Euromoney Pulse Survey: Renminbi’s internationalization continues apace

In a survey conducted by Euromoney’s Research Group in association with ICBC on the renminbi’s rise, close to 3,000 treasury and finance professionals of international companies with exposure to China responded and shared their views on renminbi liquidity management, cross-border trade settlement, inter-company invoicing and some of the main operational challenges corporate treasurers face in the country. While three-quarters of the respondents said they do not use a local bank for liquidity management operations in China, the data on using the renminbi for cross-border trade now and in the future show the importance of keeping up with developments.

Graph 2 shows clearly how participants expect their use of the Chinese currency in international trade to increase steadily over the next five years, rising 10% during that time.

Challenges and opportunities

When it comes to difficulties faced by treasurers in China and factors that would lead to the enhancement of cash and liquidity management operations in the country, there are some interesting cross-overs.

Renminbi and cross-border cash pooling top both lists. The recently introduced rules allow multinational companies to integrate their China onshore RMB cashflow with their regional and/or global cash pools. The cross-border cash pool is treated as an inter-company loan eliminating cross-border fund transfer restrictions. The People’s Bank of China initially ran a trial of the system for companies registered in the Shanghai Free Trade Zone, but in June the rules were significantly expanded, affording many more multinationals the chance to benefit.

However, as with all new rules, the process hasn’t been entirely smooth and confusion still reigns over the finer points of implementation, possibly explaining why the concept tops the list of difficulties. Once all the issues are ironed out however, it seems the market expects the initiative to enhance local cash and liquidity management operations.

Third on the list of difficulties is the filing procedure, which has attracted criticism for being complex. However, despite being highlighted as a significant problem, a better system of filing only ranked three from the bottom in the list of factors that would substantially enhance RMB cash or liquidity management operations in China.

Just under half of those who responded revealed they did not employ an intercompany renminbi invoicing model, something which could perhaps be a part of the solution to more streamlined filing.

Just shy of 3,000 respondents gave us their opinions around their use of RMB in their daily transaction/liquidity management business. For more analysis, visit www.euromoney.com/research.