Japanese companies TDK and Toray Industries are streamlining their fund transfers to and from China to cut costs, a move many other businesses are expected to follow now that the Chinese government has eased financial regulations.
Electronic parts maker TDK will consolidate transfers of foreign-currency funds to and from subsidiaries in China by year’s end under a scheme called netting. It had previously channeled money to its nine Chinese arms individually, resulting in 151 transactions every month.
With the new system, TDK will conduct all Chinese transfers through one Shanghai company that will distribute and collect money from specific destinations within China using Citibank’s system. This will cut the number of transactions to 10 a month for TDK, the first Japanese company to gain approval for such a scheme.
The company has seen demand for funds climb from a boost in trading with local smartphone parts makers and other manufacturers, but it costs more to convert the yuan into foreign currency in China than in Japan. By consolidating the transfers, TDK hopes to lower currency exchange fees and administrative costs by a total of about 100 million yen ($940,000) every year.
Toray, a leading producer of synthetic fibers, hopes to pool its dollar assets between its China and Hong Kong operations in October under the management of Sumitomo Mitsui Banking. It will raise dollar funds in Hong Kong, where interest rates for the currency are lower, for use on the mainland.
It will begin by consolidating over 10 operations, and aims to eventually bring together all of its branches in China. By adjusting the surpluses and deficits between them, Toray could also decrease its borrowing.
Beijing first relaxed the regulations governing international fund transfers in the Shanghai Free-Trade Zone in March, then implemented the reforms nationwide in June.
Many Japanese companies in a variety of industries, especially in manufacturing, have operations in China. Increased trade leads to higher demand for funds, indicating that more businesses could adopt similar schemes.
