Renminbi Review 2015: The impact of RMB devaluation on usage patterns

The RMB FX fixing reform in China on 11 August 2015 enabled a more market-based approach, yet also caused RMB to devalue by more than 3% against USD within three days. Standard Chartered commissioned Asset Benchmark Research to conduct a survey of corporate users over the impact of this recent devaluation of RMB on its usage, operational challenges and the outlook for the currency.

Findings of the Renminbi Review 2015:

Read the full report in English or Simplified Chinese.

• Managing RMB FX volatility – given the recent volatility of RMB, the majority of respondents (61%), especially onshore respondents, are managing their RMB FX risk more actively
• Intention to hedge after 11 August – bulk of respondents (61%) have not decided whether to change or not to change their hedging position; while 27% planned to hedge more. Instead of active hedging, China-based corporates are managing their RMB FX exposure by settling more trade in RMB, thereby shifting some FX risk to foreign suppliers and buyers; while offshore companies tend more in reducing their holding of RMB by converting RMB into their functional currency
• Currency outlook – 44% respondents think the RMB will weaken in the next three months; while 42% expect it to remain stable during the same period. Key considerations included the rise in the Fed rate, the slowdown in China’s economy and the policy risk. The views from onshore and offshore respondents generally aligned
• Attitude towards trade settlement – there is quite a conspicuous split between onshore and offshore respondents in this regard. 44% of China-based companies have proactive attitudes towards RMB trade settlement; while only 31% of companies based outside China are proactive. Also, China-based exporters have a high percentage (80%) in anticipating their trade settlement in RMB to increase in the next six months; while only 33% of non-China based exporters expect their RMB trade settlement will increase
• Reduction of foreign currency debt – depreciation in RMB may have caused companies based in China or those with main business in China to reduce their holdings of foreign currency debts, particularly USD debts

Earlier issues of the Offshore Renminbi Review

The Offshore Renminbi Review is part of our Renminbi Research series, and is a quarterly survey of corporate opinion, conducted by Asset Benchmark Research.