140 Years of Cash Management in China 19 April 2005 Brian Tsang Senior Vice President Payments and Cash Management HSBC China

Agenda 1.The first 130 Years 2.The recent 10 years 3.Year Next 10 years and beyond

The First 130 Years…

Cash Management in China: Beforehand  Making and receiving payments – “Cash Management” was non- existent  Scattered, independent “clearings”  “Approval” was mandatory  Source of help and advice

The Recent 10 Years

Cash Management in China: The Recent 10 Years  Cash Management concept promoted by multinationals and foreign banks  Vastly improved clearing infrastructure via State Banks and PBOC  Revolutionised / evolutionised foreign exchange regulations  Expanding business scope for foreign bank branches  Trusted advisors from banks, legal/law firms and regulators  Not without its challenges though…

Evolution of Cash Management in China Basic Cash Mgmt. Activities Greater focus on Consolidation Regional Cash Management Global Treasury Activities STAGE 1STAGE 2STAGE 3STAGE 4 Locally- managed payments and receipts Reporting and cash flow forecasting Day-to-day liquidity management Consolidation of banking processes Greater emphasis on controls Centralized management of payments and collections Increased focus on investments and structured liquidity mgmt. Global file- based payables & receivables mgmt In-house bank Many corporates are now moving into Stages 2 & 3 Regional & Global Strategy Entity-based Deployment

2005: Time to Take Stock Now…

Cash Management in China: What Now? Integrated Payments Solution Nation-wide and x-border Best clearing route used Electronic payments with advice Cheque outsourcing Centralized or de-centralized Integrated Receivables Solution ALL cash / cheque / electronic receipts, nation-wide and x-border FULL collection information captured Online real-time enquiry over Internet – based on payor, invoice or instrument Outsourced AR matching

Cash Management in China: What Now? Liquidity Management Solutions RMB and FCY cash concentration “Entrusted Loan” (EL) framework One-to-one EL pairs Group ELs Holy grail achieved – Group Liquidity Solution (GLS) 3 rd party ELs X-border ELs Integrated Delivery Channels Global Internet banking platform Global host-to-host platform FULLY integrated China cash management tools World-class management control and security Innovative channels interoperability

Cash Management in China: What Now? Integrated Delivery Channels HSBCnet (Internet) HSBC Connect (Host-to-host) Customer’s Business Processes Our Clients A/R Management Treasury Management A/P Management ERP/ Treasury Systems Information Management Alliance Bank Network Integrated Receivables Solutions Receivables Management System Payments Advising Integrated Payments Solutions Cheque Outsourcing Electronic payments Liquidity Management Solutions Account management Group Liquidity Solution Group Entrust Loan HSBC’s Integrated Cash Management Solutions mirror your business process management and systems in China

HSBC and Our Partner Banks: Your One-stop Shop Single interfaceConnects via…Partner banks Cash management solutions and HSBC Connect  Nostro-a/c  Standing Instructions  Simplified Chinese enhanced SWIFT  Host-to-host link  Service Level Agreement ABC BOC CCB ICBC BoComm  HSBC and 3 rd party a/c reporting  Integrated Payments Solution – HSBC and 3 rd party a/s  Integrated Receivables Solution – nation- wide  Integrated Liquidity Management – HSBC and 3 rd party a/c HSBCnet Combined strengths to meet your needs

Next 10 Years and Beyond…

 Nation-wide RTGS clearing infrastructure connected to all local banks and foreign bank branches. Top internet infrastructure  Efficient and effective inter-company liquidity management – inside China and cross-border  Regulations rationalization, “cash trap” will be gone  Converged business scope between foreign banks and local banks  One-off cooperation >> business partnership >> strategic alliance >> systems / operations integration Cash Management in China: Next 10 years and beyond INNOVATIONS in GLOBAL cash management FROM CHINA!

HSBC’s Commitment in China  Largest foreign bank branch network  Largest strategic investment in China  China “old hands” with international expertise  Global technology with local touch  As a conduit between our customers and regulators Your Trusted Advisor For Cash Management in China

Best Cash Management Bank in China and Asia Best Overall Cross-border Cash Management Bank in Asia (2004) Best Cash Management Bank awards* (2004) –Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, Singapore, Taiwan and Thailand * Domestic business/cross-border Best Overall Bank for Cash Management in Asia ( ) Best Bank for Liquidity/Working Capital Management in Asia ( ) Best Provider of Outsourced Treasury Solutions in Asia ( ) Best Bank for Payments and Collections in Asia ( ) Best Bank for Risk Management in Asia (2005) Best Bank for Money Market Funds in Asia (2005) Best Cash Management Bank in Asia ( ) Best Cash Manager – Asia ( ) Best Cash Management Bank in Asia ( *) Best Bank for Payables and Receivables ( ) Best Bank for Cash Management, Trade, Custody and DRs in Hong Kong (2005)

Thank You