Vive la Revolution
2017 is a critical year for European politics not to mention the triggering of Article 50 and Trump.
With Investec, you can pay RMB direct to your suppliers, without having to convert through USD first.
|Cost Effective||Evidence suggests that Chinese suppliers often add up to 3-5% on every invoice simply to cover their foreign exchange risk. By paying your suppliers directly in RMB, you could potentially lower these costs.
|Competitive Advantage||Not all firms have the ability yet to make or receive payments in RMB – those who can may enjoy a competitive advantage.|
|Wider Supplier base||As access to foreign currency by Chinese firms is still limited, RMB settlement can be used to access a wider supplier base in China.|
|Process Advantages||Save your Chinese suppliers / buyers the time and effort of converting USD to RMB – this can speed up the payment and delivery process.|
|Process Advantages||You can hedge RMB with traditional forwards (instead of NDF’s as you had to previously).|
In March of last year, the People’s Bank of China relaxed the use of RMB for cross-border payments and trade settlement. Through the cancellation of the Mainland Designated Enterprise (MDE) List, China has effectively made it easier for international (non-Chinese) companies to pay their Chinese suppliers in RMB.
All companies in China will now be allowed to settle in RMB with companies outside of China, unless they appear on an exceptions roster of "enterprises under close supervision".
RMB or CNY?
The renminbi, literally translated as “people’s currency”, is the official currency of the People’s Republic of China. It is issued by their monetary authority, the People’s Bank of China (PBoC). The official abbreviation of Renminbi is “RMB”, although the Chinese yuan (“CNY” – its English name) is still commonly used in financial markets.
The primary unit of the renminbi is the yuan (think of it like GBP – the primary unit of sterling, is the pound).
One yuan = Ten jiao
One jiao = Ten fen
The days of a “fixed” rate of exchange on the RMB are long gone. In just two years the Renminbi has strengthened by over 7% and along with significant external politic pressure the trend would suggest it will continue to strengthen increasing the cost of imported goods. The opportunity that now exists giving importers the ability to hedge against this move is a significant step forward in easing some of the complications associated with transacting business in China.