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It is still a small portion of corporate transactions and there are
likely multiple layers of political risk - inside and outside of China.

Banks back switch to renminbi for trade
By Robert Cookson in Hong Kong
Published: August 26 2010 17:55 | Last updated: August 26 2010 17:55
A number of the world’s biggest banks have launched international
roadshows promoting the use of the renminbi to corporate customers
instead of the dollar for trade deals with China.

HSBC, which recently moved its chief executive from London to Hong
Kong, andStandard Chartered, are offering discounted transaction fees
and other financial incentives to companies that choose to settle
trade in the Chinese currency.

EDITOR’S CHOICE
Editorial Comment: Renminbi goes global - Aug-26

David Pilling: Long march to convertibility - Aug-25

Opinion: Great dangers of great powers - Aug-20

Lex: McDonald’s renminbi bonds - Aug-20

Beijing looks to broaden renminbi use - Aug-17

Opinion: Watch China’s coasts, not its currency - Aug-10

“We’re now capable of doing renminbi settlement in many parts of the
world,” said Chris Lewis, HSBC’s head of trade for greater China. “All
the other major international banks are frantically trying to do the
same thing.”

HSBC and StanChart are among a slew of global banks – including
Citigroup andJPMorgan – holding roadshows across Asia, Europe and the
US to promote the renminbi to companies.

The move aligns the banks favourably withBeijing’s policy priorities
and positions them to profit from what is expected to be a rapidly
growing line of business in the future.

The phenomenon will accelerate Beijing’s drive to transform the
renminbi from a domestic currency into a global medium of exchange
like the dollar and euro.

Chinese central bank officials accompanied StanChart bankers on a
roadshow to Korea and Japan in June. The bank held similar events in
London, Frankfurt and Paris.

Lisa Robins, JPMorgan’s head of treasury and securities services for
China, said there had been a “spike in interest” from international
clients.

An increasing number of Chinese companies have been asking foreign
trading partners to accept renminbi as payment, said Carmen Ling, Hong
Kong head of global transaction services at Citi.

BBVA, Spain’s second-biggest bank, is also drawing up plans for a
global marketing campaign that will focus on Latin American companies
that export to China.

Banks started establishing renminbi trade settlement operations in
mid-2009, when Beijing introduced a pilot scheme allowing companies to
use the renminbi for trade outside China.

The scramble has intensified in recent months as Beijing has
substantially expanded the scheme – from a handful of Asian countries
to the whole world – and introduced other liberalisations to its
currency regime.

Cross-border trade in renminbi totalled Rmb70.6bn ($10bn) in the first
half of the year – about 20 times the Rmb3.6bn recorded in the second
half of 2009.

But those figures remain tiny compared to the $2,800bn worth of goods
and services that were traded across China’s borders last year, most
of which was settled in dollars or euros.

With renminbi trade settlement volumes expected to increase rapidly,
banks are under pressure to establish a foothold in the nascent market
and demonstrate to Chinese officials that they are committed to the
scheme.

China has taken several steps in recent months to boost the
international use of its currency and to establish Hong Kong, the
special administrative region, as the global centre for offshore
renminbi business.

McDonald’s, the US burger chain and icon of globalisation, took
advantage of the new rules this month when it became the first foreign
multinational to issue renminbi-denominated bonds in Hong Kong.