When it comes to China, the old timers of banking–that is, aside from the several powerful China-based banks–are Standard Chartered and HSBC. Both U.K.-based financial institutions have roots dating back to the colonial period in China and have operated relatively sizable branch networks since the mid-19th century. The gap between foreign banks is shrinking: With the largest network of any foreign bank, HSBC, for instance, employs more than 1,000 and maintains 10 branches, three subbranches and two representative offices. In contrast, Deutsche Bank operates only four branch offices, but its staff is up 200 since 2001 and now sits at close to 1,000, with more than 20 dedicated to cash management sales and support. Banks like BofA and ABN Amro have also been making a strong push to expand their China presence.

But none of the global banks has a branch network sufficient to allow multinational companies to avoid working with local banks, which necessitates the establishment of strategic alliances with domestic banks. "In this country, a bank with 300 branches would be small," notes Shenglin Ben, head of ABN Amro's working capital group in China. "The Chinese banks see us as partners more than competitors."

EVERYBODY GRAB A PARTNER

Treasury staffs of multinationals are often thankful for the partnerships. Take, for instance, a company like Eastman Chemical Co., based in Kingsport, Tenn., which has been actively pursuing additional business in China in recent years. It has several joint-venture manufacturing operations there and has divested some wholly owned manufacturing sites. It started a trading company to capitalize on special privileges that trading companies enjoy in specified zones. "We consider China a very important country. We're active already and evaluating additional ventures," reports Michael Watts, director of corporate finance.

But Eastman Chemical has no treasury specialists in China, so it has to manage a lot of its cash flows there remotely or via nontreasury employees. So far, its sales in China are mostly dollar denominated, but the company is expecting to start selling more in local currency, so treasury is getting up to speed about the currency implications of collecting in renminbi (Rmb).

For banking services, Eastman Chemical's preferred providers are the global banks in its credit syndicate: HSBC, Citigroup and the three largest Japanese banks, Watts explains. Without treasury people on the ground in China, it's easier to work with the big relationship banks, he points out. Language is a factor in that decision, he concedes. The global banks have multilingual staffs in China. The Chinese banks often do not, so working with a local bank often means using in-country support from Eastman Chemical's local accounting staff, he explains. The global banks have correspondent banking networks in China to clear checks, but can only offer Rmb services in a limited number of branch locations.

For Eastman Chemical, the decision to go with global banks also rests on their technological sophistication compared with their Chinese counterparts. With the big banks, balances can be managed and wires initiated at those banks by Eastman Chemical treasury staff outside China. But the global banks generally don't offer consolidated reporting for accounts in Chinese banks, so treasury still often has to depend on local nontreasury staff to supply balance and transaction information, Watts explains.

To act as intermediaries among multinationals, Chinese banks and government officials, global banks have competed intensely for the cream of the crop of Chinese nationals, like Karen Chan, with banking savvy and fluent English. Chan, for instance, spent her whole life in the People's Republic of China. She took her first job out of college with the Development Bank of Singapore when it was opening a China office, then joined Standard Chartered in 1997 and moved up quickly through its ranks for six years before joining BofA last November. "She definitely came with a track record. We knew she was the one to lead our team, to be our point person," says Evans. "She's a good listener. She quickly becomes a trusted adviser."

But it didn't take long for Standard Chartered to miss the ambitious and talented Karen Chan, and it managed to lure her back this past August with another significant promotion. Although she has never lived in an English-speaking country, Chan studied classroom English since elementary school and, for nearly seven years, has worked in a professional environment where she speaks English most of the time, which accounts for speech that is spontaneous, nuanced but accented. Married and the mother of one daughter, Chan is the only child of two parents who both worked in government-owned businesses. Her father is a member of the Communist Party; her mother, now retired, is not. "I've never been interested in politics. I was always studying and trying to prepare for a good career," Chan explains.

But while Standard Chartered's Chan is one of a handful, she is not unique. Although BofA was sad to lose her, it had other China-savvy hands to lead its business. Last June Zhen (Leo) Yin, formerly head of product for HSBC in China, switched teams to work for BofA. His qualifications, according to BofA's Evans: knowledge of the changing scope of products; appreciation of which creative solutions for clients are workable in China; and strong relationships with China's Big Four Banks to deliver the kind of "seamless partner arrangements corporate customers have come to expect in other parts of the world."

A FEW GOOD BANKERS

For Citigroup, the key China banker is Huang Xiaoguang, a 45-year-old Shanghai native who has been with Citi for seven years and currently is general manager of the Shanghai branch, managing director/head of corporate bank for east and north China and head of corporate finance for all of China. He grew up in China, but spent six years outside the country, most of that time in the Netherlands, earning an M.B.A. there on a United Nations scholarship and working as a project manager for Phillips and AT&T. Before joining Citi, he worked seven years for ABN Amro in Shanghai, Hong Kong and Singapore. He learned his English in Chinese classrooms, starting in third grade.

Then, there's ABN's Ben. A veteran of 10 years in China for the Netherlands-based bank, Ben spent the early 1990s in the U.S., getting a Ph.D. in economics from Purdue University. He sees a need not only among multinationals for treasury services in China, but also among a few emerging Chinese corporations that are ready for treasury sophistication. "We've all had to climb the learning curve rapidly," he observes.

But not all multinationals are ready to work with the global banks. So far, Network Appliance Inc., the Sunnyvale, Calif., computer data storage venture, has found it easier to work with Chinese banks, reports Chris Afarian, assistant treasurer. "We're selling more in China and expanding our banking relationships there. The foreign banks usually aren't allowed by the government to do some of the things we need," he explains.

DON'T TRY THIS AT HOME

"You certainly do need help setting up a basic treasury operation in China," Afarian says. There are obstacles, but there are always ways of getting things done. It will get easier as regulatory restrictions are gradually lifted on foreign banks and the Chinese add functionality and improve the technology of their payment infrastructure, he predicts. NetApp collects mostly U.S. dollars in accounts outside China, "which simplifies our situation quite a bit," he concedes.

Things are already becoming less complex for multinational treasury managers in China, and the future looks even brighter. Electronic payment systems are evolving, and the Internet is being used increasingly as a banking platform, says Shirley Chan, Deutsche Bank's Hong Kong-based head of cash management for Greater China. The Chinese ban on intercompany loans was a major impediment to efficient liquidity management until the Chinese government decided to allow "entrust" loans, an indirect vehicle for moving cash from a subsidiary that has it to one that needs it, she explains. It works by letting the company invest funds with a bank, which then lends the funds to the needy subsidiary. The bank lends entrusted funds, not deposits, so no loan is booked on the bank's balance sheet. The bank takes no risk, and cost is lower than a straight bank loan.

Even so, no one expects the Chinese regulatory maze to come tumbling down any time soon, which guarantees bankers like Karen Chan a long and profitable career ahead.