Companies to increase Renminbi trade settlement in 2019 as forex risks mount reveals latest China Construction Bank report

Shanghai, China, 22nd May 2019 - Growing concerns over foreign exchange risks are driving more companies in and oustside of China to turn to the use of Renminbi (RMB) to settle their trade transactions according to a new report released by China Construction Bank (CCB) entitled "Renminbi Internationalisation 2019 - New Inroads, New Prospects".

The report is based on the findings of a survey conducted by Asian Banker Research in partnership with CCB across 402 Chinese companies, 117 foreign companies and 43 financial institutions (FIs) earlier this year to assess the developments in RMB internationalisation in 2018 and the outlook for 2019.

• Over 50% of the surveyed companies increased RMB based cross-border trade settlement in 2018 and expect to continue in 2019
• 41% of FIs expect the opening of financial markets to boost the use of RMB
• A notable 80% of Chinese companies said that the Belt and Road initiative has increased international use of RMB

Over 50% of the surveyed companies increased RMB based cross-border trade settlement in 2018 and expect to continue in 2019

The survey revealed that 54% of Chinese and 58% of foreign companies increased their RMB based cross-border trade settlement in 2018. The key driver for this was the ‘need to reduce forex risks’ among Chinese companies and to ‘get better rates from suppliers’ for foreign companies. 2019 is expected to see a similar trend as 53% of foreign and 54% of Chinese companies plan to increase their RMB based cross-border trade settlement.

A significant 25% of foreign companies said that they ‘use RMB only when counterparties require’ in this year’s survey compared to 47% in last year’s survey, indicating that foreign companies are becoming more proactive in using RMB for cross-border trade.

In another growing trend, 47% of foreign companies increased their RMB based deposits outside mainland China in 2018. The trend is expected to continue in 2019 as, 45% of foreign companies and 30% of FIs plan to increase their RMB based deposits this year.

41% of FIs expect the opening of financial markets to boost the use of RMB

51% of Chinese and 41% of foreign companies said that they are already using it. In addition, 41% of Chinese companies that are not currently using it, plan to do so in 2019. The China Interbank Bond Market (CIBM) was the most popular channel as 47% of respondent FIs are using it for accessing China’s onshore bond markets.

A notable 80% of Chinese companies said that the Belt and Road initiative has increased international use of RMB

A significant 80% of Chinese and 69% of foreign companies, said that the Belt and Road has led to the increase in the use of RMB based cross-border products and services. 69% of companies felt that the initiative improved access to new markets and customers.

A significant 52% of FIs, 66% of Chinese and 63% of foreign companies also said that the inclusion of RMB into the International Monetary Fund (IMF) special drawing basket (SDR) led to an increase in their use of RMB.

The report also shown increased trade tariffs and protectionism emerged as the most significant concern among companies (72% Chinese and 67% foreign). 61% of Chinese and 57% of foreign companies reported making supply chain adjustments in 2018 after tariff introductions.

Click here to download the full report

About China Construction Bank

China Construction Bank Corporation is a leading large-scale joint stock commercial bank in Mainland China. At the end of third quarter 2018, the bank’s core indicators and market capitalisation continued to be among the top in the industry, with total assets of $47 trillion (RMB23.35 trillion) and a net profit of $32 billion (RMB214.86 billion).

For further information, please contact:

Ms. Sara Wang

The Asian Banker

swang@theasianbanker.com