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Firms Missing Out on China Boom Despite RMB Uptake

Nearly a quarter of
global businesses are now using the renminbi (RMB) to trade with China
, yet only two in five
firms are aware of the trade initiatives being put in place by the Chinese
government to facilitate cross-border trading, a HSBC Commercial Banking
survey shows.

Of the 1,600 decision-makers polled, 24% of companies that are
trading with China say they now do so using the renminbi, up from 17% last

But just 41% said they were aware of the government’s flagship
Belt and Road initiatives, intended to generate USD2.5 trillion of cross-border
commerce annually through policy and infrastructure developments, including
plans to boost trading connectivity.

“The Belt and Road initiative is happening now and is so large
it will be a key driver in the use of renminbi,”
Stuart Tait, regional head
of HSBC Commercial Banking, Asia Pacific, tells Profit & Loss. “
Companies need to be
prepared for that.”

Too many businesses are
unaware of the opportunities that are emerging from the Belt and Road
initiative, adds Tait. “Which is surprising as companies are looking for new
markets and new opportunities for growth,” he says.

HSBC, the largest foreign
bank to have a presence in China, also found that only 7% of those who were
aware of these government initiatives were working on a strategy to capitalise
on the changes.

This was despite 43% of businesses surveyed stating that they
expect to see an increase in RMB business over the next
12 months, with 40% planning to expand or launch new
ventures with China during that time.

Foreign companies are
certainly working with their Chinese counterparts and the banks, Tait adds.
“The financing packages are being put in place and an element of that will
inevitably be foreign exchange hedging,” he says. “The survey shows that
companies are now more comfortable at dealing in the renminbi – one of the reasons
being that they believe they get a better price.”

A further reason behind
the rise in RMB usage, according to the survey respondents, is that they are
having less difficulty understanding regulations, navigating documentary
requirements and moving funds than they did in the past.

Launched by the Chinese
government in 2013, the Belt and Road initiatives aim to develop two corridors
linking China to the world: the ‘Belt’ referring to the overland trading routes
connecting China via central Asia to Europe and the Middle East, while ‘Road’
references the maritime equivalents to the south, linking China, Southeast
Asia, India and Africa.

The release of the survey
findings follows the RMB’s inclusion this month as the fifth global currency in
the International Monetary Fund’s Special Drawing Right. “It’s a fantastic
symbolic step for the currency
but it goes beyond symbolism,” Tait says of the move. “It really demonstrates
that it is one of the most used currencies in the world – it’s the second most
used in trade. And as Belt and Road is very much focused on trade it is
certainly poised to keep growing as this initiative kicks off.”

Colin Lambert

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