in Pudong, including banks, securities companies and insurance companies, amounted to 883, with 39 of them having started operations in the Zone this year.
The emerging financial institutions have also made a breakthrough recently — a total of 1,539 new equity investment and management companies were established in the Zone by September. The number of newly-added financial leasing and wealth management companies were 762 and 86 respectively.
Before cross-border cash pooling was available, every sum of money needed to go through a very strict approval process, which might take a week or even a month.”
Dover Asia Pacific