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Alexander Hamilton Awards

Opening the Credit Umbrella in China

Honeywell wins the 2017 Gold Alexander Hamilton Award for Best Practices in Restricted/Emerging Markets.

Honeywell has a significant—and expanding—presence in China. But managing a treasury function there requires creative thinking. “China is a very unique market,” says Lawrence Chang, China treasury manager for Honeywell. “Its banking system is different from those of other countries. We have to understand the banks’ mind-set and find a mutually beneficial way to enlist their cooperation, while at the same time controlling risk.”

These were top-of-mind considerations when the global conglomerate looked at revamping its credit facilities in the country. Its Chinese businesses are cash-rich, but many require bank guaranties—such as warranty bonds, prepayment bonds, and performance bonds—as well as bank acceptance drafts, which are a standard method of payment within the Chinese auto industry. Historically, each of Honeywell’s four legal entities in China maintained a separate line of credit with a local bank branch to issue these agreements.

Maintaining four separate lines of credit was inefficient, Chang explains: “From an operations perspective, we had four individual entities going through the same process with four different Bank of China branches. They would each negotiate bank fees individually and then go through the same internal approval and legal review processes.” There was a lot of duplication of activities in this environment.

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Meg Waters

Meg Waters

Meg Waters is the editor in chief of Treasury & Risk. She is the former editor in chief of BPM Magazine and the former managing editor of Business Finance.

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