(31 January 2025 – Hong Kong) The use of Chinese Renminbi (RMB) in trade finance is gaining momentum rapidly as corporates seek cost efficiencies and supply chain diversification amid US-China tensions and improvements in the currency’s offshore liquidity.
The Chinese currency’s cheaper funding costs and growing offshore liquidity, coupled with a new facility, are boosting its appeal. More companies in Hong Kong could be encouraged to use RMB-based trade financing to “achieve cost efficiency and facilitate international trade in a dynamic macro environment” as regulators prepare to provide a US$13.8 billion trade-finance liquidity facility.
The measure will offer banks in the city a stable source of relatively lower-cost RMB funds to support customers’ trade financing needs, helping stabilise interest rates in trade finance because the rate would be based on a swap facility between the People’s Bank of China (PBoC) and the Hong Kong Monetary Authority (HKMA).
The RMB ranks third in global trade finance, with a six percent share in December 2024 compared to a two percent share four years ago according to Swift.
“The Yuan’s use in trade finance is gaining momentum, particularly among companies in sectors such as electric vehicles, solar panels and engineering, procurement and construction. Chinese companies ‘going-global 2.0’ push has been boosted by slower domestic business growth and uncertainties with traditional trading partners such as the US and Europe amid tariff threats” commented Standard Chartered Greater China and North Asia Head of Trade and Working Capital, Carmen Chan.
“They are looking to capture new opportunities in other regions. Trade flows between China and Southeast Asia, Africa and the Middle East have been growing, with many companies using Hong Kong as a ‘super connector’” Chan added.