Enabling payments between regional currencies and the Chinese Yuan/Renminbi will accelerate and enhance existing commercial links between the Middle East & China
HSBC Middle East completed its first cross border renminbi (RMB) trade transaction this week, becoming the first bank to announce such a transaction in the region. HSBC is already the
leading international bank conducting RMB settlement and payments, and with this announcement, HSBC Middle East joins its counterparts in Europe, Hong Kong, and Australasia in
closing landmark RMB deals.
HSBC worked with Royal Palace Furniture, a UAE based retailer, to complete an RMB transaction with its suppliers in China. With a large percentage of its raw material requirements
sourced from China, the ability to remit funds in RMB will enable Royal Palace to expand its supplier base whilst clearly demonstrating to existing suppliers that the company is
committed to doing business in China.
"Businesses in the Middle East view China as one of the most important growth markets for trade in the next six months. The ability to settle trade and other international payments in RMB provides clients with more flexibility when determining payment terms with their supplier base in China thus creating the potential to open up new opportunities for expansion into Asia. This increased flexibility is likely to result in further trade between the two regions," commented Simon Vaughan Johnson, Regional Head of Commercial Banking, HSBC Middle East & North Africa (MENA).
Vaughan Johnson highlighted HSBC''s strategic focus on enabling clients in the region to maximise
international opportunities, with a particular focus on the world''s emerging markets. "This deal clearly demonstrates our capacity to facilitate international business, which is a key element in ensuring that HSBC MENA remains the number one trade bank in the region. Our teams are committed to working across geographies and teams within HSBC to better serve our clients, wherever they operate. As trade with China continues to develop in importance for our customers around the MENA region, I foresee an increase in the customer demand for RMB settlements," he added.
Simon Vaughan Johnson, CMB MENA, HSBC. Previously, settlement in RMB for cross border trades was only permitted between five pilot cities in mainland China, Hong Kong, Macau and the member countries of the Association of Southeast Asian Nations. In June 2010, the People''s Bank of China, China''s central bank, opened the program up to a further 20 provinces as well as countries around the world, and in August 2010 HSBC China became one of the first foreign banks to have completed RMB trade settlement transactions at its eligible branches located in the 20 designated provinces. In addition, HSBC was the first foreign bank to issue RMB bonds
in Hong Kong, the first to undertake a cross-border RMB settlement and the first to establish a RMB trade finance standard rate for reference.
"HSBC is well established in all of the key trading hubs in the Middle East, and has been consistently recognized by industry bodies as the leading trade bank in the region," commented Kersi Patel, Head of Trade and Supply Chain, HSBC Middle East & North Africa. "Combining deep regional knowledge with global expertise enabled colleagues in Europe, Australasia and Hong Kong to be among the first to close RMB settlements in those regions, and we are delighted to be announcing the first such deal in the Middle East. We look forward to working closely with many more regional companies looking to explore the benefits of settling in RMB."
Key Facts
It''s anticipated that within 5 years 30% of China''s Trade will be settled in renminbi and that it will become one of the top three currencies used in global trade. (source HSBC Global Research paper "Expanding the renminbi''s role in foreign trade" )
HSBC China has rolled out RMB cross-border trade settlement service in the 17 Mainland cities where it has a presence, the widest geographic coverage for such service among all foreign banks in mainland China. HSBC was the first foreign bank to issue RMB bonds in Hong Kong, the first to undertake a cross-border RMB settlement and the first to establish a RMB trade finance standard rate for reference.
With the expansion of the RMB trade settlement programme by the Chinese government in June 2010, HSBC has extended its RMB capabilities to 24 countries across the globe and has already completed its first RMB trade settlement in UK, Mauritius and New Zealand.