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  July 10th, 2014 | Written by

More US Businesses Mull Trading in China’s RMB

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New York, NY – German and French companies are using renminbi to trade (RMB) and now, increasingly, American businesses are too, according to a recent HSBC global survey of international business decision makers in 11 countries.

“More US businesses are using RMB to settle trade and more plan to use it amid expectations by business leaders that their trade with China will increase in the next 12 months,” the survey found.

Seventeen percent of US businesses leaders said their companies had used RMB to settle trade this year, up from nine percent last year.

With the global average of RMB use at 22 percent, this places US businesses just behind French (26 percent) and German (23 percent) businesses in terms of RMB use outside of China, Hong Kong and Taiwan.

Furthermore, the survey found, 22 percent of US businesses, who aren’t already using RMB, said they plan to use it within the next six months to five years, up from eight percent a year ago.

Globally, an average of 32 percent of leaders said they planned to use RMB in the future.

“As China continues to internationalize its currency, there are more opportunities and considerations in trade, investment, cash management and funding for US companies,” said Steve Bottomley, Group General Manager, Senior Executive Vice President, and Head of Commercial Banking for North America, HSBC Bank USA.

US-based businesses, he said, “are becoming more comfortable using RMB and are increasingly making it, or looking to make it, a part of their competitive strategy and planning.”

Trade with China Set to Grow

US business leaders may have good reason to do so as 55 percent said they expect trade with China, the world’s largest trading nation, to grow over the next 12 months, though that percentage is down from last year’s survey, when76 percent said it would.

American businesses now sell about seven percent of their exports to China, compared to just one percent a decade ago. HSBC expects that to increase to 14 percent by 2030 with a third of China’s trade settled in RMB by 2015 and the currency fully convertible by 2017.

Still, the survey found most US businesses surveyed said they don’t use RMB because they don’t understand or aren’t aware of the benefits of using it.

However, two-thirds of companies in mainland China and Hong Kong said foreign firms doing business with China gain financial and relationship advantages from using RMB, including receiving discounts on RMB-denominated transactions.

“Hedge Against Fluctuations”

Additionally, global leaders said the top reasons for using RMB were meeting demand from counterparties, minimizing foreign exchange risks and increased convenience.

“US businesses can use RMB to hedge against fluctuations and potentially reach additional suppliers,” said HSBC’s Executive Vice President and Head of Large Corporate, Commercial Banking, Martin Brown.

“It may also improve business relationships by making it more convenient for their Chinese counterparties, who may be reluctant to take on dollar exposure because their cost base is denominated in renminbi,” Brown said.

When asked what might help non-RMB users reconsider trading in the currency, those surveyed suggested more simple procedures, further liberalization of the exchange rate; expansion of RMB eligible transactions; and the availability of more guidance.

The HSBC survey was conducted by Nielsen and involved business executives from 1,304 international companies that currently do business with Mainland China or are a business in Mainland China that imports/exports outside of the region.

The research surveyed international businesses in Australia, Canada, China, France, Germany, Hong Kong, Singapore, Taiwan, the UAE, the UK, and the US.