The possibility to pay Chinese suppliers in RMB is a recent development that importers should be aware of.
Last week I attended an excellent seminar organized by the French Chamber of Commerce in Hong Kong. RMB settlement was a hot topic.
There are no restrictions at all for Hong Kong-based companies to convert their dollars or euros into Chinese yuan (RMB), and to pay Chinese supplier directly in that currency.
An HSBC representative told the audience that most importers, including many of the largest ones, are not fully aware of the current situation.
The finance director of Tesco Int’l Sourcing explained that they decided to settle their invoices with Chinese suppliers in RMB mainly for three reasons:
- It allows for more transparency on the evolution of the supplier’s costs (no currency effect),
- Suppliers bet that the RMB will go up faster than will actually does. If the buyer has different expectations, then he should pay in RMB.
- Chinese suppliers are happy to get RMB rather than USD. If they get USD, they need to pay the change and they need to wait for 7-10 days to get the cash in RMB.
He also noted that it takes time to switch a purchasing organization to settle in RMB:
- Internal processes need to be modified,
- The staff needs to take new habits (example: asking for dual quotes in USD and RMB).
Has anybody got an experience with RMB settlements?