The FINANCIAL — As a result of the liberalisation of Chinese financial markets in recent years, the renminbi is also gaining in significance in Europe. Despite lesser GDP growth, considerable currency fluctuations and tighter regulation with regards to capital outflows, acceptance of the renminbi has risen significantly with German speaking corporate clients over the past two years. In cooperation with the market research institute FORSA, Commerzbank conducted its third renminbi survey amongst 2,400 small- and medium-sized corporate clients with business exposure to China within the D-A-CH region.
According to Commerzbank, the new survey confirms expectations from the previous ones, yet also reveals some surprises: nearly one third of the participating clients (31 percent) have already converted their invoicing to renminbi when conducting trade with China. This figure is up from 17 percent in 2016. A further 5 percent of clients are planning to convert their invoicing process within the next 12 month. Corporate customers mention four measurable advantages from invoicing in renminbi: 1) possible advantages in price negotiations (62 percent), 2) hedging of the exchange rate risk (60 percent), 3) request of the Chinese trading partner (37 percent), as well as 4) advantages in tapping the Chinese market (35 percent). Interest in hedging against the foreign exchange risk has climbed considerably since the last survey (47 percent in 2016). Nearly two thirds (64 per cent) of the surveyed companies have already used advice on the topics of Asia to adjust their existing business setups to latest changes in the regulatory and financial landscape.
Frequently mentioned barriers to accept renminbi in international trade are “current use of EUR/USD in established procedure” with 59 percent and the “preference of EUR or USD by the Chinese trading partner” with 41 percent. For the first time 13 per cent of the companies mentioned of a ‘lack of confidence in the sustainability of the currency’ or expressed concern ‘due to existing capital controls’ (12 per cent) – in our opinion this represents a reaction to the tighter capital outflow restrictions by Chinese regulators.
According to Commerzbank, following the conversion of invoicing to renminbi, corporate enterprises make active use of well-established banking products to conduct trade with China: 89 percent of the surveyed companies process their payment transactions in renminbi and 82 percent use offshore renminbi accounts. More than half of the respondents (52 percent) use renminbi term deposits to invest their excess liquidity. When safeguarding against exchange rate risks, companies make active use of standard hedging products: FX spot transactions with 68 per cent and forward transactions with 63 per cent. 42 percent of active renminbi users stated that they trade this currency electronically on FX platforms. This further indicates that the Chinese currency is complex and that advisory services are appreciated when dealing with China. Renminbi usage is in particular demand by the manufacturing sectors. China is one of the most important trading partners for European importers and exporters, which as a result increases the acceptance of renminbi in trade.