Wednesday 9th April , 2014 7:22 am
Bankers have hailed the imminent trading of the Chinese Yuan as a move that will help ease demand for the US dollar in the country’s forex market.
The value of the cedi, which has plummeted in recent times as a result of the pressure put on traders’ demand for the dollar, will see some recovery when the yuan comes in.
This will mean, businesses and traders dealing in the Sino region will not need to convert to any major currency before transacting business.
Dr. Benjamin Amoah, Head of Financial Stability at the Bank of Ghana (BoG), has said that the central bank has made significant progress in getting the yuan into the country’s currency trading system.
“Work is far advanced in getting the yuan into the system because we have seen that it is needed – and demand always creates supply, so we are trying to make it available and we are working on it; very soon it will start. I don’t want to put a time on it.
“Currently, the demand is for the yuan because a lot of people go to China,” he added.
According to the Chinese Embassy in Ghana, trade volume between China and Ghana has been increasing year- on-year to hit a little over $2 billion for the first time in 2010.
In 2012, China-Ghana trade volume rocketed to $5.4 billion while available data for the first nine months of 2013, show that trade between the two countries reached $3.8billion.
Meanwhile, the United States Department of Commerce has reported that goods traded between Ghana and the United States of America, which has reported that goods traded between Ghana and the United States of America, which has been been on the ascendency over the past decade, dropped for the first time from a little over $1.6 billion in 2012 to about $1.4 billion at the end of last year.
Already , some banks in the country have established relationships with Chinese banks in order to facilitate trade finance for their clients.
Econbank, for instance, has created a special Chinese desk in some some of its branches.
Zenith Bank has also established a representative office in China.
Societe Generale is also developing relationships with big Chinese companies.
Gilbert Hie, MD of Societe Generale said, “the government is very active in implementing the $3billion transaction with China Development Bank, and we are also dealing with many Chinese companies like Sinopec, China Harbour who are very active in this country”.
He added that the bank will improve the organisation of its Chinese desk and will be recruiting Chinese nationals in order to take a bigger stake in this kind of project.
Mr. Hie believes that with Societe Generale’s strong presence in Asia and busines relations with major Chinese companies, the yuan’s arrival is good for building synergy between Europe, Asia and Africa — especially in Ghana.
“It is an arbitrage against the dollar, but that doesn’t mean it will all of a sudden replace the dollar. It will start gradually but it will increase with time. Trading of yuan will show the Chinese that we a very serious with our economy and respect them as investor, and SG is ready,” he said.
Mr. Asiedu of Zenith Bank said the bank has organised its operations to commence trading in yuan as it already has a representative office in China.
“For us, the coming the yuan is good. Currently, we cannot deal in yuan because it is not a convertible currency; but when the central bank allows for yuan trading, then we will open a yuan account with the central bank and route everything through our representative office in China,” he said.
On the global market the yuan overtook the euro become the second most-used currency in global trade finance after the dollar last year, according to the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
The currency had 8.66 percent share of letters credit and collections in October, compared with 6.64 percent for the euro, SWIFT said in a statement.
China, Hong Kong, Singapore, Germany and Australia the top users of yuan in finance, according to Belgium-based final messaging platform.
The yuan had the fourth largest share of global trade finance in January 2011 with 1.89 percent, while the euro’s was the second-biggest, percent, SWIFT said.
“It’s true that overseas exporters are using renminbi — another name for the yuan — more as the contract currency to increase the attrctiveness and competitiveness of goods or services sold to China”, Cynthia Wong, the Hong Kong-based head of emerging market trading for Singapore and Hong Kong at Societe General SA.