DBS RMB Index for Winning Enterprises rose to record high of 60.5 in 2Q 2015 | 繁體

Business needs and usage of RMB rebounded despite deterioration in both business performance and outlook

Recent stock market rout has limited impact on the internationalisation of RMB

Business needs and usage of RMB rebounded in 2Q 2015
Business needs for RMB, measured in terms of the use of RMB customer orders/ invoices, is a key indicator of actual RMB acceptance and usage levels at the corporate level. In 2Q 2015, 31% of local companies surveyed said that they had RMB customer orders/ invoices in the past 12 months, representing an 8% increase from 23% in the previous quarter. Some 36% said that they would use RMB for these purposes in the next 12 months, up from 32% in 1Q 2015.

The percentage of companies using RMB products rose to 30% in 2Q 2015 from 27% in the previous quarter. Some 25% of companies said they are currently using or will consider using RMB deposits in the next 12 months, versus 24% in 1Q 2015. Those that said they are currently using or will consider using RMB trade services in the next 12 months also increased to 6% from 5% in the previous quarter.

Deteriorated business performance and outlook
The rebound occurred despite the fact that actual business performance and business outlook both deteriorated over this period.

Companies’ business performance has worsened persistently since 2Q 2014. Citing economic slowdown as the main reason, manufacturing, retail, community and personal services sectors reported deterioration in their business performance in 2Q 2015.

Business outlook for the next 12 months also deteriorated, with 28% of respondents believing business performance will worsen, from only 18% in the previous quarter. The manufacturing sector fared worst, with more than half of the respondents expecting declines.

Positive correlation between appreciation expectations & business needs for RMB
There is a generally positive correlation between appreciation expectations and business needs for RMB over the course of our study. In 2Q 2015, appreciation expectations made a comeback and business needs for RMB increased in tandem.

Nathan Chow, Vice President and Economist, Group Research, DBS Bank (Hong Kong) Limited, said: “Despite the State Council recently announced that the RMB will be allowed to trade in a wider range against the dollar, greater price swings are not expected in the near term. On one hand, Beijing will likely keep its currency relatively stable at a time when China’s weakening economic growth is fanning fears of capital flight. On the other hand, by keeping the RMB largely stable, China could further promote the cross-border use of the currency.” 

Recent stock market rout has limited impact on the internationalisation of RMB
Nathan Chow said: “The recent stock market debacle should not derail Beijing’s attempt to internationalise the RMB. The internationalisation of a currency is the process of promoting its use outside the home country. This process can be grouped into three categories: 1) Currency being used as a pricing and invoicing currency; 2) used as financing and investment tool; and 3) adopted as a reserve currency. For the RMB, encouraging development was seen in all these fronts.”

The proportion of China’s trade settled in RMB has already surged to 25% from 3% in 2010. Inward and outward direct investments that were settled in RMB have ballooned by 850% and 830%, respectively, over the past three years. The offshore RMB bond market has doubled in size each year since 2008. Its outstanding volume (including Certificates of Deposit) reached approximately 700 billion yuan as of July 2015.

“More importantly, many foreign reserves managers are showing an increasing appetite for the currency. To date, around 50-60 central banks, sovereign institutions, and supranationals have invested in the RMB. All these reflect the fact that the Chinese Yuan is now perceived as a relatively more mature currency,” Nathan Chow said.

DBS RMB Index for VVinning Enterprises (DRIVE) offers a strategic tool for policy-makers, businesses and investors to track the actual usage and acceptance of RMB among Hong Kong companies as well as their sentiment towards future RMB adoption. DBS releases the findings of DRIVE on a quarterly basis. Fieldwork for the 2Q 2015 survey was conducted through telephone interviews with the business owners and decision makers of over 200 companies in Hong Kong.

Attachments:

1. DBS RMB Index for VVinning Enterprises (DRIVE) 2Q 2015 presentation deck
2. DBS RMB Index for VVinning Enterprises (DRIVE) 2Q 2015 research report

Photo Captions

Photo 1: Nathan Chow, Vice President and Economist, Group Research, DBS Bank (Hong Kong) Limited, said, “Despite the State Council recently announced that the RMB will be allowed to trade in a wider range against the dollar, greater price swings are not expected in the near term. On one hand, Beijing will likely keep its currency relatively stable at a time when China’s weakening economic growth is fanning fears of capital flight. On the other hand, by keeping the RMB largely stable, China could further promote the cross-border use of the currency.” 

Photo 2: Lily Lo, Assistant Vice President and Economist, Group Research, DBS Bank (Hong Kong) Limited, said “The index reading rose to a record high of 60.5 from the previous quarter’s 55.1, as the business needs and usage of RMB increased among local companies.”

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