Although the Chinese renminbi (RMB) is becoming increasingly internationalized, most US businesses aren’t ready to use it to settle trade because they aren’t aware of the benefits of doing so, according to the findings from a global survey by HSBC.
Just nine percent of 102 US business leaders recently surveyed by HSBC said they had conducted cross-border RMB transactions. When asked why they weren’t using it, the top reason was because they weren’t aware of its benefits or hadn’t fully considered it (67 percent). Other reasons for not using RMB cited by US business leaders included foreign exchange considerations such as a preference to use US dollars or to avoid currency fluctuations (40 percent); process concerns (28 percent) and concerns about regulations (26 percent).
The US is not alone. RMB use to settle trade among Australian and German executives is also less than nine percent, according to HSBC survey findings. However, during July 2012 – April 2013, 16 more countries started using the RMB for more than 10 percent of their payments with China and Hong Kong, according to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), bringing the total number of countries that exchange more than 10 percent of their payments with China and Hong Kong in RMB to 47 out of a possible 160.
“Clearly, RMB use is growing among global competitors,” said Prabhat Vira, Head of Global Finance and Trade Receivables at HSBC Bank USA, N.A. “To remain competitive, US businesses may want to seize the renminbi opportunity now to thrive.”China is a top market for US imports and exports and has the world’s second largest GDP behind the US, according to the International Monetary Fund. It was also the largest recipient of foreign direct investment in the first half of 2012, according to HSBC research. As such, trade between the US and China is healthy. In fact, 77 percent of US business leaders surveyed by HSBC said they import from China and 49 percent said they have export partners in China. Additionally, US business leaders said international business growth was a priority with more than three quarters expecting to see an increase in their company’s international business growth in the next 12 months.