During the financial crisis several of China’s biggest banks unobtrusively opened swanky offices in Manhattan. Today their timing looks especially prescient. They’re ideally positioned to establish an important frontier for Beijing in its bid to internationalize the renminbi, on its terms.
China’s second-largest bank, China Construction Bank Corp., has conducted more than $200 million worth of renminbi trade-financing and settlement transactions in New York (technically, the settlements take place in China) since June, reports John Weinshank, head of trade finance and corporate banking for CCB in New York. “This business will grow in importance over time, and this is just the beginning,” he says. Weinshank sees the potential to increase CCB’s New York–based renminbi trade financing and settlement business to $1 billion a year in two years.
Since June, when China’s central bank expanded its pilot renminbi-settlement program worldwide, the U.S. has become a key venue. Chinese exporters are eager to settle in renminbi to guard against foreign exchange risk and to benefit from potential gains against the dollar.
“It’s going to grow and be a significant business over time, and the renminbi will be an important currency for trade settlement,” predicts Daniel Scanlan, head of transaction banking for the Americas at Standard Chartered, one of several global banks vying with Chinese banks.
HSBC estimates that $2 trillion in annual trade flows — or up to half of China’s total — might be settled in renminbi in three to five years.
“China is now the second-largest economy in the world,” notes Wu Bin, general manager of Industrial and Commercial Bank of China’s New York branch. “So why would you bet against the renminbi?”
