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Being a CFO in China: Interview with Olivier Masurel, Vice GM and CFO of 3Suisses, China

|Includes: BAC, Citigroup Inc. (C), CAF, FXI

This first appeared in the CMR Business Quarterly

Being a CFO in China: Interview with Olivier Masurel, Vice GM and CFO of 3Suisses, China

Olivier Masurel is the Vice GM and CFO of women’s fashion brand 3Suisses in China. CMR recently sat down with Mr. Masurel to learn more about the day to day of being a CFO in China, and his outlook for China business going forward.

CMR: The financial crisis has led to a chilling of the credit markets in the US and Europe. Many critics argue that banks are not lending enough to businesses in the US which is preventing a recovery.  How has the financial crisis affected China’s credit markets?  Has lending evaporated in China?

OM: We have actually seen a loosening of the credit markets in China since January with bank lending going up over $275 million USD in March alone. The large State-Owned Chinese banks especially have become more willing to provide local financing to help businesses grow during these difficult times.  There have not been fears of banks collapsing in China like the panic we had hitting Citigroup and Bank of America, which has led to a stable, functioning credit system.  

The strong credit lending has given companies like us better ability to increase loan capacity. The only problem is we don’t know how long the access to easy credit will last. In a month or so we might see restrictions again as we saw last year when the Government put lending restrictions, which is causing a rush by many companies to take out loans now. For now, though, local sources are a good place to look for financing which is why China has been less hit than other parts of the world.  The credit markets are still working which is the basis for a sound economy.

CMR:  How do you make long term plans for your company in the context of often changing laws and regulations?  

OM: It’s really important to have someone in the company, or outside advisers, that stays abreast of such changes and know how to maneuver in them. For example, companies often use shareholder loans from the parent company as a way to repatriate money since it is hard to send earnings out of the country and because the RMB remains a non-convertible currency.  Currently SML term shareholder loans are authorized within the company's borrowing gap. Local authorities had been more flexible on this restriction in the past. However, they did one a sudden ask our company to fully comply with the regulation forcing us to immediatly repay our shareholder loan. Individual arrangements are common practise in China. However, their essence make it difficult to plan long-term."

The role of the banker is therefore critical here, to help you navigate the laws and come up with backup plans. Having a good lawyer is also key to help you find ways to maneuver legally, and they are often less conservative than bankers. It was our lawyers, that initially supported our idea to make a capital increase in EUR while our capital was registered in USD. On the opposite, the bank holding our capital account was plainly saying it was impossible. In the end we did save a lot of money due to RMB appreciation against the dollar.

CMR: Many critics complain that the Government is not transparent, and that officials are difficult to talk to. How do your experiences working with the government measure up? 

OM: Actually, I have a very high opinion of the local government in Shanghai. I was afraid to approach the local officials when I first arrived here, but I have since learned that they are a very good resource, and very helpful for clarification and explanation of laws. As long as you approach them in the right way, and frame your questions in the appropriate way, if you have a question, you can ask. The rules change so quickly here and there is a lot of discretion at the local level that you have to be able to talk with local officials.  In my experiences, they have been very helpful in helping us interpret laws and determine how to best proceed to make sure everything is done legally but in a way that maximizes are business efforts.   

CMR: What other key lessons have you learned as CFO in China? 

OM: I want to emphasize the value of getting a local team that you trust. Our accountant, for example, is absolutely indispensable. She has been with us for ten years, and I rely on her for a lot of issues. She knows all the banking regulations by heart, so she is incredibly helpful for dealing with banks. She’s also really the bridge between the CFO and the government. She knows how to talk to the officials, how to present and sell our questions in the right way, to build our relationship with them. So much is in the hands of the local government here, it’s so important to have someone like her in your camp.  

CMR: What is your outlook for China going forward? 

OM: China has seen a slowdown over the past few months but in all I remain very positive on the economy. Ecommerce still managed to grow at a rate of 128% by volume in 2008. And I have faith in the government, I think they have enacted very smart regulations.  They have moved quickly which has helped build up business and consumer confidence.   I’m still very bullish on China.