Optimising use of Rmb crucial for corporates keen to leverage on growing Asia trade scene
“The global financial supply chain as seen from inside an emerging market” dialogue, held during The Asian Banker’s RenminbiWorld Conference 2013, discussed opportunities and challenges arising from increased renminbi adoption. November 13, 2013 | Esther TanA paradigm shift in the global regulatory landscape has spurred further development of the renminbi - from being a mere trade currency, to being deployed in various treasury management and investment strategies. Corporates are beginning to favour use of the renminbi for settlement means as confidence in the currency sets in. The renminbi is now deemed a reliable currency which possesses the ability to retain value and resist risk. Furthermore, simplification of rules governing use of the renminbi places the currency on a trend of appreciation and heightened flexibility. With internationalisation of the renminbi, direct and indirect funding channels are expected to increase, whilst trade financing activities are optimised. Increased cross border lending is also expected to take place, while the impact of the Shanghai Free Trade Zone is not to be belittled, as movement of the renminbi sees further relaxation. Expansion of cross border trades will pave the way for more cash and trade products; this in turn, encouraging emerging solutions such as incorporation of renminbi capabilities into regional treasury centres (RTC). Challenges ahead Nevertheless, increased usage of the Chinese currency is also accompanied by its fair share of challenges. For instance, adopting use of the renminbi only make sense if corporates have a two-way flow of the currency. It may be easier to convince exporters to receive in renminbi as the currency is expected to appreciate, but to persuade importers to pay in an appreciating currency is more of a chore. That said, corporates need to learn to optimise their holdings of the renminbi, whether to buy, hold, or hedge, especially when the renminbi trading band widens. While the People’s Bank of China has liberalised its capital and current accounts substantially, renminbi liquidity pales in comparison to the USD, thus rendering a much higher interest rate and the need for collateral when borrowin... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Cash, Treasury & Trade, China, Rmb, Trade Finance, Transaction Bankingcash,China,Rmb,Trade Finance,Transaction Banking, Cash, Treasury & Trade,China,Rmb,Trade Finance,Transaction Banking, Keywords:RenminbiWorld Conference 2013, Cash Mobility, Cross-Border Transaction, Shanghai FTZ, Commercial Risk, PBoC RenminbiWorld Conference 2013, Cash Mobility, Cross-Border Transaction, Shanghai FTZ, Commercial Risk, PBoC
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