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UK SME's Missing Out On Financial Benefits Of Trading In Renminbi

Posted on 17 Jul 2013

 -discounts of up to 5% available to businesses settling in RMB

 - UK SME's show the most confidence for international growth over the next 12 months versus the likes of China and Singapore.

UK businesses trading with China could be missing out on discounted terms as they are not settling their trading in Renminbi (RMB), according to a recent survey carried out by HSBC amongst international business decision makers.

Only one in ten (11%) of the UK businesses surveyed, said they had conducted cross border transactions in the local Chinese currency, despite 55% of Chinese businesses interviewed in the same survey, saying they would offer discounts of up to 5% to their trading partners for RMB denominated transactions.

HSBC surveyed 700 international businesses from Australia, China, Germany, Hong Kong, Singapore, UK and USA and found that businesses around the world are reporting healthy trade with China. 81% of the 101 UK businesses interviewed reported international growth in 2012 and 79% of UK SME's expect further growth next year.  This was the most confident response from the seven markets.

Peter McIntyre, HSBC's UK Head of Trade said: 

"This survey highlights a need for UK businesses to learn more about how using RMB could help them reduce costs and give them competitive advantage when trading with China.  It is clear that Chinese businesses are prepared to share the benefit gained from removing the currency risk from within their cost base. At HSBC we want to provide insight to our customers supporting their international business plans and by undertaking this survey we can see real potential financial benefits to companies using RMB."

The key issues holding businesses back from using the RMB appear to be awareness and consideration, with businesses stating that they are unsure of the clear benefits.

Less than 1 in 10 businesses globally feel they have a "very good" understanding of RMB

  • 51% of companies insisted RMB usage would increase if the procedures were further simplified
  • 38% of businesses globally are not using RMB as they cannot perceive a clear benefit

The future

While many respondents did not currently perceive the benefits of the RMB, almost a quarter (24%) of those surveyed expect to start using the currency within the next 5 years to mitigate foreign exchange risk (59%) and benefit from better pricing (42%).

Almost three quarters (73%) of all companies using the Chinese currency expect their RMB cross-border business to grow during the next 5 years, with a quarter (26%) estimating growth of more than 10% in 2013. The main drivers for those using the RMB were to mitigate foreign exchange risk (48%), meet demand from their counterparties (46%) and convenience (42%).

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