Funding for businesses in China: a transfer pricing perspective
March 25, 2008
H Ching Tan and Douglas Fone, of Transfer Pricing Associates, examine the transfer pricing issues in funding for Chinese enterprises
Funding has always been a key factor in any multinational company, driving innovation, allowing for expansion and growth, facilitating restructures in business operations and generally, allowing companies to engage in activities to drive profits. For the same reason, cost of funds is quite often a burdensome expense within a multinational profit and loss statement. In an effort to keep cost of funds low within a group, multinational companies have long taken a global approach to manage funding within the group on an efficient basis. It is common for companies with stronger credit ratings within a multinational group (usually the parent company) to assist its associated entities (with weaker credit ratings) by taking up external loans and providing intra-group loans to its related entities.
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