Discount for settling trade in Rmb
A survey of mainland Chinese corporates has revealed the potential cost-benefit for companies outside China settling trade in renminbi (Rmb).
HSBC spoke to 692 of its mainland corporate customers and 41% said they would be willing to offer discounts of up to 3% in return for using Rmb to settle trade, with a further 9% saying they would offer more than 3%.
Chinese corporates are also planning to expand their own transactional use of Rmb, with 77% of those polled saying they expect one third of Chinese trade to be conducted in Rmb by 2015, and 30% are planning to use the currency for investment purposes in the next year.
The Rmb has been growing as a cross-border trade currency since it was initially floated in 2005 and Andrew Sutton, senior vice-president Rmb internationalisation at HSBC China tells GTR that the survey’s findings “demonstrate that renminbi trade is here to stay” and that the “willingness of Chinese firms to offer discounts or better terms in exchange for Rmb trade is unlikely to fade with time”.
Along with greater exchange rate flexibility and simplified transaction processing, respondents highlighted exchange risk management, operational convenience and accounting advantages as reasons for opting for Rmb in cross-border trade.
Sutton says that many companies doing business with China are already feeling the benefit of Rmb savings. He says: “We encourage all companies that trade with China to open dialogue with their mainland counterparties to see whether switching to Rmb might be a mutually beneficial move.”