More Chinese traders plan to use the yuan in overseas trade despite barriers holding back the currency in the Mena region and elsewhere.
Yuan gains currency in region
Barriers are holding back a greater use of the Chinese currency in the Middle East and North Africa (Mena) region and elsewhere, according to a HSBC survey.
But despite the restrictions entangling the yuan, about US$2 trillion (Dh7.34tn), more than half of China's total global trade, will be settled in the currency by 2015, the bank says.
"We believe that with the continued extension of the use and investment channels for offshore renminbi [the yuan], overseas markets will see a steady and continued rise in renminbi holdings and strengthened local support for renminbi settlement over time," said Tim Reid, the Mena regional head of commercial banking for HSBC.
Issues and challenges surrounding the yuan's use were inevitable as the currency went global, he said. Nearly eight in 10 businesses in mainland China that have not yet started to use the currency to settle cross-border trade were planning to use it in future transactions, the survey found. HSBC surveyed 1,300 companies in 18 cities in the world's biggest exporting economy about their outlook for the currency in global trade.
A big obstacle for 37 per cent of surveyed Chinese traders yet to use the currency, however, was its acceptability among trading partners outside China, the results showed. Of this percentage, more than half said their overseas partners had difficulties in obtaining the currency to pay or lacked channels to use the currency they received as payment.
Nevertheless, an increasing number of regional traders are using the yuan to settle trade deals.
But some manufacturers in the region are already complaining that they are paying more for Chinese raw materials as the yuan continues to rise against the dollar.
The dollar remains the main trade settlement currency, reflecting the US's position as the biggest global economy. Traders in the Mena region expect the yuan to become one of their top three trade settlement currencies this year after the dollar and the euro.
As many as 13 per cent of respondents from the region said they would settle trade deals in the currency in the next six months, according to HSBC's latest Trade Confidence Index, released this month.