Both sides wallflowers in renminbi dance
A survey of firms doing business with Chinese firms has found each side waiting for the other to raise the question of invoicing in renminbi, a conference in Auckland heard.
Professor Kathy Walsh, from Sydney’s University of Technology, presented the findings of the five-year survey of Chinese and Australian firms to a conference on financial liberalisation and the renminbi, organised by Victoria University and the New Zealand Contemporary China Research Centre.
‘‘One of the most striking results of the survey is that both Australian and Chinese corporates are waiting for the other to initiate a change,’’ she said.
‘‘In one survey 70 per cent of Australian corporates were waiting for Chinese firms to request and 76 per cent of Chinese corporates are waiting for Australians to accept.
‘‘The results reflect somewhat of a waiting game where each firm is waiting for the trading partner to take the lead.’’
Walsh, who has studied the internationalisation of the renminbi, argued that it was inevitable the Chinese currency would take its place on the world stage but it was a slow process.
Her survey of the expectations of invoicing in renminbi found the benefits to Australian firms were predominantly price and accessrelated but firms also rated the ability to accommodate their Chinese trading partners.
Chinese firms saw benefits more in terms of reduced exchange-rate risk and improved trade terms.
‘‘There is a willingness by many Australian companies to settle trade in RMB should their Chinese trading partners request it however they don’t seem to be actively pursuing it.’’
The survey found many Chinese small firms were often unaware they could invoice in the Chinese currency.
But, she said, it was clear from discussions that some Chinese banks discouraged invoicing in renminbi because they could miss out on high-margin foreign exchange business.
‘‘This was also the case for firms using trading companies to manage their trade and invoicing as none of these firms used RMB for settlement.
‘‘Trading companies have a long history in China and traditionally act as a broker between foreign and Chinese companies trading with each other.
‘‘It is likely that the trading companies are charging their clients a substantial fee for foreign exchange transactions and – like the banks – are reluctant to give up the fees.’’
While many Chinese and Australian corporates were not using renminbi for trade invoicing, some had begun trialling a small number of trades.