China expands cross-border cash pooling to benefit multinationals

China has expanded a cross-border cash pooling program for multinational companies nationwide, a move aimed at enabling a broader range of smaller multinationals to better manage cross-border funds.

The People's Bank of China and the State Administration of Foreign Exchange jointly issued a notice on Friday to roll out nationwide the centralized operation of cross-border funds in both renminbi and foreign currencies for multinational companies. The rules will take effect on Sept 14.

The move extends a pilot program nationwide, allowing more companies to benefit from streamlined cross-border fund management.

The rules make it easier for multinationals to pool and allocate cross-border funds by consolidating quotas for external borrowing and overseas lending and allowing companies to determine how much of those quotas to pool.

Companies will be able to manage renminbi and foreign currencies through the same account, while being encouraged to prioritize the use of renminbi.

Under the new rules, multinational groups seeking to establish a cross-border cash pool are required to meet a minimum scale threshold, with their domestic member companies recording combined cross-border receipts and payments of at least 700 million yuan ($104 million) in the previous year.

Alternatively, they can qualify if their domestic members had combined annual revenue of at least 1 billion yuan and overseas members had revenue of at least 200 million yuan.

The thresholds are halved for groups whose lead company is registered in a pilot free trade zone.

The notice also streamlines registration procedures while strengthening ongoing supervision to guard against cross-border capital flow risks.