Making overseas payments in local currencies can help U.S. small businesses save money while offering flexible pricing and compete better locally. This is particularly helpful when making payments to China.

But while this somewhat hidden benefit may be lost on a number of U.S. companies and manufacturers worldwide, it’s common knowledge with those who are clients of Western Union Business Solutions, a recent analysis by the leader in global payment services says.

In fact, the firm’s American clients increased the number of their RMB payments by almost 90 percent in the first six months of 2013 compared to the same period last year.

“The growing demand we saw in 2012 for RMB has carried on into 2013, with the number and volume of Renminbi payments increasing across all of our major markets,” says Raj Agrawal, president of Western Union Business Solutions. “Businesses around the world are becoming more aware of RMB internationalization and the benefits that trading in the local Chinese currency can create for all parties.”

In the U.S., renminbi transactions now represent nearly 12 percent of all payments to China, up from just over 8.5 percent in the first half of 2012, the report says. That makes the U.S. the top market for RMB payments.

Australia was reportedly the second largest market for RMB payments, reflecting growth of almost 50 percent, while the U.K. and Hong Kong upped their RMB transactions by over 40 percent and 80 percent, respectively, over the same period.

Furthermore, Australian clients sent about 6 percent of their payments to China in renminbi in the first half of 2013, compared to 4 percent in 2012, with British clients seeing similar growth from 3.7 percent to 5.3 percent.

Not surprisingly, Hong Kong represents the market with the highest percentage of renminbi payments, with 37 percent of transactions to China being made in RMB in the first half of the year, compared to 28 percent a year ago.

“Japan, France, Singapore, and New Zealand also recorded strong year-on-year growth,” Agrawal adds. “While overall client take up is modest compared to the likes of the United States and Great Britain, the indicative trend we have seen in all four markets is certainly towards steadily increasing demand for Renminbi.”

Agrawal adds: “The Society for Worldwide Interbank Financial Telecommunication (SWIFT) recently reported that the Chinese Renminbi has become the world’s 11th most used currency and the demand we are seeing certainly reflects this upward trend.”

This report comes just when the Chinese yuan leaped to ninth in the Bank of International Settlements’ (BIS) most recent analysis on foreign-exchange turnover, pulling ahead of the Swedish krona and the New Zealand dollar, according to the Wall Street Journal.

In fact, the newspaper cites the BIS as saying that “trading in Chinese currency has more than tripled over the past three years, to $120 billion a day” in 2013.

Alfred Nader, Vice President of Corporate Strategy and Development, North America, Western Union Business Solutions, tells Industry Today that even though the majority of payments made by American clients are still made in U.S. dollars, businesses around the world are now reevaluating how they transact business with China.

“In light of this, companies and manufacturers of varying sizes now have to begin drafting foreign exchange strategies, which is something they previously never had to do,” Nader says.

Referencing the aforementioned SWIFT analysis, Nader claims that the renminbi will leap from 11th to seventh by the end of next year.

“It’ll be a hop and skip for it,” he says. “We have seen, in a very short period of time, a large surge in the number and value of payments companies are sending to China in renminbi, and it’ll keep growing in popularity, especially among small and medium sized businesses, as long as the Chinese keep making it easy to do.”

Recent policy developments by China’s central bank to allow Chinese businesses to settle their trades in the yuan have done just that, he says, adding that the resulting domino effect has dramatically altered the trade-related payments landscape, enabling businesses globally to pay in Renminbi. He says Western Union was the first non-bank to launch direct RMB payments in 2011.

Likewise, more and more companies are asking their Chinese suppliers if they would like to receive their payments in renminbi, allowing them to save money by negotiating better payment terms that shaves off a handful of hidden costs that would otherwise incur by paying in the U.S. dollar.

Recent Western Union research revealed a desire by Chinese companies to receive payments in RMB. To account for the foreign exchange risk associated with settling in currencies other than CNY, one in five Chinese companies surveyed by Western Union Business Solutions said they add fees of, on average, 3 percent of the total transaction cost.

He adds that the most important thing for American companies to do is to ask if they can make payments in RMB.

“A large number of Chinese companies are hesitant to make the first move and ask their foreign customers to do that. But if American companies ask, they’ll be pleasantly surprised – not only in the response, but in the cost savings,” he says. “If an American company can get more attractive payment terms and better pricing simply by switching to the RMB, it’s time to consider moving away from the dollar.”

About Western Union Business Solutions
Western Union Business Solutions, a division of The Western Union Company, enables companies of all sizes to send and receive international payments and manage foreign exchange, creating unique solutions tailored to suit their FX needs. Businesses are supported by a network of trading offices, strategic banking relationships and a global clearing network.


Request our Media Kit

Please fill out the form below. The media kit, which includes pricing options and information on our audience will be sent to your inbox shortly.