The number of RMB payments to China by British companies increased by nearly 10% in the second quarter of 2012 compared with the first quarter, says Western Union.
The company adds that British SMEs were the main drivers for the growth in payments to China for goods and services in RMB from the UK – and the UK is not alone in the trend.
Payments to China-based suppliers in RMB from the US rose by more than 15% in Q2 2012, by 30% from companies based in France and by 25% from Australian companies, says Western Union.
The move is hardly surprising. In 2011, HM Revenue & Customs (HMRC) figures showed there was £30.2 billion-worth of merchandise imports from China into the UK.
On this basis, the value of FX-related fees charged by Chinese exporters to their UK clients is approximately £180 million or 3% of the value of one-fifth of the UK’s total imports from China, says Western Union.
Western Union regional finance director Gareth Heald says more UK companies should be mindful of the competitive edge paying Chinese suppliers in RMB gives them.
“China is Britain’s third-largest import trade partner and is not a market in which UK businesses can afford to be left behind,” says Heald.
In March, a Western Union report found that foreign companies that are willing to re-denominate their trade transactions with their Chinese counterparts into RMB are able to benefit from potential dollar cost savings of 2% to 3%.
The People’s Bank of China announced in June that both importers and exporters in China were allowed to begin settling cross-border trade in RMB.
Previously, only China-based importers were allowed to settle in renminbi, while Chinese exporters were only allowed to settle in RMB with companies on the mainland designation enterprise list, which was restricted to 67,000 companies.
Consequently, financial messaging service Swift tracked an uptick in July in the number of businesses making payments into China and Hong Kong valued in RMB.