Global payment services group Western Union has reported increased client appetite for making payments to China in its local currency, the renminbi (RMB).
It said that its UK clients increased the number of RMB payments to China by nearly 10% in Q212 compared to the previous quarter. Growth in UK RMB payments was driven mainly by small and medium-sized enterprises’ (SME) trade with China. In the US, RMB payments rose over 15% during the same period, while France and Australia recorded increases of approximately 30% and 25% respectively.
Gareth Heald, regional finance director for Europe, Middle East and Africa (EMEA) at Western Union Business Solutions, said: “It is clear British companies are starting to re-evaluate how they transact business with China. While the vast majority of payments are still being converted from sterling into US dollars, in a very short period of time we have seen a definite increase in the number and value of payments companies are sending to China using the RMB, particularly within the SME sector.
“British SMEs are doing what is necessary to gain a competitive edge in a difficult economy. This is encouraging, but the UK needs to be mindful of global competition. China is Britain’s third largest import trade partner and is not a market in which UK businesses can afford to be left behind.”
The group adds that increasing RMB payment volumes are consistent with the findings of its research that revealed a desire by Chinese companies to receive payments in RMB; 20% of the companies surveyed stated they added fees of, on average, 3% to their invoices to overseas buyers to cover the foreign exchange (FX) costs, representing an estimated £180m cost to UK businesses.
“UK SMEs are adapting the way they conduct business to suit the new environment,” said Heald. “By-passing the US dollar middleman when trading with China can help them gain a competitive edge in their negotiations and shave off some of the hidden costs they can incur when paying in US dollars.”
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