The global financial crisis of 2008-09 triggered a radical reshaping of the corporate treasury landscape. While moving cash around a company as efficiently and effectively as possible is an age-old problem for treasurers, its successful management has become even more challenging in the post-crisis era.
Business owners prepare for the worst, taking out assurances by choice and by law to protect their company. Yet for some reason, while they protect their creditors and bottom line at home, when entrepreneurs go abroad they often overlook one detail that can make the difference between a good quarter and one they’d rather forget.
In mid-January this year, the Chinese renminbi (RMB) strengthened to a rate of 6.0406, its strongest level against the US dollar (USD) since China de-pegged its currency from the dollar in 2005. Since that time, USD/RMB had effectively been a one-way bet; the RMB was both an attractive vehicle for carry traders seeking to exploit the renminbi’s juicy yield - currently almost 5%. Additionally, it was a way for corporate treasurers to boost profits, often using structured derivatives (such as target redemption forwards) to capitalise on a view that the RMB would continue to strengthen.
Since China reopened its insurance markets in the 1980s, the Asian giant has become one of the fastest growing insurance markets in the world, with the nominal annual premium growth rate of the property and casualty (P&C) sector in the past 10 years reaching about 22%. According to industry figures, China’s premium volume of US$126bn ranked it as the third largest P&C market worldwide in 2013, only marginally behind Germany’s US$133bn (the US remains a distant leader with a P&C premium volume of US$726bn). As at the end of 2013, China’s total insurance assets amounted to US$1,338bn, of which US$177bn stemmed from the P&C sector.