Best Cash Pooling Solution: Walsin Lihwa

Established in 1966 and headquartered in Taipei, Taiwan, Walsin Lihwa (Walsin) is a leading manufacturer of wires, cables and stainless steel in the Greater China region.

The challenge

Walsin’s HQ Treasury in Taipei manages a USD cross-border cash pool between its entities in Hong Kong and Mainland China. The liquidity structure has been instrumental in supporting the working capital needs of Walsin’s new manufacturing plant in Yantai City in Mainland China, where funding is provided to its Shanghai entity in the form of intercompany short-term USD loans. However, with the increase in USD interest rates over the last few years, intercompany borrowing costs have surged for Walsin’s Shanghai entity.

The company sought a quick and simple solution that delivered more cost-effective funding in alternate currencies to meet Walsin’s urgent working capital needs in the mainland, while ensuring compliance to China’s cross-border regulatory framework.

The solution

Walsin, together with banking partner, HSBC, innovatively navigated China’s regulatory framework, leveraging Walsin’s existing cross-border pool between Hong Kong SAR and mainland China, to deliver new internal funding efficiencies via lower-cost currencies, in a quick and compliant fashion.

Given strict controls around cross-border funding, Walsin relied on its bank’s expertise in navigating China’s regulatory landscape. As Walsin’s existing single currency cross-border pooling structure was setup under China’s State Administration of Foreign Exchange (SAFE) regulation no. 7, the framework permitted the addition of new currencies (such as RMB) into the pool, without having to undergo additional regulatory approvals.

Best practice and innovation

The company has added RMB into its existing single-currency cross-border pooling structure, allowing it to make intercompany loans in RMB to replace more costly USD funding.
The approach, which is permitted under China’s SAFE regulations, allows Walsin to implement the addition within a quick span of just two months without having to go through additional regulatory approvals, to meet the urgent needs of its new manufacturing plant in China’s Yantai City.

The new multi-currency cross-border pooling structure also opens up new liquidity optimisation and cost saving opportunities for Walsin at both the HQ and entity levels, including converting the RMB funds into USD to repay existing loans, while Walsin’s HQ can also invest the surplus USD from loan repayments to yield higher returns.

Key benefits

• Cost savings
• Headcount savings
• Process efficiencies
• Increased automation
• Risk mitigated
• Improved visibility
• Errors reduced
• Manual intervention reduced
• Future-proof solution
• Exceptional implementation (budget/time)