12 Sept 2014
A YRD "Going Out" Case Study (1): Corporate Financial Services for Promoting Overseas Investment
The representative of Boneng Transmission (Suzhou) Co Ltd candidly talked about the company’s plan to secure funds at lower costs by way of debt financing in Hong Kong so as to finance its investments overseas. Given Hong Kong’s status as a leading international financial centre in the region, the city can not only assist Chinese mainland enterprises in optimising the funding sources, but can also provide comprehensive financial and tax planning services, as well as other forms of professional support. It is for these reasons that Hong Kong is Boneng Transmission’s preferred platform for outward investments.
Focus on corporate financing arrangements
The company’s finance manager, Pan Xiangliang, said: “Boneng Transmission is currently seeking to expand its investments overseas, establish contact with end-user customers and enhance its ability to serve overseas customers. Naturally, funds are required to kick-start these plans and we are hoping to secure financing at a lower cost by using Hong Kong's corporate financing services, including its debt financing facilities.”
“Furthermore, the company needs to gain an understanding of the laws, regulations and other practical issues related to outward investment, such as local environmental protection and labour requirements. As such, the company hopes to obtain one-stop, professional services in Hong Kong in support of its investment arrangements. Our requirements range from corporate finance, financial and tax planning, to actual operation.”
Boneng designs and manufactures high-quality spiral bevel gears, planetary gears, helical and worm gears, variable speed drivers and other transmission products. These are predominately used in equipment for the metallurgy, mining, petrochemical, power, construction machinery, vessels, lifting transfer, and logistics sectors. It also provides transmission parts for non-standard equipment for use in stages, ropeways and multi-storey garages.
The company has an annual production capacity of 80,000 units of transmission equipment and has offices in more than 40 mainland cities. Its products are sold to domestic and foreign enterprises across China and are also exported directly to the United Kingdom, Russia, Southeast Asia and a number of other regional markets. In addition, Boneng has subsidiaries in the United States and India, providing sales, installation and other services for its clients in those locations.
Professional services solve practical problems
Boneng’s core competitiveness lies in its R&D and design capabilities. The company provides clients with standard and non-standard designs using highly-modular products coupled with adaptive design solutions. In this way, it meets the varied industrial requirements of a range of sectors with cost-effective quality products. It quickly and efficiently provides clients with customised design services, as well as products and parts that meet the specific requirements of any client’s specialised equipment.
The company is planning to expand its presence in the US and to set up subsidiaries and assembly lines in Europe, including Germany and France. It intends to provide its overseas corporate clients with comprehensive technical consulting, design, installation and maintenance services. It plans to do this by pooling the expertise of its mainland transmission technology experts, as well as the application engineers and after-sale service technicians at its overseas offices.
Pan said: “Although the production lines we set up in close proximity to our clients in Europe and the US only engage in the assembly of parts and components made in China, these countries often require these production facilities to undergo environmental assessment to ensure that they comply with local environmental regulations. The hiring of local engineers and technicians must also be in compliance with the relevant labour laws, as well as requirements with regard to employee benefits, labour protection and labour union.”
According to Pan, in addition to securing funds at a lower cost in Hong Kong, Boneng can also make use of the legal, accounting and other professional services available in the city. As such, it can resolve any issues the company encounters in the course of its “going out” initiatives. The free flow of information in Hong Kong also makes it convenient for the company to obtain information on overseas investments. The city is, therefore, an ideal service platform for Boneng when it comes to making outward direct investments.
Remark: For more information about China’s “going out”, please refer to the research article Jiangsu/YRD: Hong Kong Service Opportunities Amid China's "Going Out" Initiative and the research report China's "Going Out" Initiative: Jiangsu/YRD Demand for Professional Services of the HKTDC Research