Indonesian businesses have yet to adopt China?s renminbi as a currency in trading with the country, amid concerns about risks but at the same time unaware of the benefits in trading, HSBC Holdings said.
China?s government started an initiative in 2009 to ultimately replace the US dollar with renminbi in its trade with other countries. Yet, it gains little traction with Indonesia, one of its key trading partners for commodities such as coal and palm oil.
?Indonesians business still wait and see about using the renminbi,? Nirmala Salli, head of global trade and receivables finance at HSBC Indonesia, told reporters in Jakarta on Wednesday.
HSBC has been introducing a wide range of trade financing instruments, such as letters of credit and bank guarantees, denominated in renminbi since two years ago, Nirmala said.
Transactions in renminbi, though, are limited to one or two months, because businesses believe that trading renminbi to rupiah is not widely available among Indonesian banks, she said.
Additionally, bank instruments for businesses to keep their renminbi, such as deposits, are offering rates at almost zero interest, Nirmala says.
Simon Constantinides, regional head of global trade and receivables finance at HSBC Asia Pacific, said that one of the risks for holding renminbi is that the currency is not freely convertible, making it susceptible to government policy changes. China pegs its renminbi to a basket of currencies.
?The government policy can dictate very quickly where the currency goes,? he said.
However, Constantinides said that for local businesses that settle their trade in renminbi, they can use it as a hedge against other currencies, reducing risks by holding a set of currencies. In can also accumulate the capital in renminbi for further investment, he said.
Source: http://www.thejakartaglobe.com/business/local-business-hesitant-on-renminbi-trade-hsbc/549429
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