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RMB maturing as cross-border usage broadens according to HSBC survey

The vast majority (77%) of Chinese corporates surveyed expect one-third of all Chinese trade (circa USD 2trn) to be conducted in RMB by 2015 (vs 10% YTD) and 30% plan to use RMB for investment-related purposes in the next 12 months.

The survey also identified a clear cost advantage to businesses outside Mainland China that choose to settle their trade in RMB. Half of all Chinese corporates stated they were desirous to offer better pricing or terms in return for using RMB to settle trade: 41% revealed they would be willing to offer discounts of up to 3% and 9% willing to offer even greater discounts.

Government increase RMB FX flexibilty and simplifies transaction processing
Moves by the Chinese government to increase exchange rate flexibility and simplify transaction processing have changed the dynamics of cross-border RMB business. The proportion of corporates using RMB because they expect the currency to appreciate has fallen dramatically. Only 25% of respondents said they used RMB in order to benefit from currency appreciation in 2012, compared to significant 44% in 2011.

Instead, China-based corporates reported that exchange risk management and operational convenience were the main reasons for choosing RMB for cross-border transactions. Seventy-two per cent of those surveyed use RMB to help manage their foreign exchange risks, a sharp increase from 49% in 2011 and 44% stated that the currency brought operational and accounting advantages (vs 34% in 2011).

While import and export transactions were the most common type of RMB business that respondents engaged in (47% and 42%, respectively), the survey revealed that 30% plan to use RMB for other purposes in the next 12 months. Fifteen per cent of corporates 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).

Increasingly convenient
Chinese corporates also reported that their counter-parties overseas are finding it increasingly convenient to use RMB. Just 15% reported that their counter-parties encountered insufficient RMB service or support from their bank overseas, down from 23% per cent in 2011. Overseas business also experienced increasingly easy access to RMB liquidity over the past year, with only 14% reporting that their overseas counter-parties lacked sources of RMB, or lacked the use for RMB funds received, compared to 21% in 2011.

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