China traders offer 5% discount for RMB settlements
HONG KONG – A new HSBC survey has found that 54 per cent of Chinese businesses will offer discounts of up to five per cent for transactions settled in RMB.
“There are very real monetary benefits for businesses using the RMB – a five per cent saving across a buyer’s total China spend could be quite significant,” says Simon Constantinides, HSBC’s Regional Head of Global Trade and Receivables Finance.
But few businesses outside Hong Kong and mainland China are taking advantage, he says.
While the survey shows that half of all international companies in Hong Kong and almost one-third in mainland China are now using RMB to conduct cross-border business, the number falls to 11 per cent of businesses surveyed in Singapore, 11 per cent in the UK, nine per cent in the US and to just seven per cent in Australia.
Constantinides says 52 per cent of companies surveyed admitted to having a limited understanding of the internationalisation of the RMB and its benefits, while 51 per cent insisted that RMB usage would increase if the procedures were further simplified. Despite China’s growing trade with the rest of the world, 61 per cent of Chinese companies said their counterparties were unwilling to consider using RMB.
The main reasons given for companies across the globe not using RMB for cross-border business included not perceiving a clear benefit (38 per cent), counterparties who are unwilling to use RMB (34 per cent) and not fully considering the use of RMB (31 per cent).
While many respondents did not currently perceive the benefits of RMB, almost a quarter (24 per cent) of those surveyed expected to start using the currency within the next five years to mitigate foreign exchange risk (59 per cent), to benefit from better pricing (42 per cent) and because of market disparities between onshore and offshore RMB markets (39 per cent). While almost three quarters (73 per cent) of all companies using the Chinese currency expect their RMB cross-border business to grow during the next five years, a quarter (26 per cent) estimated growth of more than 10 per cent in 2013.
Constantinides says: “It is clear that Chinese traders are prepared to share the benefit gained from removing the currency risk from within their cost base. Businesses trading with China who fail to seize the opportunity of using the RMB may be losing out to their competitors – it’s not a level playing field.”