HSBC survey: Canadian companies leaving Renminbi on the table

Canadian companies are the least likely of those surveyed to use RMB for trade settlement, report says

August 19, 2014
by PurchasingB2B Staff
Image: Thinkstock

Image: Thinkstock

TORONTO—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. This is the key finding in Canada of a new global survey of international business decision makers in 11 countries carried out by HSBC. The survey is called HSBC Global Survey: Canadian companies currently leaving Renminbi on the table.

HSBC commissioned Nielsen to conduct a market survey of 1,304 international companies that currently do business with Mainland China or are a business in Mainland China that imports/exports outside of the region. The survey was in the field between April 3 and May 7, 2014 and was undertaken to understand clients’ attitudes towards using RMB, reasons of using or not using RMB for trade and investment activities, as well as other insights they can offer about the RMB.

Canadian companies are the least likely of those surveyed to use RMB for trade settlement, the survey found. Only 5 percent of the Canadian businesses surveyed said they had conducted cross border transactions in the local Chinese currency, compared to 22 percent of global companies and 17 percent of US companies. Conversely, 55 percent of Chinese businesses surveyed said they would offer discounts of up to 5 percent to their trading partners for RMB denominated transactions.

In contrast, Canadian companies are embracing trade with Mainland China. 74 percent of Canadian companies surveyed expect to increase trade with the country in the next 12 months—well above the global average of 59 percent.

“China is Canada’s second largest trading partner behind the US. Trade between Canada and China is growing at a remarkable pace—increasing 57 percent between 2007 and 2012,” said Linda Seymour, executive vice-president and head of commercial banking at HSBC Bank Canada. “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.”

HSBC said it offers a suite of global cash management, FX risk management and international financing solutions to help companies that are trading internationally, including with China.

The future
While many respondents do not currently perceive the benefits of settling trades in RMB, 37 percent of Canadian companies surveyed expect to start using the currency in the future, just above the global average of 32 percent.

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,” noted Seymour.