KUALA LUMPUR: Usage of yuan will continue to grow in Malaysia as the country’s bilateral trade and investment relationship with China continues to deepen.
According to HSBC Malaysia, increasingly more Malaysian companies have become comfortable with using yuan for trade settlement as the internationalisation of China’s currency begins to gain pace.
Citing a study by SWIFT, HSBC Malaysia head of global markets Alvin Kong said the usage of yuan between Malaysia and China had increased by 214% over the last three years.
“All indicators are showing that this trend will likely to continue,” Kong said.
“The increase in yuan usage is driven by growth in trade and investment intra-Asia, and between Asean and China.
“And China’s Belt and Road Initiative (BRI) will only continue to accelerate the usage of yuan in Malaysia and most parts of Asia,” he said at a briefing on Asian Outlook and RMB Forum.
The BRI is a multi-faceted strategy to boost the flow of trade, capital and services between China and the rest of the world. It would involve about 65 countries, covering 63% of global population and 29% of global gross domestic product.
Kong noted that in a survey completed last year on 100 Malaysian corporations, 46% believed that yuan would be an international trading currency in less than five years, and 30% would anticipate the growth of yuan being used as cross-border settlement currency over the next 12 to 18 months.
Meanwhile, HSBC Malaysia CEO Mukhtar Hussain said he would expect Malaysia’s bilateral relationship with China to deepen.
“China views Malaysia as a strategic partner in Asean ... Malaysia will not only be a recipient of Chinese investments but the country may well end up as a platform on which China companies would set up their regional offices to promote their activities across the Asean region,” Mukhtar said.
He added that the BRI had already begun identifying areas of specific interests that China had in Malaysia.
According to HSBC Malaysia head of commercial banking Andrew Sill, in Malaysia, the BRI would not only benefit the construction sector but there would be significant spillover effects to benefit other sectors such as energy, tourism as well as real estate.
“There will be significant spillover benefits from the BRI, hence there are increasing opportunities for Malaysian corporates to play a role to ride along the development,” he said.