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UAE businesses see competitive advantage in settling cross border trade in RMB

: Monday, July 21 - 2014 @ 11:09

41% of businesses in UAE that currently do not trade in RMB plan to start in the future – the greatest proportion of which plan to start using it in the next 1 to 3 years, a new HSBC Commercial Banking survey shows.

The future increase is likely tied to the fact that more than half of UAE respondents (55%) see business relationship benefits from RMB adoption, while 86% view competitive pricing as a key driving factor in future usage.

According to the 11 country poll, recognising competitive advantage extends globally but awareness of the potential benefits varies widely. Half of respondents from Singapore, 44% from the US and 42% from the UK said they believe RMB usage brings financial benefits, yet less than a third of their German and Canadian peers share this view.

Overall, 59% of decision-makers surveyed said they plan to increase their cross-border activity with mainland China over the next 12 months, rising to 86% in the UK, 74% in Canada, 73% in the UAE and 63% in France. At the same time, only 22% said their company currently settles business in RMB.

Commenting on the results, Ahmed Yeganeh, Regional Head of International Subsidiary Banking for HSBC MENA, said, “The survey results, particularly those of UAE businesses, are certainly reflective of the trend we are seeing amongst our customer base. More and more businesses are recognising how trading in the currency can help them build stronger relationships, mitigate risk as well as benefit them in terms of pricing. We very much expect the RMB to become more widely used amongst UAE businesses in the medium term, and strongly encourage those who trade with China but are yet to fully embrace it, to start considering its benefits with a view to adopt – as and when appropriate – in the future.”

With its trade in goods passing $4 trillion, China overtook the US to become the world’s largest trading nation in 2013. The IMF’s projections for nominal dollar GDP show that China will add about $850bn to global demand this year; the equivalent of adding an economy the size of Indonesia to global trade flows.

As China becomes ever more important to international businesses, the internationalisation of the RMB is creating new opportunities in trade, investment, cash management and funding. HSBC forecasts that a third of China’s trade will be settled in RMB by 2015 and that the currency will be fully convertible by 2017.

For its new survey, HSBC polled more than 1,300 decision-makers from mainland China, Hong Kong, Singapore, Taiwan, Australia, Germany, France, Canada, the UK, the US and the UAE who represent companies that conduct international business with or from China.

Among the other highlights of the survey:
•33% of UAE businesses surveyed believe RMB will become an international trading currency in the next five years.
•Outside the Greater China region (mainland China, Hong Kong and Taiwan), businesses in France (26%) and Germany (23%) report the highest levels of RMB usage.
•Globally, 59% of companies currently using the RMB to settle cross border business expect to use it more over the next 12 months.
•32% of companies globally surveyed that don’t use the RMB already expect to do so in the future.
•Reasons for using the RMB include requests from trading partners, reducing FX risk, convenience, winning new business and gaining better pricing.
•Those surveyed believe that the simplification of procedures (68%), further liberalisation of the exchange rate (61%) and expansion of transaction types that are RMB eligible (57%) would encourage them to further use RMB.

For further information please contact:
Saadia McGlinchey
Tel: +97144235237
Email: [email protected]

Ahmad Othman
Tel: +97144235628
Email: [email protected]

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Monday, July 21- 2014 @ 11:09 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.

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