Cross-border yuan transactions forecast to soar
Cross-border transactions in the mainland currency are expected to more than double in five years, says survey of multinational firms
Almost two-thirds of multinational companies that do business with China expect the value of cross-border yuan transactions to more than double in the next five years, a survey shows.
The survey, conducted by law firm Allen & Overy in January and February, sheds more light on the growing use of the yuan by multinationals based outside the mainland, Hong Kong and Taiwan. About 150 senior executives were polled.
Western corporate treasuries are using the yuan in an increasing number of ways beyond just the settling of bills. Over the past year, it has been used by companies with offices on the mainland to pay their staff, boost inter-company cross-border lending and channel yuan offshore through cash pooling services that Beijing approved last year, according to the survey.
"[Yuan] internationalisation is driving their corporate strategy. It is not just some treasury in a little room thinking about it, it's a boardroom issue," said Jane Jiang, a China regulatory partner at Allen & Overy.
"It has exceeded my expectations how large corporations are seeing [the yuan] as part of their business operation."
However, for the shorter term, more than half of the companies surveyed expect yuan-denominated transactions to grow between 10 per cent and 20 per cent in the next 12 months. That suggests a slower growing pace in near term compared with the five-year outlook for those companies, reflecting some obstacles they are facing in near future to conduct more yuan business.
More than 70 per cent of polled companies said the delayed launch of the China international payments system, a worldwide payment superhighway to process cross-border yuan transactions, was their top concern for use of the yuan in transactions.
The system was scheduled to debut last year, but the launch has been postponed and the central government has shifted its focus towards developing clearing banks worldwide to help establish regional settlement and clearing facilities.
Some market participants expect the system to be launched this year after 19 banks were selected for testing.
More than two-thirds of the polled participants were from companies with annual sales exceeding US$1 billion, according to the survey.
Most of the companies surveyed were from the manufacturing, consumer goods and retailing, and technology and telecommunications sectors.
People's Bank of China governor Zhou Xiaochuan on Saturday said the mainland would accelerate currency reforms as part of a push for the yuan's inclusion in the International Monetary Fund's currency basket.
