Date
20 November 2017
HSBC believes that a third of China's trade will be settled in renminbi by 2015 and that the currency could become fully convertible by 2017. Photo: Reuters
HSBC believes that a third of China's trade will be settled in renminbi by 2015 and that the currency could become fully convertible by 2017. Photo: Reuters

Foreign firms yet to seize the RMB benefit in trade: HSBC

Two-thirds of Chinese and Hong Kong firms admit that using the renminbi in trade gives exporters a vital edge over their rivals, while foreign firms are still largely unaware of the advantage, HSBC Holdings plc said on Wednesday.

“Most Chinese businesses look favorably on overseas partners who are using the yuan, as it shows commitment and eliminates foreign exchange risk from their cost base. Yuan should be a core component of every company’s business planning although it cannot guarantee success in China,” said Simon Cooper, HSBC’s chief executive for global commercial banking.

“Many companies need to be educated on how yuan can help them connect to opportunities in China and get ahead of their rivals in this highly competitive market,” he said, citing a poll conducted by the lender across 11 markets.

HSBC expects that a third of China’s trade will be settled in renminbi by 2015 and that the currency will be fully convertible by 2017. In 2013, there was a year-on-year increase of 46 percent in the use of the yuan for trade settlement in Hong Kong. 

France saw the highest level of renminbi usage at 26 percent among the countries outside of the Greater China region while Germany came in the next at 23 percent.

As the currency is not fully convertible, respondents believed that simplification of procedures, further liberalization of the exchange rate and expansion of transaction types that are yuan-eligible would encourage them to further use the currency.

China has overtaken the US to become the world’s largest trading nation last year with US$4 trillion trade in goods. The International Monetary Fund has projected China will add about US$850 billion to global demand this year.

In Hong Kong, 58 percent of respondents said they use the yuan, up from 50 percent a year earlier, and far more than the global average of 22 percent. About 56 percent of the yuan users expect cross-border renminbi usage to grow in the next 12 months. Lower cost is the major motivation for them to use renminbi in cross-border trade, they say.

Half of the respondents from Singapore, 44 percent from the United States and 42 percent from the United Kingdom said they believe renminbi usage brings financial benefits. However, less than a third of their German and Canadian peers share this view.

Meanwhile, more than half of United Arab Emirates respondents said they see business relationship benefits from renminbi adoption, compared with 46 percent in France and 40 percent in Australia.

For its survey, HSBC polled more than 1,300 decision-makers from mainland China, Hong Kong, Singapore, Taiwan, Australia, Germany, France, Canada, the UK, the US and the UAE who represent companies that conduct international business with or from China.

– Contact the reporter at [email protected]

RC

Ayishah Ma is a financial reporter on Greater China issues.

EJI Weekly Newsletter

Please click here to unsubscribe