HSBC conducted the first ever transaction in RMB in Poland

Having widened its offer by solutions enabling trade settlements with Chinese partners in RMB, HSBC bank has conducted the first RMB transaction in the history of Polish bank sector.

This makes Poland one of over 40 countries from 6 continents where HSBC has become the pioneer in RMB trade settlements. This is another step in pursuing HSBC Group’s strategy in corporate banking – to be the leading bank for international business.

„We now have know-how from Poland and other countries, where HSBC conducted transactions in the Chinese currency. We want to make Polish companies familiar with mechanisms determining the behavior of the Chinese market. We’re ready to support our customers in their cooperation with Chinese partners and in settlements in RMB. We trust our offer will be interesting for companies engaged in trade exchange with China and that the just conducted transaction will be one of many”, says Pawel Kusiak, head of CMB and Global Banking at HSBC Bank Polska SA.

At present around 30% of companies serviced by the bank use trade finance products, out of which every third trades with Asia. “We estimate that the number of our customers trading with China will grow by 40% by the end of 2011, also thanks to the new RMB offer”, adds Pawel Kusiak

Chinese companies want to settle in RMB…

Almost 8 in 10 companies from mainland China that do not settle trade with their cross-boarder partners in RMB, are planning to do it – showed a survey conducted by HSBC bank in China (HSBC Bank China) among 1,300 companies from 18 Chinese cities. “The openness of Chinese companies to settlements in their local currency is natural.

Paying or receiving payments in i.e. USD they need to exchange USD to RMB, bearing currency risk. When they settle in RMB, they get rid of this risk”, says Andrzej Puta, head of TSC at HSBC Bank Polska SA. However, this solution brings benefits not also to the Chinese but also for their foreign trade partners (i.e. from Poland) who can not only get better contract conditions (i.e. a lower unit price in the case of import or a higher price for goods in the case of export to this market). HSBC’s experts expect that by 2015 the value of trade settlements in RMB will reach around 2 trillion USD.

...but their foreign contractors have no such ability?

Asked about obstacles on their way to settle trade with foreign contractors in RMB in the same survey, Chinese businesses pointed at problems with buying RMB or lack of options enabling further trading with RMB contractors receive from the Chinese within trade settlement. This is what over half respondents (59%) answered. Almost 1/3 (31%) pointed at lack of sufficient support from banks servicing their foreign partners. “Banks’ offer in this area is limited indeed. HSBC was the first bank in the world that conducted trade settlement transaction in RMB. In Poland we’re also the first bank to enable companies settlements in this currency”, says Andrzej Puta.

Among other barriers making trade settlements in RMB more difficult Chinese companies included in this survey listed the lack of knowledge on the part of their foreign contractors. “From European companies’ perspective, that are used to settlements in USD with their Chinese partners, settlements in RMB may see a bit exotic. Sharing our knowledge and experience gather during our 146-year presence in this market, we’re trying to convince our customers they’re not”, says Andrzej Puta.

How can a Polish company settle in RMB?

„Settlements in RMB are as simple as settlements in other currencies, like USD for example”, persuades head of TSC at HSBC bank. Polish company willing to settle trade in RMB with its Chinese partner should open an account in RMB at HSBC. If it’s an import company it should check if its Chinese contractor is on the list of companies authorized to trade with foreign partners. This list is called Mainland Designated Enterprises (MDE) and includes over 67,000 Chinese companies that can settle in RMB. Having done that the importer should ask its Chinese partner to issue an invoice in RMB and present it to HSBC, together with some transport documents. Next the company contacts with HSBC’s FX dealer, asking for RMB’s exchange rate for trade settlement purposes. Dealer checks the rate, informing the customers about its level. Customer accepts the rate (price of currency) and makes an RMB purchase order (spot transaction). RMB purchased by the dealer are transferred to customer’s account. Having RMB at hand on his account, the importer makes a money transfer to his Chinese contractor’s account via electronic banking system HSBCnet. The bank executes the transfer. If Polish importer works with a company from Hong Kong instead of from mainland China, he doesn’t have to check if his partner is of MDE list as in Hong Kong companies can pay or receive payments in RMB without any restraints. When goods are sold (exported) to China Polish exporters gives his RMB account number to his Chinese partner who makes a transfer to this account. In this case it doesn’t matter if the Chinese party is from mainland China or Hong Kong. Having received the RMB payment the customers can use it to pay his Chinese suppliers (currency risk elimination) or exchange it to PLN or other currency.