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Wading Into the RMB

With China's economy slowing, U.S. companies may be able to grow profits by denominating deals in renminbi. Heres what they need to know before taking the plunge.

By Anil Sawrup, Cheryl Girling | Updated on August 22, 2013

Despite the spectacular economic development China has engineered, the use of the renminbi (RMB) has not grown at the same pace as the country’s industries. Many U.S. businesses that source from China continue to pay their suppliers in U.S. dollars. Doing so is convenient, and it eliminates foreign exchange (FX) risk in those transactions. It also costs more, and it puts these companies at a disadvantage compared with businesses that are willing to transact in RMB.

As China has liberalized the RMB over the past decade, an increasing number of European, Australian, and Asian companies have begun making RMB-denominated deals. If China continues to experience a credit squeeze and deceleration in economic growth, U.S. companies may find themselves under increasing pressure to use the local currency when working with Chinese trading partners. The time is right to evaluate the pros and cons of paying and billing in RMB.

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