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Buyer acceptance of yuan settlement growing, albeit slowly

The limited availability of the yuan in international markets is preventing widespread adoption of the China currency in overseas trade. More than 80 percent of respondents to a Global Sources buyer survey said they are not using the yuan as a trade settlement currency in their China transactions. Nearly half of surveyed buyers said this is because the yuan is not widely circulated in their home countries.

Even in countries where availability of the China currency is not such a major issue, other challenges make it difficult for most buyers to transact in the yuan. More than 22 percent pointed to high currency exchange fees as a deterrent. Nearly 16 percent said not being able to carry out overseas interbank fund transfers discouraged them from settling purchase orders in the yuan.

One factor throttling widespread yuan trade settlement is lack of information. Syria-based Ghassan Hawari, one of the buyers surveyed for this report, said he needs to know more about transacting in the yuan. Still there are others who are used to dealing only in the dollar. "My business is very small and I usually just think in terms of either US or Canadian dollar," said George Clark, a security products buyer from Canada. "Once I cannot deal in dollars, I am lost and will seek out a dollars-only client as a matter of business self-defense."

And although the China government expanded the yuan trade settlement trial to more than 67,000 exporters in early December, many manufacturers remain ineligible. "Our sources do not quote in yuan, always in the US dollar," said Douglas Shanks, a US-based buyer of packaging materials and products. Instead, one of Shanks' suppliers quoted prices with the caveat, "as long as the exchange rate for the yuan is the same as today and for 30 days thereafter."

Boilo Nikolov's suppliers do not quote in the yuan as well. An importer of ferrous and nonferrous metal castings from Bulgaria, Nikolov said none of his suppliers are familiar with transacting in the yuan.

The difficulties associated with yuan trade settlement have made it the least viable option in dealing with the China currency's appreciation. Only 9 percent of respondents chose this recourse, with 54 percent opting to increase sourcing from other countries instead.

Despite such obstacles, however, nearly 40 percent of surveyed buyers indicated their willingness to transact in the China currency in the future. In fact, some want to use the yuan now but are unable to do so because their suppliers still want to receive payment in US dollars.

One-third of importers that want to use the yuan in China trade come from the EU, mostly in Ireland, Italy, Germany and Sweden. These buyers source a variety of products, ranging from apparel, garment trimmings and buttons to LED lighting products and consumer electronics.

US buyers account for 22 percent of respondents willing to transact in the yuan. They import mostly gift and promotional items, LED lighting and solar products, and consumer electronics.

Eighteen percent are buyers from Central and South America that source auto parts and accessories, medical equipment and supplies, and building materials from China.

 

Download PDF versions
Buyer Survey: China sourcing alternatives (January 2011)
Buyer Survey: Yuan trade settlement (January 2011)

Please contact the This email address is being protected from spambots. You need JavaScript enabled to view it. if you have any questions about the survey or would like additional information.

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