Mike Green
HSBC
Ask the Expert: Dealing with the Renminbi
Mike Green, senior international business manager at HSBC, offers guidance on the growing importance of the Renminbi.
Q: As China continues to grow will the importance of RMB as a trade settlement currency rise? What product solutions are available for me with regard to RMB?
The rapid growth of China over the past decade is likely to continue, leading to more commercial links with UK businesses. For businesses that are looking to expand into China and develop new products and services the opportunity is significant, but so are the challenges to doing business in this culture. One issue potential exporters to China must be aware of is the chinese currency, Renminbi or RMB.
The recent deregulation has further opened the Chinese market and commercial contracts can now be agreed in RMB. In fact, in 2010 more than RMB 500BN of China’s trade was in RMB and this figure is expected to increase in 2011. This allows Chinese suppliers to invoice and receive settlement from European buyers in their local currency, avoiding foreign exchange risks and costs.
Equally, customers are also likely to benefit, because without the foreign exchange costs and currency fluctuation risks, the Chinese supplier may be willing to negotiate favourable terms for the goods and services you are purchasing
At HSBC, we can help businesses settle these payments through their trading partner in China via either the onshore (Shanghai) or offshore (still largely Hong Kong based) RMB market. There are benefits to both routes; in general the onshore market through Shanghai has more favourable rates than the offshore route. On the other hand, the offshore market provides excellent RMB liquidity and more hedging options, such as forward contracts.
HSBC can help you to open an RMB account and initiate payments directly from that to a Chinese supplier as well as help you to settle your RMB payment by any currency with competitive exchange rates. HSBC can also provide financing solutions to bridge any potential funding gap and optimise your cash flow.
All answers are for general guidance only. Each case must handled on the individual facts.
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About Mike
Mike has worked for HSBC for over 30 years, primarily in International Trade Services and Finance. He assists and advises companies in the North East to minimise and manage their import and export risks and concerns mostly in the areas of commercial, financial and country issues. If necessary providing structured bank facilities and loans linked to their international trade cycles.
Contact Details
Mike Green
Senior International Business Manager,
HSBC
mike.p.green@hsbc.com
08455 858094
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