The FINANCIAL — Only 22 per cent of businesses are using the renminbi (RMB) for cross-border trade with China despite the country’s growing importance to the global economy, according to research carried out for HSBC.
The RMB Internationalisation Study 2014 covered more than 1,300 businesses in 11 countries and territories. It also found that 32 per cent of the companies trading with China that did not currently use the RMB were planning to do so in the future.
Outside mainland China, Taiwan and Hong Kong, RMB use was led by companies in France and Germany. Among companies already using the currency, 59 per cent expected their level of cross-border RMB activities to increase over the next 12 months. Their principal reasons for using the RMB were convenience, reduced foreign exchange risks or costs, and requests from trading counterparts, according to the survey.
Businesses that are considering adopting the RMB cited winning more business and meeting requests from trading partners as their main incentives. Businesses in the UK, mainland China and Taiwan were the most likely to start using the currency.
Respondents were also optimistic about their prospects of trade with mainland China, with 59 per cent anticipating that this would increase in the next 12 months, according to HSBC Group.
Despite growing interest in the RMB and trade with China, barriers to the currency’s adoption and use in cross-border settlements remain. Respondents named the simplification of procedures, further liberalisation of the exchange rate and the expansion of the types of transactions that can be carried out in RMB as the top three ways in which the future growth of RMB cross-border business could be encouraged.
The expansion of the RMB in foreign trade settlement is the first step in China’s three-stage plan to internationalise the currency. Significant progress has been made. According to SWIFT, the RMB has overtaken the euro to become the second-most used currency in global trade finance after the US dollar. In 2013, the RMB was used to settle 18 per cent of China’s total trade, compared with 3 per cent in 2010. HSBC expects this to reach 30 per cent by the end of 2015.
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