Australian companies 'need to trade in Chinese currency'

AUSTRALIAN companies risked being left behind in doing business with China because of their unwillingness to trade in the yuan.

AUSTRALIAN companies risked being left behind in doing business with China because of their unwillingness to trade in the Chinese currency.

HSBC Australia's head of commercial lending, James Hogan, warned yesterday that a new survey by HSBC of almost 700 companies in China showed that they had a strong preference for doing business in the renminbi when trading with international companies.

But he said Australian companies had been slow to do business in the currency, which could affect their business potential, preferring to have their China business denominated in US dollars.

"Some 25 per cent of Australia's two-way trade is with China," he told The Weekend Australian yesterday. "But only 1 per cent of that trade has been settled in RMB since 2009."

This was far behind the global figures that show that 10 per cent of all trade with China is currently being settled in renminbi.

The Chinese government has been gradually releasing its controls on the China currency in recent years, particularly for trade-related business.

Mr Hogan welcomed tomorrow's release of the federal government's paper on the Asian Century, but he said companies themselves needed to do more to understand the best way to do business with China.

"There is a potential threat for Australian business because we are not as conversant with the RMB as we need to," he said.

"Companies from Latin America and Africa are coming on stream and potentially competing with us for exports to China."

He said the vast majority of the Chinese companies surveyed expected to see a significant increase in trade denominated in RMB in coming years. Half of the companies surveyed were also prepared to offer better terms to foreign companies prepared to do business in RMB.

Mr Hogan expected the Asian Century report to be a "first-class piece of work". "But we should recognise that it is a starting point, setting themes for further integration with Asia," he said. "It is not going to solve the issues."