Readiness to do business in renminbi (RMB) could give some countries’ exporters a vital edge over their rivals in developing trade links with China, according to an HSBC Commercial Banking survey.
The bank polled more than 1,300 decision-makers from mainland China, Hong Kong, Singapore, Taiwan, Australia, Germany, France, Canada, the UK, the US and the United Arab Emirate (UAE) who represent companies that conduct international business with or from China.
Whilst two-thirds of companies in mainland China and Hong Kong said foreign firms doing business with China gain financial and relationship advantages from using RMB, awareness of these potential benefits varies widely overseas, according to the 11-market poll.
Half of respondents from Singapore, 44% from the US and 42% from the UK said they believe RMB usage brings financial benefits, yet less than a third of their German and Canadian peers share this view. More than half of UAE respondents said they see business relationship benefits from RMB adoption, compared with 46% in France and 40% in Australia.
Overall, 59% of decision-makers surveyed said they plan to increase their cross-border activity with mainland China over the next 12 months, rising to 86% in the UK, 74% in Canada, 73% in the UAE and 63% in France. At the same time, only 22% said their company currently settles business in RMB.
“This survey highlights a need for many companies to learn more about how the RMB can help them connect to opportunities in China and get ahead of their rivals in this highly competitive market,” said Simon Cooper, chief executive (CEO) of HSBC Commercial Banking.
“Most Chinese businesses look favourably on overseas partners who are using RMB, both because it shows commitment and because it eliminates foreign exchange risk from their cost base. Although a currency can’t guarantee commercial success in China, it’s clear that RMB should be a core component of every company’s business planning.”
With its trade in goods passing US$4 trillion, China overtook the US to become the world’s largest trading nation in 2013. The International Monetary Fund’s (IMF) projections for nominal dollar gross domestic product (GDP) show that China will add about US$850bn to global demand this year; the equivalent of adding an economy the size of Indonesia to global trade flows.
As China becomes ever more important to international businesses, the internationalisation of the RMB is creating new opportunities in trade, investment, cash management and funding. HSBC forecasts that a third of China’s trade will be settled in RMB by 2015 and that the currency will be fully convertible by 2017.
Among the other highlights of the survey:
- Outside the Greater China region (mainland China, Hong Kong and Taiwan), businesses in France (26%) and Germany (23%) report the highest levels of RMB usage.
- Of companies using the RMB to settle cross-border business today, 59% expect to use it more over the next 12 months, led by UK businesses.
- Nearly one in threecompanies that don’t use the RMB already expect to do so in the future.
- Reasons for using the RMB include requests from trading partners, reducing FX risk, convenience, winning new business and gaining better pricing.
- Those surveyed believe that the simplification of procedures (68%), further liberalisation of the exchange rate (61%) and expansion of transaction types that are RMB eligible (57%) would encourage them to further use RMB.
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