The Dilemma of Cash Management in China

During the past few years China has attracted investment by foreign multinationalcompanies. With its entry into the World Trade Organization on 11 December2001 China promised to further open up its market to foreign goodsand services and to welcome foreign investment in the following five years inpreviously restricted sectors such as banking and financial services. HoweverChina's cash management environment still provides many impositions andobstacles to challenge corporate treasurers. Moreover unwritten localcustoms and practices coupled with the lack of written regulations do notease situation.Hence this paper introduces the reader to the complex requirements impositionsand obstacles of cash management in China. In this paper the authorfocuses on two cash management instruments netting and cash poolingand presents the associated dilemmas. Furthermore the author highlights entrustedloans as an alternative solution. In the course of the paper it becomesclear that implementing cash management instruments requires testing theboundaries of regulation and technology.The paper addresses financial managers and treasurers economists as well asentrepreneurs.