Around 41 per cent of UAE businesses, which currently do not trade in the Chinese currency Renminibi (RMB), plan to do so over the next three years, a new survey has found.
According to a HSBC Commercial Banking Survey, the rising interest in the RMB among UAE firms is due to their plans to increase cross border trade with China and the financial benefits that the currency offers.
Almost 55 per cent of respondents in the UAE said that they see business relationship benefits from RMB adoption while 86 per cent said that competitive pricing was one of the key factors in driving the usage.
The survey, which polled 11 countries, also found that around 73 per cent of businesses in the UAE planned to increase cross-border activity with mainland China.
Globally, 86 per cent of businesses polled in the UK, 74 per cent in Canada and 63 per cent in France also looked to increase trade with China over the next few years, the survey showed.
“The survey results, particularly those of UAE businesses, are certainly reflective of the trend we are seeing amongst our customer base,” said Ahmed Yeganeh, regional head of International Subsidiary Banking for HSBC MENA.
“More and more businesses are recognising how trading in the currency can help them build stronger relationships, mitigate risk as well as benefit them in terms of pricing. We very much expect the RMB to become more widely used amongst UAE businesses in the medium term.”
China surpassed the US to become the world’s largest trading nation in 2013 with its trade in goods exceeding $4 trillion. The IMF’s projections for nominal dollar GDP indicate that China will add about $850 billion to global demand this year.
Moreover, internationalisation of the RMB is also creating new opportunities in trade, investment, cash management and funding.
HSBC forecasts that a third of China’s trade will be settled in RMB by 2015 and the currency will be fully convertible by 2017.
Around 33 per cent of the UAE businesses polled also said that they believe that the RMB will become an international trading currency in the next five years.
Many UAE lenders are cashing in on the growing interest of local businesses in the RMB by launching Asian financial services.
Last year, HSBC launched a series of Renminibi deposit accounts for its customers in the UAE looking to invest in the Chinese currency. Meanwhile, Commercial Bank of Dubai introduced a Chinese banking platform called TianLong in 2012 to support the business needs of Chinese small and medium enterprises.