Chinese Currency Opening Up To The Market

 

by Mary Jo Mack of Silicon Valley Bank

 

As a result of the latest in a series of moves by China to open its historically restrictive Renminbi currency, also known by its abbreviation of RMB, to international use, US Companies can now send and receive RMB currency for Business to Business trade and service related payments.

What does this mean for US companies?  According to Mary Jo Mack, of Silicon Valley Bank, this means US companies can now:

– Negotiate better pricing agreements. Chinese companies generally prefer invoicing in RMB as it eliminates FX-related fees for them.  They may be willing to pass some of this benefit on to you in the form of price concessions.

– Improve supplier relationships. Suppliers get more immediate payment and in some cases more rapid tax rebates from the government for their export-related costs

– Broaden your supplier and customer base by making it easier to do business with  US Companies through the use of the local currency

– Improve working capital management, as shortened supplier payment periods open the door for better credit terms, and faster payment recognition shortens days sales outstanding

– Improve visibility and control over currency risk. As you eliminate the vendor’s need to bill at higher costs to cover their anticipated foreign exchange expense, you have transparent pricing and the ability to easily manage your resulting foreign exchange exposure

– Gain a competitive advantage, as not all overseas firms accept payment in RMB

 

If you have questions, or to find out more about the technical aspects of RMB wires, please call Mary Jo Mack of Silicon Valley Bank at 415-806-5341.