'More firms want to use yuan for trade'

More companies around the world are willing to use the yuan for trade, believing that it will become an important international currency, according to a white paper released here yesterday.

It found that 73 per cent of the nearly 3,500 global firms polled think the yuan will become a major world currency, 9 per cent higher than last year. These firms also show more confidence in the Chinese currency, with 72 per cent planning to use it more in cross-border transactions - 3 per cent higher than last year and 11 per cent ahead of 2013.

The yuan is also being circulated in a more diversified region than last year, said Mr Cheng Jun, general manager of the global trade service department at Bank of China, which has compiled the results annually since 2013. He pointed out at the release of the white paper that 10 per cent of the companies in countries outside East Asia and Asean use the yuan as a settlement currency while trading with China, up from 5 per cent last year.

The white paper also revealed new trends in yuan internationalisation. The currency's depreciation has made companies less willing to deposit or invest in it while more are willing to hold yuan debt due to cheaper financing costs as a result of lower interest rates.

Most firms are undeterred by the depreciation, with 64 per cent saying their willingness to use the yuan has not been affected by it. It also found that while there has been more widespread use of the yuan in China's international receipts and payments, firms trading in raw materials and commodities have relatively little bargaining power in insisting on pricing goods in yuan.

The white paper this year included a new feature to track the use of yuan in countries along the "One Belt, One Road". It found that firms along these two ancient trading routes show more interest in using cross-border yuan. More than 80 per cent plan to increase using the yuan in daily business transactions, 8 percentage points higher than the entire pool of overseas firms.

However, this same group also reported having slightly more difficulty in gaining access to yuan-denominated products and services compared to the average. This indicates that there are new opportunities for banks to improve their yuan business coverage in the "One Belt, One Road" region, said Mr Cheng.

Chong Koh Ping

A version of this article appeared in the print edition of The Straits Times on November 07, 2015, with the headline ''More firms want to use yuan for trade''. Print Edition | Subscribe