UAE-China trade soars amid growing, albeit tiny RMB share

The trade between the United Arab Emirates (UAE) and China soared in 2012, but the Chinese currency did not reach the Gulf state's hearts and minds, analysts of the Hong Kong and Shanghai Banking Corporation Limited (HSBC) said Monday.

The development of the Renminbi (RMB) into the top group of global currencies is well underway, Simon Cooper, deputy chairman and chief executive of HSBC Middle East and North Africa, said at a client conference on the growing importance of the RMB in the global and Middle Eastern trade with China in Dubai.

He added that despite the fact that China replaced India as the UAE's biggest trade partner, the RMB has still a long way to go to become an accepted currency of choice for exporting and importing firms with business interests in China.

Although banks, including HSBC, Standard Chartered and local bank Emirates NBD, offered RMB accounts in the UAE and many Chinese banks' established branches in the Gulf state, many consumers do not usually trade in RMB.

"Traders still hesitate to go for RMB-trade, as lots of customers' education has to be done about the RMB. They are used to mostly trade with the greenback, Gulf currency or Euro," said Praveen Gutpa, managing director of HSBC Group.

He said that bank clients often ask questions, such as "How can I manage currency risk with an RMB account?" or "Where to invest with an RMB account if I have excess liquidity?"

Gutpa said HSBC has already convinced major oil and construction companies in the UAE to open RMB accounts. "This helped them to reduce currency risk to import machinery from China in RMB and increase sales opportunities when they export through labeling goods in RMB, rather than in U.S. dollars," he added.

Nevertheless, the main message from the HSBC conference was that no trading company can ignore the rise of the "redback."

The RMB has globally become an accepted trade currency, Stephen King, the group chief economist at HSBC, said, adding that its way to internationalization was irreversible.

"We expect that China's currency will become a fully convertible currency in five years," said King.

Meanwhile, Gutpa said as bilateral Sino-Arab trade will surge further, "no one can ignore bank products based on the RMB."