January 29, 2014

CrossCountry Consulting Examines Implications of the Rise of the Chinese Redback on Treasury Operations

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(McLean, VA) The Chinese Renminbi or “Red Back” as it is commonly known has made a gradual but steady entry onto the world currency stage.  With the loosening of Beijing’s restrictions on the international trading of the Renminbi (RMB), the currency is now the 9th most traded in the world. 

CrossCountry Consulting, a McLean-based financial services consulting firm, closely examines how the increase of direct settlement of trades in RMB is predicted to create a significant shift in the international currency market.  CrossCountry Consulting’s latest report identifies several considerations for treasury operations.  Tembi Sibanda, Associate Director with CrossCountry Consulting says, “The emergence of the Renminbi as a major trading currency poses numerous challenges and requires companies that offer FX products or have significant trade with China to review traditional ways of doing business if they are to remain competitive.”

CrossCountry Consulting’s talented consultants can assist treasurers with identifying best practices in treasury operations, developing an end-state Target-Operating-Model for Renminbi settlements, and implementing projects to achieve the model, including change management.

The Renminbi’s take-off on global markets accelerated in 2009, as the Chinese government approved several Chinese firms to settle transactions in Renminbi internationally.  In the past, strict government restrictions on trading or holding the currency meant transactions were generally first traded in U.S. dollars and then converted to RMB.  Companies would deposit the U.S. dollar equivalent with the People’s Bank of China (PBOC) who would then pass the settlement in Renminbi to the Chinese company at the state-controlled exchange rate.  The lengthy and complex process of settling Renminbi transactions in U.S. dollars is a pain point for many treasurers.

CrossCountry’s team has the experience and expertise to provide finance function transformation assistance to companies with significant trade in the Chinese market who are not already utilizing direct RMB settlement, those expecting to initiate trade with China or those wishing to explore opportunities arising as a result of the shift.  CrossCountry Consulting’s research provides six critical questions each company should think about when examining the current RMB arrangements.