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As $ loses ground, Renminbi gaining currency globally

The Chinese renminbi is touted to be the next major global currency and traders outside China willing to transact in the currency instead of the US dollar are rising, according to a survey by HSBC.

The Chinese renminbi is touted to be the next major global currency and traders outside China willing to transact in the currency instead of the US dollar are rising, according to a survey by HSBC.

The survey showed that nearly 50% of companies outside China were willing to offer better pricing when trades were settled in renminbi. Around 41% were willing to offer discounts of up to 3% and some even higher, the survey showed.

?We continue to connect customers in China to opportunities overseas and are seeing increased demand for the use of RMB as a transaction currency,? said Noel Quinn, Regional Head of Commercial Banking Asia Pacific of HSBC in a release.

Quinn said global companies must take advantage of the cost benefit and settle trades in renminbi with Chinese counterparts. Most China-based companies believed that settling transactions in the Chinese unit gives them an advantage in currency risk management as well.

While imports and exports were the dominant form of transactions settled in the currency, 30% of companies said they were willing to settle other transactions also in the renminbi.

Nearly 15% companies said they intend to use RMB for capital injections, 11% plan to use it for offshore loans and 4% for cross-border acquisitions (vs 11%, 8% and 1% who used RMB for these purposes in 2011, respectively).

Moves by the Chinese government to increase exchange rate flexibility and simplify transaction processing have changed the dynamics of cross-border RMB business, the survey said.

In contrast, the percentage of companies that transacted in renminbi to take advantage of its appreciation has fallen. ?Only 25% of respondents said they used RMB in order to benefit from currency appreciation in 2012, compared to significant 44% in 2011,? the release said.

According to Montgomery Ho,Head of Commercial Banking HSBC China, the reminimbi is likely to become a major trade currency in the next three years.

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First published on: 02-11-2012 at 02:18 IST
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