In recent years, China has played an increasingly pivotal role in the global economy. Last year, some commentators expressed fears that China was heading for a "hard landing". In fact, growth at 7.8 per cent was above China's target of 7.5 per cent; the economy rebounded in the final quarter; and we are optimistic about 2013, anticipating growth of 8.6 per cent.
This is a story of long-term success: China's performance is supported by its fundamental transition – its move up the value chain, and its continued urbanisation. By 2014, we expect China's GDP will be three and a half times bigger than it was in 2000. It will contribute a greater proportion of global growth than ever before. China's leadership has set a target of doubling GDP and GDP/capital over the decade to 2020.
By 2015 the RMB
could account for
a third of China's
Just as, over the past ten years, nations with strong links to China have benefited from its growth, so for the next ten years, nations who increase their exposure to China are likely to reap the rewards.
The Chinese currency, the RMB, burst on to the world stage at the end of the last decade. In a few short years it has rapidly begun to establish its international credentials.
At HSBC, we saw RMB-denominated trade settlement increase 56 per cent, year on year, over the first nine months of 2012. Multinational firms including Volkswagen and Tesco have already raised funding in RMB, and many more will follow. A growing number of countries, including Japan, South Korea and Russia, are holding RMB in their reserves.
We strongly support the further internationalisation of the RMB as envisaged in the 12th Five-Year Plan by the Chinese government. We believe that by 2015 the RMB could account for a third of China's international trade and take its place among the world's top three trade currencies.
Further internationalisation would reflect China's status as a global economic power and support its burgeoning trade and investment relationships around the world. Discussions between the Bank of England and the People's Bank of China to establish a swap line are a positive step, supporting London's ambitions to be a major offshore RMB centre, and facilitating the internationalisation process.
For businesses, settling accounts with Chinese partners in RMB could help both parties better manage currency risk, and reduce intermediation costs. Some Chinese sellers offer better terms in RMB. An HSBC survey found half of Chinese corporates were willing to offer discounts of 3 per cent or more. And if a Chinese buyer is choosing between two firms who offer similar products at similar prices – say, a German manufacturer of machine parts and a British one – the ability to settle in RMB could be the deciding factor.
The longer perspective is that in five years' time, using the RMB is going to be an absolute must for any firm serious about establishing an international presence. Those who delay risk being left behind, while early adopters can get a head start.
This is the Year of the Snake. I think it will also be the year of the RMB.
This article reflects the Chairman's speech that he made at the Chinese New Year celebration in London on 26 February 2013.