MANILA, Philippines - The Philippines should assess its readiness to do business in renminbi (RMB) to increase competitiveness, a foreign bank official said.
HSBC Philippines country head of commercial banking Mimi Concha said the bank has conducted a survey which indicated that readiness to do business in renminbi could give some countries’ exporters a vital edge over their rivals.
“The survey results provide helpful insights for the Philippines on the future of RMB in country and globally. In 2013, the RMB overtook the euro as the second used currency in global trade finance, next to the US dollar. Thus, companies doing business with or from China could gain real benefits in being RMB ready,” she said.
“Here in the Philippines, we at HSBC are excited to get into conversations with our clients on RMB and together unearth opportunities on trade, investment, cash management and funding,” Concha said.
“Whilst two-thirds of companies in mainland China and Hong Kong said foreign firms doing business with China gain financial and relationship advantages from using RMB, awareness of these potential benefits varies widely overseas, according to the 11-market poll,” she added.
Half of respondents are from Singapore, 44 percent from the US and 42 percent from the UK. They believe RMB usage brings financial benefits, yet only less than a third of their German and Canadian peers share this view.
More than half of UAE respondents said they see business relationship benefits from RMB adoption, compared with 46 percent in France and 40 percent in Australia.
Overall, 59 percent of decision-makers surveyed said they plan to increase their cross-border activity with mainland China over the next 12 months.
“This survey highlights a need for many companies to learn more about how the RMB can help them connect to opportunities in China and get ahead of their rivals in this highly competitive market,” said Simon Cooper, chief executive of HSBC Commercial Banking.
“Most Chinese businesses look favourably on overseas partners who are using RMB, both because it shows commitment and because it eliminates foreign exchange risk from their cost base. Although a currency can’t guarantee commercial success in China, it’s clear that RMB should be a core component of every company’s business planning,” Cooper said.
With its trade in goods above $4 trillion, China overtook the US to become the world’s largest trading nation in 2013.
The IMF’s projections for nominal dollar GDP show that China will add about $850 billion to global demand this year; the equivalent of adding an economy the size of Indonesia to global trade flows.
As China becomes ever more important to international businesses, the internationalization of the RMB is creating new opportunities in trade, investment, cash management and funding, HSBC said.
HSBC forecasts that a third of China’s trade will be settled in RMB by 2015 and that the currency will be fully convertible by 2017.
For its new survey, HSBC polled more than 1,300 decision-makers from mainland China, Hong Kong, Singapore, Taiwan, Australia, Germany, France, Canada, the UK, the US and the UAE who represent companies that conduct international business with or from China.
Outside the Greater China region (mainland China, Hong Kong and Taiwan), businesses in France (26 percent) and Germany (23 percent) report the highest levels of RMB usage.
Of companies using the RMB to settle cross-border business today, 59 percent expect to use it more over the next 12 months.
The HSBC survey also showed that 32 percent of companies that don’t use the RMB already expect to do so in the future.
Reasons for using the RMB include requests from trading partners, reducing foreign exchange risk, convenience, winning new business and gaining better pricing.