RMB: A Currency Alternative for Thai-Chinese Trade Settlements (Business Brief No. 3296 Full Ed.)

The RMB has now become another currency option for Thai-Chinese trade settlements. The value of such settlements grew more than five folds to RMB209.07 million in 4Q11, over the RMB33.32 million reported in 4Q10. However, the RMB transaction volume that Thailand undertakes with China is relatively small compared to that of Singapore or other East Asian nations, such as Taiwan and South Korea, as we have just began to use the RMB for trade settlements. .

Among the advantages of RMB payment is that it will enable Thai businesses to reduce forex risks other than using only USD for trade settlements with China. Moreover, it will allow Thai businesses to strengthen business networks in China, while Chinese exporters to Thailand will benefit from easing export procedures, settlements and tariff exemptions.

It is expected that the RMB will play a greater role in Thai-Chinese trade settlements, supported by the size of China's economy, growing Chinese trade and investment in Thailand and its attempts to loosen RMB capital inflows and outflows. In addition, the Thai government is actively supporting commercial banks to offer the RMB payment service, which should help promote bilateral trade between Thailand and China.

Nevertheless, using the RMB for trade settlements are being restricted by limited RMB liquidity offshore as China's goal of RMB internationalization is still at an early stage, resulting in a wide spread between the RMB and other currencies. Moreover, transaction channels available for RMB are limited compared to the USD. As a result, Thai entrepreneurs should consider these factors thoroughly before using the RMB.