RMB overtakes ringgit in Malaysia-China payments

KUALA LUMPUR - Chinese yuan or renminbi (RMB) - an increasingly used currency for global payments - is rapidly gaining ground in Malaysia with the most recent Society for Worldwide Interbank Financial Telecommunication or SWIFT data showing its use for payments with China and Hong Kong swelling by a massive 68 per cent over the last 12 months and by more than twice or 214 per cent over the last three years.

The RMB has already overtaken the Malaysian ringgit (RM) as the second most used currency between China and Malaysia.

In January 2013, the ringgit accounted for 17 per cent of total payments by value between both countries, but fell by half over subsequent years - from 8 per cent in January 2014, 4 per cent in 2015, and a mere 2 per cent in January this year.

Over the same period, the RMB accounted for 8 per cent of payments in 2013, rising to 11 per cent in 2014 and a high of 17 per cent in 2015 before falling to 8 per cent this year as the US dollar grew in dominance with an 87 per cent share.

"Despite volatility in China and widely reported economic slowdown, the Southeast Asian markets such as Singapore, Thailand and Malaysia have been enhancing RMB payment capabilities including the establishment of RMB clearing centres," said SWIFT Asia-Pacific head of payments Michael Moon, noting the growth reflects the extensive trading relationships between the region and China.

Commenting on the latest SWIFT report, HSBC Malaysia head of payments and cash management Mandeep Singh said RMB international usage between both countries is set to rise as Malaysia is China's biggest ASEAN trading partner - annual bilateral trade tops US$100 billion - and in a prime position to facilitate China's ASEAN trade relationships.

HSBC has benefited from the growth in offshore RMB services with its revenue rising 3 per cent in this segment year-on-year.

Mr Singh expects the internationalisation of the RMB to be further boosted by China's ambitious "One Belt, One Road" (OBOR) initiative and investments in regional infrastructure investments to connect China with Eurasia via sea and land routes.

SWIFT said that, as at January, the RMB remained the fifth most active currency for global payments by value and accounted for 2.45 per cent of the total, or a slight increase from 2.3 per cent last December.

Malaysia's stepped-up engagements with China in trade and investments are reflected in the recent disposal by state-owned 1MDB of power and land assets to Chinese companies for some RM15 billion (S$5 billion).

Previously, the private sector has inked a few deals with Chinese firms, one of the largest being the sale of 47 hectares of land (including some to be reclaimed) by the Sultan of Johor to Guangzhou R&F Properties for an impressive RM4.5 billion.

Chinese demand for bauxite saw vast swathes of lands in the state of Pahang transformed overnight into open mining pits until a temporary ban was put in place early this year in a belated attempt to control rampant extraction of the mineral.

As the Chinese appear more willing than most to pay top dollar for assets, more Chinese investments are expected should the government or its agencies dispose of more assets - particularly non-core - to help fill coffers depleted by the collapse in oil revenue.

On the tourism front, Putrajaya is rolling out the red carpet by allowing the Chinese to apply for electronic visas (e-visas) if they do not stay for more than 30 days, and electronic registration for those on short trips of less than 15 days. The aim is to attract 8 million Chinese visitors this year and the generation of much needed tourism income.

This article was first published on March 3, 2016.
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