Two steps to better liquidity in China

Author: | Published: 1 Jul 2005

With the implementation of regional and global centralized treasury structures and the demands of Sarbanes-Oxley for global oversight of treasury, corporate treasurers are under increasing pressure to manage their liquidity in Asia. Yet China remains the stumbling point for many multinationals trying to centralize treasury functions, because the restrictions on cross border and domestic flows of capital mean that treasury techniques used elsewhere cannot be easily rolled out in China. But in 2004 China relaxed restrictions on the establishment of holding companies and group finance companies. The changes ensure these two entities are more cost effective for multinationals to establish and offer possibilities for corporate treasurers to more efficiently manage liquidity in China.

China's liquidity restrictions The non-convertibility of the renminbi has meant that many multinationals have large borrowing positions in many parts of the world while they are sitting on large amounts of renminbi deposited in Chinese bank...