A growing number of companies are switching to Chinese
currency Renminbi (RMB) for their Chinese business according
to a representative survey carried out by Deutsche Bank
among companies in the UK, Germany and the Netherlands.
Currently, 20% of companies carry out their invoicing in
Renminbi, with the remaining 80% stating that switching
their invoicing over to Renminbi is already in the pipeline.
By moving over to Renminbi, companies can lower prices in
negotiations with Chinese business partners by an average of
4.8%.
“We are seeing a growing trend towards the use of Renminbi
transactions, particularly from SMEs,” says Nils Ole
Matthiessen, Head of Global Finance & Foreign Exchange
Structuring Germany & Austria. In doing so, companies are
taking advantage of a number of benefits. They are expanding
their network of suppliers and buyers by bringing on board
more Chinese companies who, in the past, only had limited
access to western currency. They are also improving their
negotiating position with Chinese customers and suppliers.
“What’s more, transaction costs are reduced and buyers
can secure price reductions of an average of almost 5%,”
says Nils Ole Matthiessen.
In spite of increasing volatility in foreign exchange
markets, only around half of companies that were surveyed
hedge foreign exchange risks in Renminbi transactions.
For companies themselves, the greatest obstacles in
international foreign exchange transactions are the slow
payment process (approx. 30%) and difficulties in obtaining
approval for payments from the Chinese authorities (approx.
15%). “Processes which accelerate or simplify payment
processes in Renminbi helps European companies to strengthen
their competitive position in China,” says Nils Ole
Matthiessen.
In June earlier this year, Deutsche Bank became the first
bank to introduce cross-border RMB payment processing in the
form of a pilot project with the Chinese central bank. The
simplified RMB cross-border payment scheme allows certain
China-based companies to invoice and settle cross-border
trades in Renminbi without having to provide documentation
for pre-trade verification. Currently, banks are required to
physically check the documentary proof of each underlying
trade transaction before they can process a RMB payment on
behalf of their corporate clients.
Trade outside of China using the Chinese currency Renminbi
currently amounts to around USD 2 billion per day, meaning
that trade in the currency pair USD/RMB has doubled in
volume over the past 15 months (May 2011: USD 1 billion).
Cross-border RMB processing volume rose year-on-year by 42%
to RMB 1.4 billion in the first half of 2012. Deutsche Bank
processes between 20 to 30% of global trade in Renminbi
(outside of China) through its systems.
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