10 January 2020

Partnership of economic behemoths attracts Chinese corporates to India

China’s trade connectivity with India, and tax and regulatory incentives supporting trade between the two economic powerhouses featured high on the agenda at the seventh event in HSBC’s and KPMG’s Corporate Treasury Forum series focused on helping Chinese enterprises ‘go-global’.

Held in Delhi, India, on 29 November, the event brought together more than 135 Chinese clients with subject matter experts from HSBC and KPMG. It also featured a keynote by Dr. Ajai Garg, Director of International Relationships with India’s Ministry of Electronics and Information Technology (MeitY), and a special address by Alan Wang, Secretary General of the China Chamber of Commerce in India.

Of high interest to the attending Chinese business professionals was Dr. Garg’s address on the importance to both India and China of the economic relationship between the two economies. Particular areas of focus included measures taken by the Indian government to address the challenges in trade and extension of interest to work collectively with China.

The impact of three critical policies rolled out by the Indian government to support the consumer goods sector drew particular attention. These were the National Policy on Electronics 2.0, the National Policy on Software, and the National Policy on Technology and Start-up Entrepreneur.

Using examples from the automotive industry, Dr. Garg unpicked the objective of each of these three policies and stressed the expectation that they would see them push value creation up from about eight percent to more than 25 per cent within the next five years.

The high interest that Chinese corporates displayed in learning how to maximise opportunities doing business with and in India bodes well for both the immediate future. Also, at the event, information on how to understand the Indian ecosystem with a view to reducing the set-up time for businesses, presented by Invest India Vice President Raja Khurana, provided attending corporates with key tips. Specific infrastructure-related examples from the airport development, roads and highways, and ports sectors illustrated how foreign investment married with the right Indian business counterparts could drive growth for all players.

India is, however, easily as complex as a market as China, with each state being comparable with entire countries elsewhere in the world in terms of population size and gross domestic product. India’s efforts to reduce the complexity of its tax system to drive more foreign investment was an area covered by Mr. Khurana that landed well with the attending Chinese corporates. Corporate tax reduction coupled with streamlining of manufacturing-sector-related policies – in particular around duties for the import of capital-expenditure-related materials, bonded warehouse and manufacturing set up, and the National Industrial Corridor Programme – stood out as crucial knowledge in high demand.

Separately, monetary policy set by the Reserve Bank of India in relation to the Chinese yuan and the impact of currency controls on liquidity management, for instance, was an area of concern for Chinese corporates. With treasury management and trade finance seeing more innovation and digitalisation in the past decade than ever before, the ability to maximise benefits from these areas while managing around monetary policy restrictions proved such enterprises with interesting challenges in the business environment ahead of them.

The goals and ambitions of future treasury departments will form the basis for the definition of methods and processes as well as the system architecture incl. potential Treasury Management Systems. The vision for treasury in the next 5 years will serve as the bearing point for decision making today. The following points should be considered when mission and vision of treasury departments are being defined:

  • Financial robustness: Ensure sufficient liquidity and an adequate funding structure to protect the target rating
  • Risk management: Capture, evaluate and manage financial risks effectively and protect earnings against financial risks
  • Sustainable finance: Fulfil ESG-criteria for sustainable finance in order to protect accessibility to capital markets
  • Transparency: Provide insight on drivers for liquidity, financial risks and opportunities
  • Communication: Manage access to banks, investors and rating agencies
  • Support of operational business: Fulfil requirements of operational business and support adaption to the market challenges through provision of liquidity, risk management concepts, execution of transactions, pension management and financial advice
  • Compliance: Ensure fulfilment of legal and regulatory criteria and support discussion on development of regulatory issues
  • Strategic steering: Provide a consistent and group wide strategy and guidelines for a standardized finance function
  • Financial stability: Achieve and maintain position as an attractive investment opportunity for equity and debt capital
  • Flexibility and independence: Ensure ready accessibility to equity and debt markets at any time and avoid dependency on specific investors, lenders or market segments
  • Digitalization: Make use of available digital solutions with a proven business case
  • Lean Organization: Automate processes and maintain a clear organizational structure with defined responsibilities
  • Efficiency: Continuously assess existing structures and processes against best-in-class for identification of optimization potential

“HSBC remains committed to connecting customers to opportunities. We aim to be where the growth is and enable businesses to thrive. The Corporate Treasury Forum in Delhi shows our commitment to equipping Chinese corporates with the knowledge and support to grow in India.”, Siddharth Rungta, Country Head, Global Liquidity and Cash Management, HSBC India.

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