Western Union Business Solutions
, a business unit of the Western Union Company (NYSE:WU), a leader in global payment services, today announced results of a survey of Chinese companies which found that by settling transactions with Chinese exporters in U.S. dollars (USD) instead of Chinese yuan (CNY) American businesses paid approximately $2.4 billion in fees to account for foreign exchange risk.
The industries most affected by these transaction fees are those that import the highest level of goods and services from China by transaction value. In New York, the personal care industry made the most payments to China in 2011 by value according to Western Union Business Solutions data, followed by the textile and finance industries. The personal care industry in particular saw strong growth in the amount of money they sent to China in 2011, with the value of payments more than doubling compared to 2010. New York textile companies grew payments by 51% while payments in the finance sector dropped 30%. New York arts and antiques dealers, while not yet ranking with the top industries in terms of overall value, increased their payments to China by a robust 179% compared to a 113% increase for the city as a whole.
“The U.S. is the number one export destination for companies based in China,” said Alfred Nader, Vice President of Corporate Strategy & Development, North America, at Western Union Business Solutions. “To date, the vast majority of transactions between companies based in the U.S. and China have been settled in American dollars. It is time to take a step back and evaluate to what extent it makes sense for American companies to continue to pay Chinese exporters in something other than their preferred local currency.”
Western Union Business Solutions’ survey of more than 1,000 Chinese companies who are able to settle merchandise exports in CNY (known as mainland designated enterprises, or MDEs) reveals a desire in China to receive payments in their home currency. The results show that more than one third (36%) would prefer to be paid in CNY, with over 20 percent naming exporter convenience and reduced foreign exchange risk as the main drivers for that preference.