Despite intensifying currency fluctuations in the current interest rate environment, treasury management professionals actively engaged with China are keeping their faith in the renminbi. That’s according to research by Asset Benchmark Research (ABR) which finds that 75% of respondents based or doing business in mainland China are unlikely to change their policy towards the Chinese currency when it comes to trade settlement.
In fact, 21% are likely to increase their renminbi usage for trade settlement. Large local companies (77%) are most likely to maintain the status quo as far as the renminbi is concerned. Multinational companies, on the other hand, are more likely to increase their renminbi exposure compared to their local counterparts.
Although it is still not the norm, a growing number of respondents have voiced interest in developing cross-border renminbi management schemes, up from 48% in 2021 to 52% this year. So far, only 18% of respondents have already set up a cross-border renminbi mechanism. Much of the interest to set up such a structure is seen from Hong Kong and Taiwan-based participants.
Several companies based in mainland China are planning to establish offshore units. Around 40% of the companies that the ABR engaged with say they have a finance and treasury management department outside mainland China, with another 6% indicating that they have plans to set up one.
These offshore finance/treasury departments are often set up for three main tasks: to fund overseas operations, to serve as an overseas financing platform, or for hedging market exposure. As in previous years, the preferred location for offshore operations is Hong Kong (55%), Singapore (20%) and other locations in Asia (25%).
As for the mainland China-based companies that don’t have offshore finance/treasury operations, an overwhelming 78% said they would consider setting up one if they had more overseas business flows.
As part of The Asset’s mission to promote best practices in the Asian financial industry, the ABR team engaged with over 500 CFOs, treasurers and treasury management professionals based in the Asia-Pacific to gain a better understanding of how they choose the banking partners they work with for their day-to-day needs.
Respondents were engaged during the first half of 2022 through a series of one-on-one interviews or an online survey.
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