HSBC: RMB Usage Expands In Cross-border Trade

Half of all international companies in Hong Kong and one third in mainland China are now using RMB for their cross-border trade businesses, according to a survey by HSBC.

Cross-border businesses include trade settlement, capital injection and lending.

RMB usage is likely to expand further. Seventy-three percent of all companies using the currency expect their RMB cross-border business to grow during the next five years. A quarter estimates growth of more than 10% in 2013.

Almost a quarter of those surveyed expected to start using the currency within the next five years to mitigate foreign exchange risk and benefit from better pricing.

Among the seven surveyed international markets, Hong Kong has the highest level of RMB usage and the highest level of understanding towards RMB internationalization.

However, fewer businesses outside Hong Kong and mainland China are taking advantage of the RMB as a means to gain competitive advantage. Only 11% of businesses surveyed in Singapore and the U.K., 9% in Germany and the U.S. and 7% in Australia are currently using RMB.

Factors that would encourage RMB usage are further simplified procedures, further liberalization of China’s exchange rate and more information and training on RMB cross-border issues.

"Chinese exporters are usually willing to consider giving discounts for transactions settled in RMB," says Albert Chan, HSBC’s head of commercial banking, Hong Kong. "Considering the potential real monetary benefits and other advantages, businesses trading with China should seize the opportunity of settling in RMB."

The survey found that the main drivers for those using the RMB were to mitigate foreign exchange risk, meet demand from their counter-parties, convenience and cheaper pricing from Chinese suppliers.