If your company buys products in China to sell them in Chile, or sells products of Chilean origin there, doing it in renminbi (RMB, the Chinese currency, whose unit of measure is the yuan) may be better than in dollars. Before explaining why, let's review a couple of things that the reader probably already knows:
1) China is the world's leading trading partner, representing 12.4% of global foreign trade. In 1995 that figure was 3%, imagine the growth they have had. The United States is in second place, with 11.9%, and Germany third with 7.9%.
2) The dominant currency internationally is the US dollar. Currently, 40% of international payments and 62% of official foreign currency reserves are denominated in US$. The euro follows with 34% and 20% respectively, while the renminbi occupies a distant fifth place with 2% in both rankings. The pound sterling and the Japanese yen remain more relevant than the RMB.

If you were the Chinese government, would you like to be the main trading partner of the world and realize that all transactions are made in dollars? Probably not. For several years, Beijing has been taking different measures to give more prominence to its currency in the international markets, starting in 2002 with permits to foreign investors to participate in the Chinese stock markets, and up until the launch of PetroYuan in 2018 (another very interesting topic, by the way). There is still a long way to go for the yuan to acquire the relevance of the US$ or the euro, but the determination is clear and seems only a matter of time. Today a company in Chile can go to the bank and buy or sell yuan, spot and forward, and transfer them to another company in China and vice versa, just as quickly as it operates in US$. These transfers in yuan come and go directly, without going through the US like dollars, reducing risks of delays and at competitive costs. In addition, normally the prices of the yuan and the Chilean peso (CLP) fluctuate in a similar way against the dollar, so that they move with much less volatility. In the last three years, the CNY / CLP has moved in a range between 93 and 103, while the US$ / CLP in the same period varied between 587 and 720 (taking effect in Chile in recent days). Several companies that import Chinese products have already “de-dollarized” their supply chain, agreeing with Chinese suppliers their operations in yuan. The dollar in these cases is nothing more than an unnecessary reference.

Let me suggest an exercise that will not cost you a penny. First, call your bank and ask how your company can operate in yuan. All banks in Chile already know about this issue, so it should be easy. Second, the next time you quote an operation with your counterpart in China, ask that in addition to the price in US$ they give you the price in yuan, and then you choose to pay in the currency that suits you best. Your counterpart in China should be happy to improve the price, because when they go to their bank to buy or sell dollars, they must pay a commission that their proposal may avoid.

Give it a try!

Alberto Yastremiz

Deputy General Manager China Construction Bank