A growing number of Australian businesses will transact in RMB in the next three to five years, as awareness of the currency grows and Chinese companies look to reduce their foreign currency risk.
HSBC today reported that although only 7% of Australian companies have traded with Chinese companies in RMB so far, 16% planned to do so within 3 years, and 20% would do so within 5 years.
HSBC surveyed more than 700 international firms, including 100 in Australia, for its 2013 International RMB survey. The survey found 53% of Chinese businesses willing to offer discounts of up to 5% for transactions settled in RMB.
James Hogan, HSBC Bank Australia’s head of commercial banking, explained that Chinese firms were looking to reduce their foreign currency exposure as more products were consumed on the domestic market.
“Historically, Chinese companies that imported materials for products that they subsequently exported had a natural foreign currency hedge for international currencies that reduced their need to deal in RMB,” he said.
“Now, as Chinese economic growth is increasingly driven by domestic consumption, this dynamic is changing.”
HSBC found Australian RMB adoption lagging the rest of the world so far, with the RMB used by 7% of Australian firms versus 10% of international companies outside of China and Hong Kong.
63% of Australian survey respondents said they did not transact in RMB due to counterparty or marketplace preferences. 35% said there was no clear benefit to them using RMB, while 32% said they had not fully considered the issue.
Within five years, the RMB will be used by 8% of US firms, 10% of German firms, and 31% of companies in the UK and Singapore.
“China and Australia are already strongly linked from a trade perspective with China accounting for more than a quarter of Australia’s two-way trade,” Hogan said.
“With this two-way trade expected to grow by 8.5% [a year] by 2020, it’s obvious Australian companies’ RMB use will increase in lockstep.”
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