Against a backdrop of the yuan's internationalization and more mainland enterprises eyeing overseas forays, Hong Kong has been urged to fortify its strengths to cement its status as Asia's corporate treasury activities center. Oswald Chan examines the opportunities and challenges ahead.

In July, the Corporate Treasurer reported that Asia-based budget airline AirAsia has decided to establish its regional treasury center in Malaysia this year, and hopes it can kick-start within the year to keep up with its regional expansion by improving cash visibility and handling foreign exchange risks.

AirAsia's decision is not an isolated case - more multinational companies are beefing up efforts to locate their centralized treasury centers in Asia. London-based retailer Unilever set up its global treasury center in Mumbai in 2009 while Japanese carmaker Nissan picked Singapore as its treasury center in 2005.

A centralized treasury management (see diagram) center will ensure greater viability and transparency of cash management, better corporate governance and cash forecasting, risk exposure control, liquidity access, and more tax-efficient cash repatriation. It can also allow companies to implement orderly and satisfactorily policies to gain better yield returns for excess cash and enable corporations to obtain lower funding costs. All these value-added attributes can transform corporate treasury activities from being transaction-based to value-added decision-making.

At the Treasury Market Summit 2014 held in September, treasury market professionals reckoned that with internationalization of the yuan picking up and mainland companies expanding overseas, Hong Kong can leverage on its premier offshore yuan financing center status to enhance its position as a treasury management base.

"With yuan internationalization and Hong Kong as a leading offshore yuan financial center, the city can emerge as an Asian treasury hub. The Hong Kong government and the Hong Kong Monetary Authority should look for strategic agendas that can help Hong Kong stay competitive," said Helen Hui, Standard Chartered Banking (Hong Kong) transaction banking managing director. "Mainland companies can set up their treasury centers and use these centers as bases to tap cheaper funding outside the mainland," she added.