How Rongshi achieves its development goals with the help of BOCHK’s treasury management platform
Rongshi International Holdings Limited (Rongshi) is a wholly owned overseas subsidiary of China’s State Development & Investment Corporate Limited (SDIC Group). Established in 1995, SDIC Group is one of the earliest comprehensive state-owned capital investment companies in China. Based on years of continuously exploring innovation and restructuring, SDIC Group focuses on developing four major business sectors:
Energy: The industry contributes to national energy security and a "dual carbon" strategy. This includes power (encompassing hydrogen energy/energy storage), energy ports, and bioenergy.
Digital/technology: The sector supports development of industries including electronic information engineering services, network security, and digital governance, new materials, special equipment inspection and testing, automotive fuel tanks, and railway operations and maintenance.
Livelihood and health: The sector helps fulfil people's need for a better life and includes potassium fertilizers, healthy aging, water treatment/industrial solid waste, trade, human resources services (including consulting services), concentrated fruit juice, as well as bio-agriculture, medicine, and medical equipment.
Industrial finance: The sector supports financial services aimed at the real economy, including securities, industrial funds, guarantees, trusts, finance leasing, and asset management companies (including Rongshi).
To align with the overall goal of “accelerating the construction of a world-class capital investment company”, SDIC Group fine-tuned the position of Rongshi to be the overseas treasury management platform at a group level in 2017. Rongshi’s primary responsibility was to build the group's overseas fund pool and to provide treasury management services.
Creating a system for continuous expansion
SDIC Group has a wide range of businesses around the world, covering over 30 countries/regions in Asia, Europe, Africa, and the Americas. Due to its unique business model, the group displays many of the characteristics of dispersed overseas investment enterprises. For instance, scattered overseas account-opening banks and disseminated foreign funds. At the same time, SDIC Group faced challenges including strict foreign exchange controls, tax differential, settlement risks and exchange rate risks.
The team at Rongshi conducted extensive research on peer industries and in-depth studies of various information and fund interaction architectures such as bank-enterprise direct connectivity and SWIFT connectivity. The team ultimately established an advanced financial and capital management system that is closely linked with the group’s unique business model and has scalability to prepare for continuous expansion.
Creating the POBO solution for a combination of local and cross-border automated cash management
To intensify the use of centralised management of overseas accounts and funds and to strengthen its efficiency, Rongshi cooperated with BOCHK to employ customised cash management products.
One of these was the payment-and-collection-on-behalf-of (POBO) accounts for subsidiaries in BOCHK. This centralised payment and receipt processing in Rongshi, while allowing associates to manage external payment and collection settlements. This process can be completed within half an hour and has considerably improved the efficiency of the payment and collection processes, besides simplifying operational procedures.
Additionally, payments of overseas subsidies are now made by Rongshi in the name of the subsidiary through POBO accounts in Hong Kong. Funds are automatically pulled from the master account and disbursed to the subsidiary whenever a payment is triggered. This service not only increases the settlement efficiency of member units but also improves the timeliness of fund returns.
Opening a POBO account in Hong Kong can also centralise the management of funds received through entrusted collection. This consolidates scattered cross-border fund collection and reduces the impact of foreign exchange controls. The positions of foreign exchange are now centrally managed by Rongshi. SDIC Group can now freely exchange non-major currencies to currencies in circulation with BOCHK when the FX rate is favourable. At the same time, automatic fund collection and payment functions through the domestic cash pool, greatly enhance the effectiveness and efficiency of fund centralised management.
How Rongshi helps SDIC create value
As the overseas treasury management platform of SDIC Group, Rongshi takes "serving the group and creating value" as its core positioning. It fully utilises the cash management products and channels of bank-enterprise cooperation to support and guarantee the successful implementation of SDIC Group's development strategy.
Centralised control: With a concentration and POBO solution, the treasury centre can take control of fund and payment transactions, which helps to streamline the payment process and reduce the risk of errors.
Improved liquidity management: A local and cross-border cash pooling structure allows companies to consolidate their cash balances at a united level. This enables better management of liquidity, reduces idle cash, and improves forecasting.