The number of American businesses using renminbi (RMB) to settle trade has nearly doubled in the past year, and that trend is expected to accelerate over the next 12 months, according to a new survey.
Between April and May 2014, HSBC polled more than 1,300 international companies in 11 countries, including 102 in the United States. Seventeen percent of U.S. business leaders said their companies used RMB to settle trade this year, up from 9 percent in 2013. The global average was 22 percent. The U.S. is now behind France (26 percent) and Germany (23 percent) in RMB trade outside of China, Hong Kong and Taiwan.
Fully 22 percent of U.S. business who aren’t currently using RMB said they plan to do so within the next six months to five years, up from 8 percent the previous year. The global average is now up to 32 percent.
“As China continues to internationalize its currency, there are more opportunities and considerations in trade, investment, cash management and funding for U.S. companies,” said Steve Bottomley, group general manager, senior executive vice president and head of commercial banking for North America, HSBC Bank USA, N.A. “U.S. businesses are becoming more comfortable using RMB and are increasingly making it, or looking to make it, a part of their competitive strategy and planning.”
Fifty-five percent of U.S. businesses expect trade with China to grow over the next 12 months. This is a drop from last year however, when 76 percent said it expected growth in this area.
U.S. businesses now sell about 7 percent of their exports to China, compared to just 1 percent a decade ago. HSBC expects that to increase to 14 percent by 2030. The bank also projects that a third of China’s trade will be settled in RMB by 2015 and the currency will be fully convertible by 2017.
Two-thirds of companies in mainland China and Hong Kong said foreign companies doing business with China gain financial and relationship advantages from using RMB, such as receiving discounts on RMB-denominated transactions. Additionally, other global business leaders said using the RMB can help meet demand from counterparties, minimize foreign exchange risks, and increase convenience. Nevertheless, most U.S. businesses surveyed do not see the benefits in using the RMB.
Martin Brown, executive vice president and head of large corporate, commercial banking, HSBC Bank USA, N.A., noted that U.S. businesses can use RMB to hedge against fluctuations and potentially reach additional suppliers. “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,” he said.