The Advantages of Adapting to RMB Internationalisation

Published on 2011-10-14

The British Chamber of Commerce Shanghai hosted an event to address the opportunities and difficulties that the Cross-Border Trade Settlement may present for UK businesses.

After more than 30 years of strong economic growth, initiated by liberal reforms in the late 70s, China finds itself as the major trading country in the world. Despite this, the US dollar has continued to dominate as the international reserve currency – until now. Thanks to the **Cross-Border Trade Settlement**, internationalisation of the Renminbi (RMB) has begun. On the 6th of September, 2011, The British Chamber of Commerce Shanghai hosted an event to address the opportunities and difficulties these developments may present for UK businesses.



The Cross-Border Trade Settlement is a series of liberalisation measures that significantly reduce restrictions on financial and trade transactions. By instituting these, the [People’s Bank of China](http://en.wikipedia.org/wiki/People%27s_Bank_of_China) (PBoC) has kick-started a rapid uptake in the use of RMB for cross-border deals and has created a thriving offshore market. There are now over 67,000 Mainland Designated Enterprises (MDEs) in 20 cities and provinces across China that are eligible to use the RMB for imports, exports and dividend payments with counterparts anywhere in the world.

[**HSBC China**](http://www.hsbc.com.cn/1/2/home) was one of the first foreign banks to be approved by the PBoC to provide the new account services. Guest speakers Magnus Montan, Head of International Business for HSBC China, and Nicole Lin, SVP & Head of Product Management for HSBC China, joined the recent British Chamber event to outline the potential gains to be made from early adaptation, and how to set up and operate RMB cross-border transactions to ensure that the potential is fully realised.

# Enterprises Eligible to Trade in RMB

Enterprise | Eligibility
----- | -----
MDEs and non-MDEs | Goods imports to China, where companies in mainland China make the payment; services imports to and exports from China and other current account transactions
MDEs only (non-MDEs with approval from PBoC) | Goods exports from China

**Transaction eligibility: Chinese banks and authorities will do the validation(there is no validation of overseas banks).**

These measures are giving the RMB new trading (imports and exports) and service (commission and dividends) purposes, which may see it gradually replace other currencies for bank transfers / transactions.

# Key Benefits for Companies

- Avoid and minimise foreign exchange losses / exposure
- Save time and labour in dealing with foreign exchange
- Make gains from future appreciation of the RMB
- Record an extra percentage of income if the RMB deposit appreciates
- All existing tax rebate rates apply
- Able to negotiate a better price, terms and conditions with buyers / sellers