Citi Treasury and Trade Solutions
38
With increasing revenues generated overseas,
the company wanted to better manage and
mobilize their offshore cash reserves to
maintain competitive advantage. As their
operations spread across extensive time zones
and involve multiple functional currencies, ZTE
needed a scalable solution to cover entities
across regions efficiently.
The Solution
ZTE partnered with Citi to implement a holistic
cash management solution through a phased
approach to:
• Thoroughly understand ZTE’s global flows,
business objectives and payment/collection
processes.
• Achieve visibility and control at headquarter
level via electronic banking of key banking
partners for countries where cross-border
liquidity structures are not allowed. Together
with ZTE’s partner banks, this solution was
implemented across 25 countries in South,
Central and West Africa.
• Establish a single currency Target Balancing
Structure for key currencies, ensuring
adherence to local regulations.
• Extend the cross-border Target Balancing
Structure to a global one.
The first phase of the cross-border sweep,
implemented in November 2014, was a EUR
Target Balancing Structure across 15 countries
in Europe. The EUR header account was opened
in London. Existing EUR subsidiary accounts in
Austria, Belgium, Czech Republic, France,
Germany, Greece, Hungary, Italy, Netherlands,
Poland, Portugal, Romania, Slovakia, Spain and
UK swept balances to the header.
The structure also incorporated the SSC process
of ZTE, minimizing intraday overdraft to enhance
control in cash forecasting and planning for
subsidiaries. This process is automated, by
allowing the target balance to maintain daily
payment needs, while up-streaming surplus
funds to the header account. This minimizes
unnecessary intercompany transactions and
withholding tax. Furthermore, in case of a
temporary shortfall in meeting payment
obligations, ZTE’s SSC will manage cash flow as
part of their centralized payment process and
intercompany lending booking. This process
enhances control prior to transactions and
ensures cash flow forecasting discipline to
minimize unexpected overdrafts in the overall
pool position.
The Result
The holistic solution and phased approached
enabled ZTE’s treasury to get buy in from
headquarters and its subsidiaries, moving
quickly to implementation within three months.
The setup of the pooling structure allowed
ZTE to further centralize its collections and
payments in the SSC framework, enhancing the
company’s visibility and control on liquidity at
the group level.
The size of ZTE’s cross-border cash pooling and
the number of countries involved are significant
among Chinese headquartered multinational
companies. ZTE had a clear strategy to build
world-class global capabilities, complemented by
innovation in their pooling structure, alongside
the integration of SSC controls and automation
to maximize efficiency and control as well as
enhance cash flow forecasting capabilities.
The holistic solution and phased approached enabled ZTE’s treasury
to get buy in from headquarters and its subsidiaries, moving quickly to
implementation within three months. The setup of the pooling structure
allowed ZTE to further centralize its collections and payments in the SSC
framework, enhancing the company’s visibility and control on liquidity at the
group level.
