KOTA KINABALU: The Malaysian government encourages efforts to diversify trade settlement from US Dollar (USD) to Renminbi (RMB) as reliance on the USD has its disadvantage due to high fluctuation on the foreign exchange (Forex) between Ringgit Malaysia (RM) and USD.
Malaysia External Trade Development Corporation (Matrade) Sabah director A. Rashid Mohd Zain said the use of Renminbi for trade settlement provided a natural hedge for businesses with Renminbi obligation.
He said Renminbi also generated cost savings and minimized exchange rate risks, particularly the exposure to exchange rate fluctuations, especially of the USD.
“Small and medium enterprises (SMEs) can reduce the cost of doing business with China by capitalizing on the Renminbi clearing house as it avoids double transactions where local SMEs and companies need not have to convert the Ringgit to USD first and then to Renminbi.
“Currently, most of local business transactions with China are still conducted in USD,” Rashid said during a seminar organized by Matrade in collaboration with the Kota Kinabalu Chinese Chamber of Commerce and Industry (KKCCCI) here yesterday.
The seminar, entitled ‘RMB a New Preferred Currency for International Trade’, featured speaker Lim Kok Fuat from the Industrial and Commercial Bank of China (Malaysia) Berhad.
The objective of the seminar is to give participants better understanding on benefits of using Renminbi and have better knowledge on how to tap on opportunities in China.
Rashid said the seminar was part of Matrade’s efforts to reach out and encourage more exporters to use Renminbi as the currency of settlement in doing business with China.
“It not only contributes to higher trade volumes between Malaysia and China, but also higher profits for our exporters.”
He said total trade with China accounted for 15.8 per cent of Malaysia’s total trade last year, amounting to RM230.89 billion, an increase of 11.1 per cent compared to 2014.
In 2015, Rashid said China was Malaysia’s largest source of imports at RM129.36 billion, an increase of 12 per cent and second largest export destination with exports valued at RM101.53 billion.
Among the major export products include electrical and electronic products, chemicals and chemical products, petroleum products, palm oil and palm-based products, metalliferous ores and metal scrap.
Rashid added that Malaysia’s trade with China for the first five months of 2016 had increased by 2.4 per cent to RM87.93 billion.
“Exports decreased by 5.6 per cent to RM34.64 billion while imports increased by 8.5 per cent to RM53.29 billion. Both Malaysia and China have set the target to achieve a total trade volume of USD160 billion by 2017,”he said.
Rashid said Renminbi would continue its momentum as the currency for international settlement with the support of the Chinese Government.
“Matrade will continue to drive campaigns to encourage the use of Renminbi for trade settlements with China as well as with other countries. However, it is the private sector that must decide on the economics of using the Renminbi for international payments and receipts.
“Institutions like Bank of China can play a prominent role in educating its clients to encourage the usage of Renminbi in Malaysia, as well as providing feedback to policymakers on what more we can do to create a more conducive environment to allow Renminbi trade to grow.”