HSBC: Experts in managing client investment, operations

For decades companies from across the world have eyed China as a potential destination for their investments.

Originally seen as a cheap manufacturing base, China's economic miracle has forced many companies to rethink their China strategy and embrace the world's most populous country as an important market for their products.

HSBC is better placed than most to guide companies that want to invest in China as foreign-investment enterprises (FIEs), with over 148 years' history of operating in Shanghai and across China.

HSBC's growing inbound investment team of 56 professionals in Shanghai, including banking relationship managers (RMs) and advisors manning country desks that represent North America, South America, Europe and Asia, and RMs based across China are ideally placed to advise and counsel FIEs in the China market.

"HSBC has been operating in China for a very long time and our colleagues in the business here are very experienced. They know how the China market works and they have a long history of helping FIEs come to China, to invest, grow and build their business in China," said Calvin Man, head of international business, HSBC China who is leading the inbound investment team.

Although born in Hong Kong, Man was raised and educated in the UK and relocated to Shanghai last year.

He came from HSBC's London office where he had been working as a director in the mergers and acquisitions advisory division. Man gave his thoughts about the China market and advice on how to be successful.

Confidence in China

"China has had a period of phenomenal growth. Policy was geared to advance China and it has been hugely successful," Man said.

"The outlook will be a little more challenging than it has been in the past, but bear in mind we're comparing that against a period of very strong growth.

"There are risks to the economy but I very strongly believe that the government has the will and capability to put in place policies that will keep China on a steady path."

He said foreign companies have been investing in China for decades but with a strong growth rate and a largely untapped western interior there's still plenty of potential.

He added that every five years the Chinese government outlines its goals and policies, indicating where this potential may lie.

The last was China's 12th Five-Year Plan (2011-15), which was published in 2011.

In the plan the government emphasized the importance of infrastructure and green industries. State funds have poured into these sectors forcing them to mature very quickly and HSBC has been able to help many FIEs make the most of this investment.

For example they bank a number of FIEs that manufacture equipment used in the construction of subways and specialist components for the trains, Man said.

He said government-based programs aren't the only focus foreign investors ought to be paying attention to however; there are a number of macro dynamics in play that may prove more influential to international companies planning to expand into the China market.

"For example rapid urbanization is boosting demand for pre-packaged or convenience foods and domestic electrical goods. Another important element is the ageing population creating space for FIEs to provide pharmaceuticals, medical devices and the actual provision of healthcare as well," Man said.

He noted that Chinese companies are well aware of the opportunities in their own market and are racing to meet rising demand.

He also said international firms currently enjoy certain advantages over domestic companies.

"FIEs currently compete based on efficient processes, quality of products and design and engineering capabilities, where they apply their international standards to the products they make.

"The Chinese market and Chinese companies, however, are developing rapidly, which stimulates the market as a whole. I think this is beneficial for all the market players in China and FIEs, of course, have experience working in more mature markets, where they have had to keep up with the competition for many years," Man said.

Trusted partner

Despite the many rewards for breaking into the world's largest market, Man said it can be a daunting challenge for many companies, which is where HSBC steps in.

According to Man, one of HSBC's biggest strengths is its international network - it has offices around the world and spread across China. Companies can approach HSBC in their own domestic markets and be immediately linked to their respective country desk in China where an RM is able to offer expert advice in the client's mother tongue.

He said with the banking platform that HSBC is able to offer globally, a group CFO, or regional CEO, can have visibility and control of their company liquidity or cash position at any point - a real advantage that clients value highly.

As Man highlights with an example, "A newly acquired US client, who we don't currently bank in the US, has regional headquarters based in Shanghai. It has been banking with a number of different banks in China, India, Singapore, and Australia. Recently, it has decided to move more and more of its business to HSBC in all of those places. We're working with colleagues in India, Singapore, Australia, Hong Kong, and so on to provide a seamless service across the Asia Pacific region. And that is a very powerful capability that helps our clients."

He said HSBC naturally offers its clients core banking services such as credit facilities but also brings the benefits of international connectivity and a deep understanding of the Chinese market to help clients.

"A major part of our offering and where we provide real value to our clients is our payments in cash management business, which offers liquidity solutions, including cash pooling.

"Companies can pool their cash both within China and across Asia-Pacific, to minimize the amount of short-term capital facilities they need.

"HSBC is able to pool their cash reserves from these different subsidiaries and can move it, on an intraday basis, to support the businesses that require a bit more liquidity and that way clients are effectively borrowing from themselves, without having to borrow from us or any other bank," Man said.

He noted that it's not only the international network that is a boon to FIEs, HSBC has the most extensive office network of the international banks operating in China.

"They are able to mirror most, if not all, of their clients' office locations across China. Additionally, HSBC is differentiated from the local banks as their offices aren't in competition with each other and can work together to the benefit of HSBC's clients," Man said.

Personal relationship

While the unique services, international connectivity and extensive Chinese network are hugely important to HSBC's growing client base of FIEs, it's often the personal relationships they build up with the country desk RMs that are most valued.

According to Man, the international team at HSBC's country desks is drawn from experienced bankers who have worked at other HSBC offices across the globe.

The RMs have worked for many years at HSBC in their home countries in a similar role and are well experienced at working with large, multinational companies.

They know how clients from Europe, Asia, North America or South America think and how they operate. The other big advantage is that they will also know most of their colleagues in their home countries. That helps in the dialogue between the clients' domestic and China offices to ensure HSBC provides a seamless service," Man said.

"We don't like changing relationship managers too often. Good relationships build up between clients and their banking relationship manager.

"It's an important and natural development as the RMs will often assist their client for several years and we often find that this personal connection will endure even when a member of the clients' team with whom we've been dealing moves to a new firm, they then often bring that business to HSBC - a testament to how highly they value our services and the trust they have with our RMs," Man said.

Finding success

He said the regulatory environment varies from country to country and companies looking to invest in China need to work with parties like HSBC who really understand how things work.

He added that HSBC spends a lot of time to get the knowledge and experience to be able to advise their international clients on the best way to address the China market.

"My suggestion for companies thinking of investing here is to really take the time to study the market. What works in other countries might not work here.

"China is a huge market with a lot of variety and so there are a lot of regional differences. Doing business in Shanghai might be very different from doing business in Chengdu or Beijing so you really need to study and think carefully about how you are going to address the market in different parts of China.

"You need to pick your partners with care and you can be absolutely sure that you've got a trusted banking partner here if you work with us," Man said.