Most European groups setting up in China assume funding works the way it does at home, but unfortunately that often isn't the case. Money is plentiful and cheap onshore, but moving it across the border is regulated, and the structure you choose in year one tends to stick for a long time.

This note sets out the main routes for funding a Chinese subsidiary and what each one costs you in flexibility.

Where a cash pool is largely a banking product in most European countries, in China it is also a regulatory arrangement. Cross border flows are subject to capital account controls, and lending between group companies is limited by quotas linked to each entity's balance sheet. A group therefore files its cash pool with the authorities, and the bank running the pool operates it within the approved limits.

This note sets out how such a pool is structured, what it can be used for and which options are available.