Despite volatility fears over the China-US trade dispute and its impact on the internationalization of the Chinese renminbi, many Asian CFOs and treasurers are still confidently using the currency in their day-to-day interactions with China-based businesses.

That’s according to the Asset Benchmark Research’s (ABR) 2019 Treasury Review, which surveyed close to 800 participants in Asia. Eighty percent of them said that there was no change in their policy regarding renminbi trade settlement. About 31% of large companies mentioned that they would actually keep increasing their renminbi trade settlement in the next six months.

While renminbi trade settlement currently remains steady, there is still a substantial number (65%) of organizations that have no plans to link their international operations with their onshore entities in China via a cross-border renminbi cash pool structure. This is even more pronounced for small and medium enterprises (SMEs) with 71% stating that they had no plans to establish a cross-border renminbi cash pool structure with their service provider.

Interestingly, of the respondents that already had or were planning to set up a cross-border renminbi solution, their methods varied with some aiming to automate cross-border cash pooling via pool header elsewhere in the Chinese mainland while others used regular intercompany loans in renminbi to send to an overseas entity outside of China.

“We are planning to expand our relationship with our service provider in China where we have six different cash pools,” says the treasurer of a Hong Kong-based distribution company. “We want to consolidate it together in the future. We have a plan to connect the cash pool between Hong Kong and China. It’s not easy to move from one cash pool to another.”

According to recent data from Swift, the renminbi represents close to 2% of global payments, slightly increasing from 1.75% to 1.93% between November 2017 and November 2019. In terms of trade finance, the renminbi has remained as the third most used currency over the last couple of years behind the euro and US dollar respectively.

In addition to the sustained usage of the renminbi, an increasing amount of Chinese companies are looking outside to international markets for additional revenues. However, when it comes to offshore treasury operations, China-based companies are still lagging. At the moment, 83% of Chinese firms surveyed by ABR did not have a treasury management department outside of China.

The China-based companies that did have an offshore treasury department mostly had it set up in Hong Kong with around 51% picking the city over other locations in Asia such as Singapore.

However, 81% of China-based businesses said that they had no plans to expand their existing treasury or finance departments, highlighting that most Chinese companies with offshore treasury operations were content with their current setup.

For the Chinese companies that did want to expand their offshore operations, many of them shared that funding overseas operations, hedging markets, and attracting offshore funding for onshore operations would be the top three tasks going forward.

An overwhelming 78% of China-based respondents stated that more overseas business would be needed to justify setting up an overseas finance or treasury department in the future.

“We think it’s very necessary for us to have overseas cash pooling so that we could better prepare for future unexpected foreign exchange policy changes,” shares the finance manager of a China-based electronic company which recently set up its treasury centre in Hong Kong. “Whether we will have another treasury centre will depend on how our global business grows.”