Perceptions gap highlights potential leaders and laggards as
trading nations strive to boost China exports***
In the global race to develop trade links with China, readiness to do business in renminbi (RMB) could give some countries’ exporters a vital edge over their rivals, a new HSBC Commercial Banking survey shows.
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 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.”
“The findings confirm the growing importance of RMB as a world currency. As part of HSBC Group, HSBC Bank Malta, which is the only bank in Malta offering Direct Trade Settlement in RMB, is well positioned to assist its customers wanting to carry out transactions in RMB as well as facilitate trade through this currency, as part of our ongoing Malta Trade for Growth initiative,” said Michel Cordina, Head of Commercial Banking at HSBC Malta.
The Head of Global Banking and Markets for HSBC Malta James Woodeson said: “Aside from creating new trade avenues, the growing use of China’s currency worldwide is also generating capital investment and financing opportunities for companies doing business internationally. The benefits for corporates using RMB include improving working capital, simplifying processes and mitigating payment risks.”
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With its trade in goods passing US$4 trillion, China overtook the US to become the world’s largest trading nation in 2013. The IMF’s projections for nominal dollar GDP show that China will add about US$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 currency 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.
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.
- 32% of companies 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.
Notes to Editors:
HSBC Commercial Banking
For nearly 150 years we have been where the growth is, connecting customers to opportunities. Today, HSBC Commercial Banking serves businesses ranging from small enterprises to large multinationals in almost 60 developed and faster-growing markets around the world. Whether it is working capital, trade finance or payments and cash management solutions, we provide the tools and expertise that businesses need to thrive. With a network covering three quarters of global commerce, we make HSBC the world’s leading international trade and business bank. For more information see www.hsbc.com/1/2/business-and-commercial