Traders pushed to use yuan to diversify risk

Only 1 per cent of all trade between Thailand and China is settled in yuan, which is meagre compared with 80 per cent in the dollar.

Chantavarn Sucharitakul, assistant governor of the Financial Markets and Operations Group at the Bank of Thailand, told the "Hong Kong-Thailand Renminbi Business Forum" yesterday that the Thai central bank would continue promoting the use of the yuan.

The Chinese currency is a priority because of its stability and increasing importance on the world stage, but the yuan market in Thailand is still unpopular because of issues such as the cost of transactions, she said.

The yuan overtook the euro as the second-most-used currency in trade finance last year. About 22 per cent or 3.27 trillion yuan of China’s total trade in the first half of this year was settled in yuan, up from 12 per cent in 2012, while Thailand is China’s second-largest trade partner in Asean after Singapore, said Vincent Lee, executive director of the HKMA.

China is also Thailand’s largest export market but only 0.9 per cent or Bt340 billion of foreign exchange was in yuan last year. However, this was a threefold increase from 2012.

Vachira Arromdee, senior director of the Financial Markets Department at the BOT, said it was working with the HKMA and other central banks in the region to increase awareness of the use of the yuan.

The BOT is prepared to provide information on the advantage and disadvantages of the use of the yuan to investors, operators, commercial banks and other financial institutions, since the use of the yuan as a means of transaction will not benefit everyone.

The HKMA’s Lee said the opportunity for the yuan to develop further in Thailand and the trade and investment opportunities for Thai corporations were massive, but it was up to Thai banks and financial institutions to work with their customers to find out how best to capture these opportunities.

"In theory, the use of the yuan would eliminate currency risk, and Chinese corporations are willing to offer discounts to enterprises outside of China if trade is settled in yuan," he said.

Trade between Thailand and China is surging and the use of the yuan could strengthen this trade link further. The liberalisation of the yuan would provide a new class of assets for a lot of Thai investors.

TOn the protests in Hong Kong, Lee said that besides getting home late, there was no effect on the Hong Kong stock market, which, along with the wider financial system, was still operating normally and in good order.

"Hong Kong remains business as usual and we are open for business," he said.