Half of all international companies in Hong Kong and 30% based in mainland China are now using the renminbi (RMB) currency to conduct cross-border business, according to a survey by HSBC, which has considerable implications for connectivity, trade finance and supporting technology platforms.
The survey carried out by Neilson on behalf of HSBC questioned 700 companies and also found that 53% of Chinese businesses surveyed would offer discounts of up to 5% for transactions settled in the international RMB currency.
“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.
More than 70% of all companies using the Chinese currency expect their RMB cross-border business to grow during the next five years, with 26% estimating 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.”
For banks offering trade finance platforms, ‘dim sum’ bonds and other online aids to help corporates trade with the growing Chinese economy it seems that the investment in technology platforms to serve this market might at last be ready to pay off.