Half of all international companies in Hong Kong and 30% in mainland China are now using the renminbi (RMB) to conduct cross-border business, according to a survey by HSBC.
The survey also found that 53% of Chinese businesses surveyed would offer discounts of up to 5% for transactions settled in RMB.
“Businesses are continuously searching for ways to reduce costs and find a competitive advantage,” said Simon Constantinides, HSBC’s regional head of global trade and receivables finance, Asia-Pacific. “There are very real monetary benefits for businesses using the RMB, a 5% saving across a buyer’s total China spend could be quite significant.”
Fewer businesses outside Hong Kong and mainland China are taking advantage of the RMB as a means to gain competitive advantage, with 11% of businesses surveyed in Singapore, 11% in the UK, 9% in Germany, 9% in the US and 7% in Australia currently using RMB. However, 52% of companies surveyed admitted to having a limited understanding of the internationalisation of RMB and its benefits while 51% of companies insisted that RMB usage would increase if the procedures were further simplified.
Despite China’s growing trade with the rest of the world, 61% of Chinese companies said their counterparties were unwilling to consider using RMB. The main reasons for companies across the globe not using RMB for cross-border business include not perceiving a clear benefit (38%), counterparties who are unwilling to use RMB (34%) and not fully considering the use of it (31%).
While many respondents did not currently perceive the benefits of RMB, 24% of those surveyed expected to start using the currency within the next five years to mitigate foreign exchange (FX) risk (59%) and benefit from better pricing (42%) and market disparities between onshore and offshore RMB markets (39%).
While 73% of all companies using the Chinese currency expect their RMB cross-border business to grow during the next five years, 26% estimated growth of more than 10% in 2013. The main drivers for those using RMB were to mitigate FX risk (48%), meet demand from their counterparties (46%) and convenience (42%).
“It is clear that Chinese traders are prepared to share the benefit gained from removing the currency risk from within their cost base,” said Constantinides. “Businesses trading with China that fail to seize the opportunity of using the RMB may be losing out to their competitors – it’s not a level playing field.”
HSBC commissioned Neilson to conduct a market survey of more than 700 companies conducting international business with China regarding their usage of RMB.
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