The Chinese RMB has slipped in international payments usage, according to SWIFT. Analysts say it’s an outgrowth of China’s central bank policies and offer suggestions on how corporate treasurers can cover liquidity needs tied to the currency.
International payments can cut across currencies, but one — the Chinese renminbi (RMB) — has been on the decline.
As noted by Euromoney, the currency has slipped to sixth place from fifth place as measured by Dec. 2016 over Dec. 2015. The data came from the SWIFT RMB Tracker, and in the latest tally, the currency’s share of payments globally stood at just under 1.7 percent as measured by number of transactions. In terms of value paid across those transactions, the outlet stated that the total fell 15 percent month over month from November to December of this year. The total RMB payments value was off 29.5 percent for the year.
Among measures being taken by the Chinese government to keep the currency from being offshored include the requirement that, as of this year, for every 100 RMB outflow, there must be an equal inflow. Significant outflows are usually regarded as speculative, and as Nathan Chow, senior economist at DBS, was quoted in the report as stating, the government is still working through what needs to be done with those efforts. “RMB internationalization is one of Beijing’s main objectives.”
However, the tougher conditions offer opportunities to those banks that can support clients’ [and corporate treasurers’] use of the currency. Speaking on payments themselves, Vina Cheung, who heads RMB internationalization at HSBC, said, for corporate clients’ liquidity challenges stemming from such government controls, “there are often questions being asked on the reason and process for the remittance, which can make payments slower.”
Banks can step in to help, she continued, with examples including the ability to consider “lending to help them to cover their short-term liquidity needs. If there are standby letters of credit, we might be able to structure a loan based around that.”
Separately, Chow told Euromoney that the currency is likely to be “going abroad as a financing and investment currency, instead of a pure trade settlement currency like it used to be in the early stage.”
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