By Daniel Hunter

UK businesses trading with China could be missing out on discounted terms as they are not settling their trading in Renminbi (RMB), according to a recent survey carried out by HSBC amongst international business decision makers.

Only one in ten (11%) of the UK businesses surveyed, said they had conducted cross border transactions in the local Chinese currency, despite 55% of Chinese businesses interviewed in the same survey, saying they would offer discounts of up to 5% to their trading partners for RMB denominated transactions.

HSBC surveyed 700 international businesses from Australia, China, Germany, Hong Kong, Singapore, UK and USA and found that businesses around the world are reporting healthy trade with China. 81% of the 101 UK businesses interviewed reported international growth in 2012 and 79% of UK SME’s expect further growth next year. This was the most confident response from the seven markets.

“This survey highlights a need for UK businesses to learn more about how using RMB could help them reduce costs and give them competitive advantage when trading with China," Peter McIntyre, HSBC’s UK Head of Trade said.

"It is clear that Chinese businesses are prepared to share the benefit gained from removing the currency risk from within their cost base. At HSBC we want to provide insight to our customers supporting their international business plans and by undertaking this survey we can see real potential financial benefits to companies using RMB.”

The key issues holding businesses back from using the RMB appear to be awareness and consideration, with businesses stating that they are unsure of the clear benefits.

• Less than 1 in 10 businesses globally feel they have a “very good” understanding of RMB
• 51% of companies insisted RMB usage would increase if the procedures were further simplified
• 38% of businesses globally are not using RMB as they cannot perceive a clear benefit

While many respondents did not currently perceive the benefits of the RMB, almost a quarter (24%) of those surveyed expect to start using the currency within the next 5 years to mitigate foreign exchange risk (59%) and benefit from better pricing (42%).

Almost three quarters (73%) of all companies using the Chinese currency expect their RMB cross-border business to grow during the next 5 years, with a quarter (26%) estimating growth of more than 10% in 2013. The main drivers for those using the RMB were to mitigate foreign exchange risk (48%), meet demand from their counterparties (46%) and convenience (42%).

Pushchair manufacturer iCandy recently opened an RMB account in order to support the company’s trade and manufacturing in China.

“As we have recently started offering iCandy products in China, it made sense for us to be able to trade in Renminbi," Bradley Appel from the company said.

"Our suppliers like to receive payments in their local currency as they are not impacted by exchange rate fluctuations and could even mean we receive a discount from suppliers.”

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