The equivalent of $2 trillion worth of trade transactions between China and the world will be carried out using the renminbi within two years, according to HSBC.
The Chinese currency is gaining increasing importance in global trade and deputy chairman and CEO of HSBC Middle East and North Africa Simon Cooper told reporters on Sunday that it would be used for almost one-third of all imports and exports between China and the Middle East by 2015.
“The region ... has increasingly strong economic ties with China and increasingly some of that trade is going to be settled in renminbi,” Cooper said.
HSBC predicts trade between China and the MENA region will reach between $350bn and $500bn by 2020.
“Twelve percent, we estimate, of China’s trade during 2012 in the MENA was settled in the renminbi. In 2010 it was 3 percent, so we’re already starting to see quite significant growth and traction in renminbi as a currency of choice in terms of financing trade in China.”
China-UAE trade has soared by an average 35 percent every year for the past decade, surpassing $35bn last year, according to the Dubai Chamber of Commerce and Industry. It now represents 10 percent of total trade excluding oil.
China is expected to become only the second country in the UAE’s trade history to jump the headline figure of AED100bn when 2012 figures are finalised.
About 60 percent of China’s total trade passes through the UAE, from where it is re-exported to Africa and Europe, making the Gulf country one of the Asian powerhouse’s most crucial partners and the UAE one of the greatest beneficiaries of China’s growth. Even the UAE’s largest trading partner, India, relies on the Gulf country for a significant portion of its Chinese imports.
HSBC was the first bank in the region to establish services specifically to assist with cross border renminbi trade transactions.
Cooper said some businesses, particularly those in countries whose currency was pegged against the dollar, remained reluctant to transfer to the renminbi, but anyone serious about doing business with China would have to consider it in the near future.
Chinese contractors often favoured firms that agreed to perform transactions in their currency, while payments in dollars often attracted an average 3 percent fees or surcharge.
However, Cooper said the dollar would remain the dominant trading currency for the foreseeable future.
“The [renminbi] won’t be the largest global currency for a long, long time to come, but I do see ... the renminbi increasing in significance in this part of the world. I don’t see it taking over the dollar but I do see it growing in importance,” he said.