HSBC has signed the first Rmb-denominated receivables finance deal between two non-mainland China companies – Hong Kong’s Milagros and the UK’s Debenhams.
The bank is providing Milagros with a US$1.5mn factoring facility that enables the manufacturer to invoice and settle sales of winter wear, handbags and accessories to department store Debenhams in Rmb.
According to Milagros’ director Herbert Lam, invoicing in Rmb will reduce costs for both parties. “Switching to an Rmb facility is a win-win move for us and for Debenhams. Most of our costs are in Rmb because we manufacture in mainland China, but most of our overseas sales are currently denominated in US dollars. This creates exchange rate risk we’ve had to account for in our prices, so now we’ve removed that risk it puts us in a stronger competitive position that will benefit our customer in turn,” he says.
HSBC is now providing insured Rmb financing for Milagros’ invoices, before collecting payment directly from Debenhams.
Rakesh Bhatia, HSBC’s global head of trade and receivables finance, believes more companies will follow that example as the Rmb gains momentum in global trade. “HSBC has built Rmb trade capabilities in 59 markets because the customer demand is already there. With the Rmb predicted to become a top three global trade currency within the next five years, we expect that demand to grow exponentially,” he adds.
Just a few days ago on August 1, HSBC conducted the first Rmb-denominated transaction in India, for a pharmaceuticals company.