Wed, Oct 22, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

SMEs are switching to Renminbi for Chinese business according to Deutsche Bank survey

Tuesday, August 28, 2012
Opalesque Industry Update - A growing number of companies are switching to Chinese currency Renminbi (RMB) for their Chinese business according to a representative survey carried out by Deutsche Bank among companies in the UK, Germany and the Netherlands. Currently, 20% of companies carry out their invoicing in Renminbi, with the remaining 80% stating that switching their invoicing over to Renminbi is already in the pipeline. By moving over to Renminbi, companies can lower prices in negotiations with Chinese business partners by an average of 4.8%.

"We are seeing a growing trend towards the use of Renminbi transactions, particularly from SMEs," says Nils Ole Matthiessen, Head of Global Finance & Foreign Exchange Structuring Germany & Austria. In doing so, companies are taking advantage of a number of benefits. They are expanding their network of suppliers and buyers by bringing on board more Chinese companies who, in the past, only had limited access to western currency. They are also improving their negotiating position with Chinese customers and suppliers. "What's more, transaction costs are reduced and buyers can secure price reductions of an average of almost 5%," says Nils Ole Matthiessen.

In spite of increasing volatility in foreign exchange markets, only around half of companies that were surveyed hedge foreign exchange risks in Renminbi transactions.

For companies themselves, the greatest obstacles in international foreign exchange transactions are the slow payment process (approx. 30%) and difficulties in obtaining approval for payments from the Chinese authorities (approx. 15%). "Processes which accelerate or simplify payment processes in Renminbi helps European companies to strengthen their competitive position in China," says Nils Ole Matthiessen.

In June earlier this year, Deutsche Bank became the first bank to introduce cross-border RMB payment processing in the form of a pilot project with the Chinese central bank. The simplified RMB cross-border payment scheme allows certain China-based companies to invoice and settle cross-border trades in Renminbi without having to provide documentation for pre-trade verification. Currently, banks are required to physically check the documentary proof of each underlying trade transaction before they can process a RMB payment on behalf of their corporate clients.

Trade outside of China using the Chinese currency Renminbi currently amounts to around USD 2 billion per day, meaning that trade in the currency pair USD/RMB has doubled in volume over the past 15 months (May 2011: USD 1 billion). Cross-border RMB processing volume rose year-on-year by 42% to RMB 1.4 billion in the first half of 2012. Deutsche Bank processes between 20 to 30% of global trade in Renminbi (outside of China) through its systems.

Information on the survey:
In April and May 2012, 102 companies from the UK, Germany, and the Netherlands were asked about their experience in doing business in China. Around 60 percent of those companies had turnover in their China business of lower than RMB 10 million.

(press release)

Deutsche Bank is a leading global investment bank with a substantial private clients franchise. Its businesses are mutually reinforcing. A leader in Germany and Europe, the bank is continuously growing in North America, Asia and key emerging markets. With more than 100,000 employees in more than 70 countries, Deutsche Bank offers unparalleled financial services throughout the world. The bank competes to be the leading global provider of financial solutions, creating lasting value for its clients, shareholders, people and the communities in which it operates. www.db.com

Bg

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   

Banner

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Commodities - Oil wreaking havoc on small-cap energy stocks sliding 36%[more]

    From Bloomberg.com: Owning almost anything in the U.S. stock market has been a losing proposition since September. Owning smaller energy companies has been a catastrophe. Hercules Offshore Inc. and Resolute Energy Corp. are among 19 oil-and-gas equities in the Russell 2000 Index that lost more than

  2. Investing - Hedge funds favor equity long/short, Strategic bond managers hedge against further high yield sell-off[more]

    Hedge funds favor equity long/short From Securitieslendingtimes.com: Equity long/short strategies will generate good returns for hedge funds in the future, according to a panel at this year’s Risk Management Association Conference on Securities Lending in Naples, Florida. Panellists Sand

  3. Legal - Ex-hedge fund analyst weeps as judge hands down 5 year sentence, Former Columbus investment manager Steven P. Moore indicted on theft charges, SEBI confirms ban for Hong Kong hedge fund, SEC announces enforcement action against compliance officer[more]

    Ex-hedge fund analyst weeps as judge hands down 5 year sentence From Hereisthecity.com: An ex-hedge fund analyst was sentenced to 5 years in prison for his role in insider-trading scheme. The New York Post reports that former hedge fund analyst Matthew Teeple was sentenced Thursday to fiv

  4. Goldman in talks to acquire IndexIQ[more]

    From Bloomberg.com: Can Goldman Sachs put ETF investors on a liquid diet? Goldman is in talks to acquire IndexIQ, Reuters has reported. Index IQ is a small exchange-traded-fund firm known mostly for products that replicate hedge fund strategies, called "liquid alternative" ETFs. While IndexIQ has 11

  5. Other Voices: CALPERS dilemma should be a warning to hedge funds wanting institutional investors[more]

    From Ian Hamilton, founder of IDS Group. A quick comment on the CALPERS’ disinvestment from the hedge fund market and the jitters it is causing. Pension Funds should not be sheep and follow CALPERS’ decision as the issues that CALPERS has with hedge fund investments are in many ways unique t