Workshop notes: Treasury Impacts & Innovations: Solving China complexities Singapore, 22 November 2016 Eurofinance

Treasurers need to keep a sharp eye on China’s financial regulators as they respond to changing economic fortunes and the actions of those deemed speculators. Recent changes affect treasury structures and best practice. This workshop and disucssion take a comprehensive look at the key changes, with presentations from top corporates in the region.

Take pooling. From early 2014 onwards, RMB cash pooling has been progressively liberalised until by September 2015, the procedure was accessible to most corporates who needed it. However, in January this year, the People’s Bank of China (PBOC) instructed banks that provide multinational corporations with RMB cash pooling services to limit outflows so that there are no net remittance outflows of capital. Previous regulations only limited the net inflow of RMB from overseas, with no cap on RMB outflow. The new ‘regulation’, which is oral only, has made it difficult to remit money out of Mainland China although intercompany loans are unaffected. In addition, new regulations in May freed up the regime for non-financial corporations to invest in the mainland. This was then partially lifted. 

There have been significant changes to the transfer pricing regime too. On June 29, China’s State Administration of Taxation (SAT) issued an announcement that has been called “the beginning of a new era in China’s transfer pricing.” The most significant changes concern not just the rules themselves but also documentation – which means more work for overstretched treasuries and more penalties if they get it wrong.

China’s biggest tax overhaul in 20 years for VAT. How can the changes be used to lower tax bills? What do the reduced liabilities on rep offices mean? 

Discussion points:

Business and background:

• Business in China - Sell to China / Buy from China / Subsidiaries in China / None (multi)

Funding China operations:

• Funding China operations ? Intercompany - On shore, Off shore, funding onshore 

• Cross border sweeping / interco loans:  Cross border pooling - CNY, USD and cross border loans - regulations and restrictions

• Interpretation and differences between bank's PBOC and SAFE rules. 

• CDB loan to offshore corporates means banks can still lend out of China

• Dividends out of PRC - frequency, regulations and compliance

Cross border trade:

• Intercompany trade / Intercompany loans / Third party trades 

• Cross border CNY payments / collections - regulations and restrictions

Local lending, trade and FTZ:

• China banks pushing wealth management loans instead of direct bilateral loans ?

• Experience with Bankers Acceptance Draft and Corporate Acceptance Drafts; reasons for use and form paper or electronic (ECDS)

• Free trade Zones (FTZ) and transit trade via FTZ

FX markets:

• On shore / Off shore trades - rationale and FX market liquidity 

• Cross border CNY settlement

• Differences between USD - CNH (HK), CNY NDF and CNY onshore

Regulations, tax, transfer pricing, etc:

• Experiences on engagement and discussions with SAFE and PBOC

• Effect of VAT (instead of business tax) on onshore pooling etc.

• Transfer pricing rules and challanges

Chaired by David Blair, Senior EuroFinance Tutor & MD, Acarate

Speakers:

John Chen, Treasury Director, Asia Pacific, Honeywell, Singapore

Gopul Shah, Director, Corporate Treasury & Structured Trade Finance, Golden-Agri Resources, Singapore

Tony Lam, Group Treasurer, TCC Group

Tony Lam, Group Treasurer, TCC Grou