In Box: Renminbi on the rise

New Zealand managers need to become as familiar with the RMB as they are with the USD, AUD and the Euro, according to ANZ New Zealand managing director institutional David Green.
The Chinese currency – the renminbi (RMB) or yuan – will inevitably become major international currency, notes Green, and large market in the currency could be operating within only few years.
Since 2003, banks in Hong Kong have been allowed to conduct limited personal RMB business, such as deposit-taking and remittances. In July 2010, the “People’s currency” made quantum leap when RMB was allowed to travel outside China on deliverable basis as part of the progressive deregulation and internationalisation of the Chinese economy.
Green says that as result “in just six months, cross-border trade settlement witnessed 10-fold increase to RMB101 billion (NZ$19.8 billion) per month in December 2010, compared with RMB10 billion (NZ$2 billion) in June.
“This meteoric ascent of the RMB in cross-border settlement is evidence of the RMB’s progress towards inevitably becoming one of the world’s principal global trading currencies.”
While trade deals with China have historically been undertaken in US dollars, RMB is now directly accessible to New Zealand importers and exporters. Green says ANZ New Zealand last month leveraged off its capability in Asia to complete its first trade deal in RMB for Wellington company NAC Trading.
“This has established trend that will likely be the way of the future. Dealing in RMB will help reduce conversion costs and also potentially give importers and exporters here competitive advantage, as Chinese customers are likely to be more comfortable trading in their own currency.”
With China now New Zealand’s second largest trade partner the opportunities are immense. Green says once the RMB is adopted as common settlement currency by exporters and importers, “a large and liquid market could be operating within only few years”.