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Tuesday, October 11, 2016, 18:32

Renminbi usage gathers steam

By Duan Ting

HONG KONG - Usage of the Chinese currency renminbi (RMB) for trade settlement relating to the Belt and Road (B&R) Initiative has continued to accelerate in 2016, according to a HSBC survey released on Tuesday.

The survey, found 48 percent of Hong Kong-based respondents use the renminbi for cross-border business. About 37 percent of non-users intend to start using the currency to trade. The survey was of 1,600 international companies across 14 markets that do business with China, or are a business based in the Chinese mainland.

The growth of renminbi usage for cross-border business is mainly driven by the Asia-Pacific market. Almost half of Hong Kong businesses believe that the renminbi will become an international trading currency in the next five years.

Financial messaging service SWIFT’s RMB Tracker said the currency bounced back to its position as the world’s fifth-largest payments currency in August, representing 1.86 percent of global payments by value. More than 80 percent of direct payments made between the United Arab Emirates and the Chinese mainland/Hong Kong in August this year were settled in yuan -- one of the highest increases worldwide.

The survey also found Hong Kong businesses are positive about the outlook for renminbi volatility, and awareness of the B&R Initiative is mainly driven by businesses in Asia-Pacific.

Sixty-one percent of Hong Kong-based respondents and 31 percent surveyed globally are confident that the yuan will decrease in the next 12 months, while 31 percent of Hong Kong businesses expect the volatility of the renminbi exchange rate to remain the same. About eight percent expect the currency to be more volatile next year.

As for the awareness of the B&R Initiative, the survey found 77 percent of Hong Kong businesses, 58 percent surveyed in Asia Pacific, 18 percent in North America and Latin America and 22 percent in Europe are aware of the initiative.

Albert Chan, HSBC Hong Kong’s head of commercial banking, said there will be great opportunities for Hong Kong companies to grow and enhance their competitiveness as the Belt and Road Initiative gains momentum.

"This initiative will also drive greater cross-border usage of renminbi, further promoting internationalization of China’s currency. Hong Kong businesses can easily benefit from using yuan as a trade currency owing to the city’s position as a premier offshore renminbi center, with deep and liquid financial markets,” Chan said.

But just 35 percent of surveyed Hong Kong businesses, 39 percent within Asia-Pacific, and 40 percent in the rest of the world have yet to pursue a strategy to capture opportunities from the initiative.

According to the China Foreign Exchange Trading System, the central parity rate of the renminbi per US dollar weakened 90 basis points to 6.7098 on Tuesday, hitting a six-year low. The rate fell 230 basis points to 6.7008 against the US dollar on Monday.

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