Trade between Canada and China grew 57% between 2007 and 2012, but Canadian companies are still not using Renminbi (RMB) (also known as yuan) when conducting these transactions – to their detriment – according to HSBC.
A survey released July 9 shows that only 5% of Canadian companies settle trade transactions with China in RMB. This is considerably less than the 17% of American companies doing so, and well below the global average of 22%.
This means Canadian companies are missing out, said HSBC. The study found that more than half of Chinese businesses – 55% – would actually offer discounts to trading partners who use RMB.
“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,” said HSBC Bank Canada executive vice-president and head of commercial banking Linda Seymour.
Those currently using RMB say they do so because it is convenient and it minimizes foreign exchange risk. Some companies report having been asked to use the currency by their trading partners.
The survey found that 74% of companies plan to increase their trade with China over the next 12 months. This is much higher than the global average of 59%. The good news, said HSBC, is that more Canadian companies do plan on transacting trade in RMB going forward. More than one-in-three respondents – 37% – said they expect to start using the Chinese currency in the future. This is five percentage points above the global average of 32%.
Simplifying the procedure of using RMB, expanding the types of transactions that are eligible to use the currency and more information and guidance about trading in RMB are cited as factors that would motivate more companies to trade using the Chinese currency.
