Major companies in Taiwan, both locally based and multinational corporations (MNCs), will increasingly use offshore China renminbi (RMB) for payments, according to Bank of America Merrill Lynch.
BofA Merrill collected and analysed data from Taiwan-based treasurers and chief financial officers (CFOs) who attended the bank’s global transaction services’ (GTS) annual Taiwan Treasury Exchange conference held in Taipei.
According to Taiwan’s leading treasurers, offshore RMB usage in cross-border payments continues to expand and will gain further traction in 2015. Fifty-five per cent of Taiwan-based treasurers polled stated that the RMB is the most relevant currency to the future of their business, ahead of the US dollar (USD) at 29% and the Taiwan dollar (TWD) at 13%.
Offshore RMB is currently used by over one-third of Taiwan corporations, with utilisation in international business poised to expand significantly, said BofA Merrill. For instance, around 30% of Taiwan-based treasurers estimate that offshore RMB will be used more frequently by their corporations for cross-border payments over the next year.
Outside of Greater China – Hong Kong and Taiwan – treasurers also see opportunities to expand offshore RMB payments into other geographies. Around one in four Taiwan-based treasurers forecast that their corporations will use offshore RMB for cross-border payments into regions outside of Greater China, including Southeast Asia and Europe, over the coming year.
“Taiwan’s corporations will continue to embrace the opportunities afforded by the ongoing RMB internationalisation programme, which is consistent with our ongoing dialogue with clients,” said Kitty Yen, head of corporate treasury sales, Taiwan, at BofA Merrill.
“As currency liberalisation will continue and business ties with China will inevitably evolve further, Taiwan-based treasurers understand that having a sustainable RMB strategy will be an increasingly vital component of their larger treasury management operations and structure.”
Taiwan-based treasurers also believe full convertibility of the RMB will be a measured and controlled process, which is consistent with statements made by China’s policymakers, according to the bank. Over 40% of respondents believe that that the RMB will be fully convertible by 2020, while about 55% of Taiwan-based treasurers estimate that full convertibility will not be achieved within this timeframe.
Other key findings include:
- Corporations in Taiwan cite intra-Asia opportunities as a driver of future revenue. Sixty-one per cent of respondents believe that Asia Pacific offers the greatest opportunity currently, compared to 18% in North America and 12% in the European Union.
- Foreign exchange (FX) will increasingly impact treasury performance in Taiwan. Around two-thirds of respondents cite FX as a primary driver of treasury performance in 2014.
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