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Foreign Exchange

Small companies seek out RMB billing for Chinese business

Small- and medium-sized enterprises (SMEs) in Germany, the Netherlands and the UK that export goods and services into China are set to increase the amount of billing they conduct in RMB, according to a Deutsche Bank survey.

Of the SMEs surveyed, 20% of those companies invoice buyers in RMB, while the remaining 80% said switching over to RMB billing is “in the pipeline”. The survey encompassed 102 companies, of which 60% had turnover in their China business of less than RMB10 million.

According to the survey’s findings, European SMEs exporting to China can lower prices in negotiations with Chinese business partners by an average of 4.8% by switching to RMB billing.

Of the SMEs questioned, 30% said they did not engage in RMB invoicing because of slow payment processes tied to international FX transactions. Meanwhile, 15% of the companies surveyed said they experienced difficulties in obtaining approval from Chinese authorities for payments for goods sent into the country.

However, switching to RMB billing can help European SMEs exporting to China expand their network of suppliers and buyers by growing the number of Chinese companies that only had limited access to western currency in the past, says Deutsche Bank.

In June, Deutsche Bank launched a cross-border RMB payment-processing facility as a pilot project with the People’s Bank of China (PBoC).

The PBoC RMB cross-border payment scheme allows certain China-based companies to invoice and settle cross-border trades in RMB without having to provide documentation for pre-trade verification.

Banks in China are required to physically check the documentary proof of each underlying trade transaction before they can process an RMB payment on behalf of their corporate clients.

The trade in USDRMB has doubled in volume during the past 15 months, as trade outside of China using RMB amounts to around $2 billion per day, according to Deutsche Bank figures.

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