For companies doing business in China there are significant advantages to using the renminbi (RMB), according to a survey carried out for HSBC. The survey covered 700 companies in seven countries and showed that some businesses were switching to the RMB to save money. Businesses using the RMB were optimistic about the future of the currency and also intended to extend their RMB activities.
The RMB international survey put questions to more than 700 businesses across seven countries doing international business with China.
- Top three reasons why businesses are using the RMB:
reduction in foreign-exchange risks or costs (48 per cent)
request from trading partners (46 per cent)
convenience (42 per cent)
- More than half of Chinese companies surveyed said they would be willing to offer a discount to partners using the RMB
- One in five would be willing to offer discounts of 3 per cent or more
- 73 per cent of businesses using the RMB expect that RMB cross-border business will grow in the next five years
- A quarter of non-RMB users plan to use the RMB within five years
HSBC commissioned the market researcher Nielsen to carry out the survey, which was conducted by random computer-assisted telephone interviewing via a market sample. There were a total of 711 companies surveyed, around 100 per country. Fifty per cent of companies had annual turnover in excess of USD30 million, while 50 per cent had turnover of USD3 million to USD30 million. The research was conducted between 8 May and 5 June 2013.
More than half of those already using the currency expected to do so increasingly in the next five years, and a quarter of businesses not using the RMB planned to start – particularly those in Hong Kong, mainland China, Singapore and the UK. Reduction in foreign-exchange risks, or costs, was a big incentive for using the currency and 42 per cent of those surveyed also cited greater convenience, better market access and requests from trading partners.
RMB for cross-border business was relatively low outside mainland China and Hong Kong, with fewer than one in five of the businesses interviewed using it, according to the survey. Non-users said the main reason was because they could not see a clear benefit for their business – or they had not considered it. That attitude was most marked in Germany, the US and the UK.
More than a third said it was because counterparts were unwilling to use the currency, and a further third claimed regulatory factors were the barrier. More than half of Chinese companies surveyed said they would be willing to offer a discount to customers who traded in RMB.
China is committed to further liberalisation of the RMB, but the currency is still unfamiliar to many businesses. Chinese companies told the survey their overseas customers were often reluctant to make the move.
By the end of 2012, just four years after China first experimented with limited trade settlement in RMB, it accounted for about 12 per cent of China’s external trade settlement. HSBC expects that to rise to 30 per cent by 2015, which would make it the world’s third-largest trade currency.