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HSBC joins UAE RMB accounts race

By Issac John DUBAI -- The growing two-way trade and tourism ties between the UAE and China received a major fillip with a leading global bank facilitating its customers in the UAE with accounts in the Chinese currency.

HSBC on Thursday became the latest international lender in the UAE to offer its business customers dedicated renminbi, or RMB, accounts at its branches, in a move to play a key role in the booming two-way trade with China, which is predicted to hit $100 billion by 2015.

"This move means that UAE customers will be able to trade with China, subject to People's Bank of China rules, and receive -- as well as pay -- in RMB without having to convert their currency exposure, helping them lower their trading costs, reduce foreign exchange risk and strengthen their relationships with Chinese partners," the bank said in a statement.

Traders and currency experts said the HSBC move was not surprising given the growing clout of China and its powerful currency that is poised to become one of the top three settlement currencies in 2011, and eventually set to emerge as world's most important reserve currency. Globally, many banks have also been racing to launch RMB accounts.

In 2010, Standard Chartered Bank became the first foreign bank in the Middle East to open an RMB account for its clients in the UAE when it launched RMB denominated account with full transactional capabilities.

With around 3,000 Chinese companies operating in the UAE and a huge community of 200,000 Chinese residents, direct non-oil trade exchange between Dubai and China surged to Dh46 billion in 2010, according to Dubai Customs statistics. Along with the trade boom, the number of Chinese tourists arriving in the UAE also increased -- by 50 per cent in 2009 and a further 50 per cent in 2010.

Nicholas Levitt, head of commercial banking for the UAE, said the RMB has already overtaken the pound sterling in its use as a settlement currency. "Now traders are telling us that they expect it be one of their top 3 settlement currencies this year. And, as trade with Asia increases, so does global interest in this important currency."

He pointed out that in 2010, China's total trade volume was just over RMB20 trillion, of which just RMB506 billion was settled in RMB. In the first half of this year alone, RMB 360 billion of China's total trade was settled in RMB.

"Given the rate of trade growth with China, we predict that more than half of the trade between China and emerging markets will be settled in RMB in the next two to four years -- our customers need to be ready for this," Levitt said.

"With almost 150 years of experience in China and Hong Kong with largest foreign branch bank network in both these locations, HSBC is ideally placed to ensure businesses in the UAE make the most of the exciting opportunities in the Far East," he said.

HSBC was the first foreign bank to settle cross-border RMB Trade across six continents, said Natasha Patel, regional head of global payments and cash management. "With our roots in Asia and a 60 year presence in the UAE there's no one better placed to help customers trade between these vital regions. The trade opportunity is there -- the World Trade Authority put the UAE fourth in a list of new primary exporters of commodities. Conversely, China comes in as the third highest net importer. Customers need a bank that's represented in both the developed and emerging markets and can help then connect the two," said Patel.

Stephen King, HSBC 's chief economist, has said trade and capital flows between emerging areas of the world could increase ten-fold in the next 40 years and China as well as India would be the main drivers of this growth.

In 2010, India and China maintained their position as the dominant trading partners of the UAE in 2010, controlling more than a third of the country's total non-oil commercial exchange.

According to King, a network of new 'South-South' trading routes connecting Asia, the Middle East, Africa and Latin America, is set to "revolutionise the global economy.

"In the same way that trade between the developed nations exploded in the 1950s and 1960s, we expect the 21^st Century to see turbocharged trade growth between the emerging nations," he said.

As South-South trade picks up, so should South-South capital flows,

undermining the US dollar's reserve currency status and fostering the development of major new financial centres, notably in Asia, King added.

"Changes on this scale would be truly remarkable, taking us back hundreds of years to when world trade was centred not on Europe and North America but, instead, on Asia and Africa," he said.

© Khaleej Times 2011