SL trade to benefit from Chinese Yuan usage
View(s):By Duruthu Edirimuni Chandrasekera
The internationalisation of Remingbi (RMB) or Yuan, the Chinese currency, will see Sri Lankan trade volumes pick up significantly, while its use in banking transactions locally (which the Central Bank approved recently) would notably facilitate such trade and investments, experts say.
Huynh Bun Quang
“By 2015, we expect China’s trade with the world to increase to US$ 2 trillion. The majority of this will be between China and the emerging markets,” Huynh Bun Quang, HSBC, Head of Asia Pacific International, Global Trade and Receivable Finance, Asia Pacific told the Business Times during a visit to Colombo, pointing out that since Sri Lanka has a growing volume of trade and investments transactions with China, local firms can benefit immensely from this move.
For anyone operating in China, looking to expand into China, or working with Chinese entities, the internationalisation of the RMB will allow for more flexibility in payment, collection and possible investments. Mr. Quang added that by 2030, it’s expected that 39 per cent of global trade will be generated from Asia. “Clients are now able to benefit immensely through cross-border trade from the RMB trade settlement initiative by China and also the recent Central Bank policies. The main driver of this will be China followed by India. As cost of currency hedging for suppliers will decrease and may be reflected in lower pricing the suppliers will see a benefit,” he said, explaining that as a result the whole settlement process is expedited, allowing for a faster payment cycle and lower Days Sales Outstanding (DSO). He also added that the buyers may be able to enjoy reduced administrative costs for making RMB payments.
HSBC is playing a crucial role in the new era (post war) and had so far launched US$ 3.5 billion worth infrastructure projects in Sri Lanka. “Trade financing is growing and it offers lower cost type transactions. We’re well positioned to facilitate this process.” ‘Accounts Receivable Financing’, a type of asset-financing arrangement in which a company uses its receivables – which is money owed by customers – as collateral in a financing agreement, will be a value added proposition to the growing demand for trade in the country, according to Mr. Quang.
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