Being yuan-ready gives competitive advantage, HSBC says
July 10, 2014 00:00 By THE NATION
READINESS TO do business in renminbi (RMB), also known as yuan, could give some countries' exporters a vital edge over their rivals as the world races to develop trade links with China, a new HSBC Commercial Banking survey shows.
While two-thirds of companies in mainland China and Hong Kong said foreign firms doing business with China gained 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 per cent from the United States and 42 per cent from the United Kingdom said they believed RMB usage brought financial benefits. However, fewer than a third of their German and Canadian peers share this view. More than half of respondents in the United Arab Emirates said they saw business-relationship benefits from RMB adoption, compared with 46 per cent in France and 40 per cent in Australia.
Overall, 59 per cent of decision-makers surveyed said they planned to increase their cross-border activity with mainland China over the next 12 months, rising to 86 per cent in the UK, 74 per cent in Canada, 73 per cent in the UAE and 63 per cent in France. At the same time, only 22 per cent said their company currently settled 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 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 (Bt129 trillion), China overtook the US to become the world’s largest trading nation last year. The International Monetary Fund’s projections for nominal growth in gross domestic product show that China will add about $850 billion 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 yuan will be fully convertible by 2017.
For its new 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.
One of the key findings was that 32 per cent of companies that don’t already use the RMB expect to do so in the future. The respondents also believe that the simplification of procedures (68 per cent), further liberalisation of the exchange rate (61 per cent) and expansion of transaction types that are RMB-eligible (57 per cent) would encourage them to use yuan further.