Exporters and importers in key markets expect to settle more trade volumes in Renminbi (RMB) as Greater China continues to play a prominent role in global trade, according to the recent global HSBC Trade Confidence Index.
The survey across over 5,100 exporters and importers in 17 markets globally showed that while the US Dollar will remain the dominant trade settlement currency globally, 56 per cent of exporters and importers in Hong Kong, 49 per cent in Malaysia and 24 per cent in mainland China expect to settle some trade transactions in RMB over the next six months. Around a quarter of traders polled from Southeast Asia combined, expect to use RMB as trade settlement currency in the next six months while nearly a tenth of traders in North America, the Middle East and Europe, combined, plan to settle future trade in RMB.
Based on responses, Greater China remains top trade partner for Hong Kong, Australia and Vietnam while mainland China will look to Southeast Asia for growth in the next six months. Globally, Greater China is identified among the top three markets with strongest growth prospects in the next six months.
Andrew Long, HSBC's Head of Global Transaction Banking, said: "As businesses globally continue to strengthen their trading links with China, they are at varying degrees, preparing to use RMB as one of their trade settlement currencies in the near future. In 10 years' time, China's exports are expected to reach US$2.4 trillion. It is critical for financial institutions to anticipate and keep pace with customer demand, which is slowly catching up with developments around RMB internationalisation. In order for financial institutions to react quickly, they need to either build their own platform or choose a partner with the access, scale and capabilities for RMB clearing and trade settlement."
HSBC has rolled out RMB trade settlement capabilities in 311 countries and territories which account for 70 per cent of China's total external trades and cover China's top 20 trading partners globally.
HSBC was the first bank to settle RMB trade in all of its ASEAN2 sites as well as in the UK, New Zealand, Mauritius and the US.
Mr Long added: "HSBC has been at the forefront of RMB trade settlement with our latest transactions involving our customers in Mexico doing business with suppliers in the Mainland. We can only expect this trend to accelerate and broaden in the next few months especially as HSBC expands our capabilities in emerging markets such as Latin America.
"It is important for financial institutions to have direct access to the local RMB clearing system and mitigate counterparty and payment risk in order to support their customers who will increasingly use RMB in their trade and investment activities.
Whether it is RMB interbank accounts, FX, RMB funding, payment or trade settlement services, HSBC has the flexibility, clearing capability, nostro account platform and footprint to help financial institutions as RMB settlement goes global." The RMB trade settlement scheme, launched in July 2009 and expanded in June 2010, allows businesses in 20 Mainland provinces and cities to settle their trade in RMB with all countries and regions across the world. In July and August 2010, participating banks in Hong Kong were allowed to offer clearing services to financial institutions and broaden participation in the RMB bonds investment market in mainland China. In
October 2010, HSBC received approval to trade in the Mainland's interbank bond markets.