July 9, 2014
HSBC Survey: Canadian companies leaving Renminbi on the table
Vancouver BC – Canadian businesses trading with Mainland China are missing out on new opportunities and cost savings because they are not settling their trade transactions in Renminbi (RMB), the world's fastest growing currency, says a global of international business decision makers in 11 countries carried out by HSBC.
Canadian companies are the least likely of those surveyed to use RMB for trade settlement. Only five per cent of the Canadian businesses surveyed said they had conducted cross border transactions in the local Chinese currency, compared to 22 per cent of global companies and 17 per cent of US companies. Conversely, 55 per cent of Chinese businesses surveyed said they would offer discounts of up to five per cent to their trading partners for RMB denominated transactions.
In contrast, Canadian companies are embracing trade with Mainland China. Seventy-four per cent of Canadian companies surveyed expect to increase trade with the country in the next 12 months – well above the global average of 59 per cent.
Linda Seymour, executive vice-president and head of commercial banking at HSBC Bank Canada, says: " China is Canada's second largest trading partner behind the U.S. Trade between Canada and China is growing at a remarkable pace – increasing 57 per cent between 2007 and 2012. The survey results highlight the need for Canadian businesses to learn more about how using RMB can help them reduce costs and secure a competitive advantage when trading with China. For example, HSBC Bank Canada's first client to open a RMB savings account in 2012 saved nearly US$100,000 by settling a US$5 million trade with its Chinese supplier in RMB."
In 2012, HSBC was the first major financial institution in Canada to offer a RMB commercial savings account, and offers a suite of global cash management, FX risk management, and international financing solutions to assist companies that are trading internationally, including with China.
While many respondents do not currently perceive the benefits of settling trades in RMB, 37 per cent of Canadian companies surveyed expect to start using the currency in the future, just above the global average of 32 per cent.
Canadian companies who are not currently using the RMB but who expect to in the future will do so to meet demand from their counterparties, and drive more business. In comparison, companies who are currently using the RMB cite their reasons for doing so as convenience, minimizing FX risk, and requests from trading counterparties.
When asked what might motivate them to use RMB, survey respondents cited: simplification of procedures; further liberalization of the exchange rate; expansion of transaction types that are RMB eligible; and the availability of more guidance.
"Whether a Canadian company is importing from or exporting to China, transacting in RMB not only offers financial benefits, it can also open doors to new business. HSBC is the leading international bank in Canada, and the largest foreign bank in China with more than 140 years of history in the region. It's this advantage that makes us a trusted expert and ally to our clients looking to realize the benefits of transacting in the world's fastest-growing currency," says Seymour.
RMB Resources for Canadian Businesses:
HSBC HSBC RMB Resource Centre: Global HSBC website site designed to provide clients with useful content and information on the RMB, including step-by-step how-to guides. www.rmb.hsbc.com/
HSBC Global Connections: Comprehensive web-based resource for businesses looking to grow internationally. Includes news on international business, free tools to help identify global opportunities, and research insights from around world. www.globalconnections.hsbc.com