outline words of the interview: Western Union Business Solutions, RMB Payment, Trade Settlement, FX Risk, RMB internationalization, Australian SMEs

Transcription

1 Interview outline Proposed Interview Topic :AUD & RMB directing Trading and how does it affect the companies Key words of the interview: Western Union Business Solutions, RMB Payment, Trade Settlement, FX Risk, RMB internationalization, Australian SMEs Interviewee nterviewee: MR Simon Glendenning General Manager Australia at Western Union Business Solutions Medias Australia China Business News Pacific Daily (Published in Australia in Chinese language) Contact Person: David Niu Tel (2) Mob Interview Questions 1. ACB News noticed that Western Union Business Solutions has provided Australian businesses with a simplified transaction process regarding direct trading between AUD and RMB (Renminbi) for over 2 years, and a news article with Western Union Business Solutions last October indicates that Australian businesses are re-evaluating how they settle trade with China. What are the main factors that an Australian company takes into account when they choose the method of trade settlement with Chinese partners? How would the new currency agreement between Australia and China affect Australian companies, both exporters and importers? In China, one of the largest markets Australian SMEs import from, a lot of businesses are invoiced in US dollars by default and this predominantly leads to a buffer being added to the invoice amount to counteract the supplier exchanging from USD to RMB. Our research shows that Australian SMEs are paying a premium of 3% or more when dealing in USD with local suppliers in China [1]. With the opening up of the RMB in 2012, we ve seen a 25% rise in payments from customers taking advantage of a simplified process by changing invoicing practices from USD to RMB in order to try and reduce the cost of doing business in China. Businesses are always on the lookout for enhancements to operational processes and cost structures; reviewing long established payment methods is one way businesses can improve their Thanks Page 1

2 bottom line. Australian importers that are flexible and savvy in their approach to doing business with China will find themselves well-placed to compete in today's global marketplace. When dealing with foreign transactions including RMB, Australian business consider a range of implications including foreign exchange fees, how to negotiate better pricing levels, widen profit margins and speed up settlement cycles. The advent of direct RMB payments can help protect against exchange rate movement, which brings predictability to cash flows and budget forecasting. [1] Western Union Business Solutions research found that one in five Chinese exporters added an average of three per cent in fees or surcharges to account for FX risk associated with receiving $USD payments. Based on Department of Foreign Affairs figures for 2010/11, there was $41 billion worth of merchandise imports from China into Australia. On this basis the value of FX related fees charged by Chinese exporters is approximately $246mil, or three per cent of the value of one-fifth of Australia s total imports from China. 2. In the news release mentioned above, you said recent policy developments in China have really changed the payments landscape for international commerce, enabling importers and exporters globally to pay in Renminbi (RMB). According to a piece of news report recently published by the Australian, while China buys almost 30 per cent of Australian exports and supplies 11 per cent of Australia's imports, less than 1 per cent of the total trade is denominated in the Chinese currency with the bulk still transacted, with contracts and settlement in US dollars. Clearly, trade payment with RMB is currently very low, do you think this situation would change in the future as the new currency agreement comes into effective? If so, which industries are more likely to do contribution on this change? With the news that was generated from the visit of Prime Minister Gillard to China and the announcements made around direct AUD/RMB transactions, awareness will certainly have been raised among Australian businesses about the opportunities now available to them. As the first non-bank to launch direct RMB payments into China nearly two years ago we ve seen steady growth since then and the direct transaction conversation is something we ll no doubt be having with an increased number of customers over the coming year. From what our customers are saying to us at the SME and lower corporate level alongside this spike in news coverage, we believe that more businesses will be looking to take advantage of direct AUD/RMB transactions in order to reduce business costs, enhance supplier/vendor relationships and gain more certainty with profit margins. Thanks Page 2

3 We believe this will have appeal across a range of industries in Australia. 3. With the new policy in place, it provides Australian companies with an option to settle trading with their Chinese business partners in AUD directly. Seen from other side, does it mean that Chinese importers are also able to make payment to Australian exporters to settle trading in Chinese Yuan (RMB)? If this is in the case, how do you feel about the prospectus for Australian export companies to accept RMB payment? What would be the advantage & disadvantage for Australian company to accept RMB payment? With the opening up of the RMB currency and the closer ties between Australia and China from a trade perspective, direct payments either way could be beneficial to both supplier and vendor. For Australian exporters, direct payments between AUD and RMB will help reduce costs associated with foreign exchange, create more certainty around profit margins, improve supplier/vendor relationships and potentially expedite the transaction process. 4. A research conducted by Western Union Business Solutions shows that WUBS Australian clients increased the number of RMB payments to China by over 25% in the second quarter of 2012 compared to the previous quarter. In the UK, RMB payments rose nearly 10% over the same period, while France and the US recorded increases of approximately 30%and 15% respectively. What is your personal opinion about the RMB payment prospective all over the world in a short term, say 3-5years? The economy in China has seen a number of years of significant growth and this has piqued the interest of the leading world economies and many other countries around the world seeking to establish closer ties with China in order to improve their economic opportunities. From our research at Western Union Business Solutions, we ve seen evidence of how payments in RMB has grown over the last year from some of these economies and there would be minimal surprise to see this continue if not grow even further. We re seeing news reports all the time of businesses establishing and investing in Chinese operations. Just last week we saw an announcement about a new scholarship program backed by Stephen Schwarzman to send 200 foreign post graduate students to study in China each year. Countries are planning ahead, businesses in those countries are also planning ahead and China along with the other BRICS economies are firmly in their thoughts. Thanks Page 3

4 5 According to the research and feedback received, ACB News has noticed that some Chinese export companies located in China are used to USD dominant trading settlement, most of those Chinese exporters monitor the USD movements and forecast the potential fluctuation range of the exchange rate of RMB against the USD in advance, and then take relevant actions to lock and minimize the risk cause by FX rate fluctuation. Some Chinese exporters declare that they are less familiar with AUD comparing with USD, and it would be harder for them to predict the AUD potential movement and then hedge the FX risk. What are your comment and insight regarding this? The recent announcement by the IMF to include the AUD as a reserve currency this year emphasises the demand for the Aussie dollar internationally and demonstrates how it s quickly becoming considered as a safe haven go to currency. As world economies become more familiar with the AUD we believe that Chinese importers and exporters will consider the currency as part of their normal transaction strategies. 6 As RMB payment is on the rise globally over the years, most observers believe that direct transaction between the two currencies can be seen as a milestone in the internationalization process of Chinese Yuan. How do you feel about the prospect of RMB internationalization? What factors do you think would be the challenge for RMB internationalization realistically, and what kind of actions or policies do you hope to see the Chinese government take in the future to accelerate the use of RMB in trading process between Australia and China, and eventually for RMB internationalization? 5. Last week, a conference was specifically held for promoting direct trading of AUD and RMB in Sydney, including issues like how to accelerate the use of RMB in trading process between Australia and China and how will Australia make use of the new policy etc. Both the Australian government and business circles realize that Australian local companies are relatively conservative and timid in face of the new payment policy. What s your understanding of the opportunities brought about by the deal for the Australian business in general? Is there any uncertainty involved? What kind of service and products are currently provided by Western Union Business Solutions could dispel the doubts of potential clients regarding the use of RMB and help them reduce international trading costs. As the first non-bank to launch direct RMB payments into China just over a year ago, Western Union Business Solutions has been working with clients on direct transactions from the early stages of the opening up of the currency. We ve seen the benefits and opportunities presented by a more open RMB for Australian businesses firsthand. From what our customers are saying to us at the SME and lower corporate level and from our Thanks Page 4

5 experience as a leader in global payment services, we ve seen businesses take advantage of direct AUD/RMB transactions in order to reduce business costs, reduce risks, enhance supplier/vendor relationships and gain certainty around profit margins. We have a suite of tailored business solutions available such as GlobalPay to help enable businesses of all sizes to manage their international transaction and this includes RMB. We also provide guidance and strategic information to help clients to make informed decisions about the best way to manage their foreign transaction strategies. 7. As we know SME companies account for half of economic activities in Australian s private sector, some analysts predict that more markets will open for Australian SME businesses who want to explore trading opportunities in China other than traditional categories like resources, education and tourism. What s your opinion about the effect of the direct currency trading agreement on SME enterprises in Australia? What assistance can be provided by Western Union Business Solutions? 8. Early this month, a Significant Investors Visa conference launched at Sydney, which attracted more than 300 delegates. As the exclusive media supporter for this event, ACB News noticed that HNW from China show their interests in the SIV, while some of them concern both security and cost of 5M AUD ( which approximately equal 32M Chinese Yuan) capital transfer to Australia. Is there any relevant solution provided by Western Union Business Solutions in this areas. The Western Union Business Solutions Online FX service offers a solution for small business and individuals to send higher principle amounts as a bank to bank transfer using our online platform. This provides access to 140 currencies and the ability lock in rates, with customer service a phone call away. Recipients can be notified by when they send a transaction and they will always have access to their payment history. The solution is mobile enabled so they can check rates and book transactions when it suits them. 9 So far, while only two banks in Australia got approval to involve in the RMB AUD direct trading business, Western Union Business Solutions is the first non-bank to launch direct RMB payments into China just over a year ago and since then WUBS has seen steady growth, what is the main difference in terms of service and products provided between the WUBS and other two banks in the FX area? Western Union Business Solutions payment specialists take the time to sit down and work one-on-one with companies to analyse their payment and FX needs, study the finances of their supply chain, identify where improvements can be made and develop a customized strategy for managing international payments in an optimal way for the individual client. Thanks Page 5

6 With the right plan in place, good payment and FX risk management can be a key competitive advantage. Our payment specialists work around-the-clock monitoring currency rates and communicating with clients in order to deliver optimized solutions for their businesses. WUBS goal is to demystify international payments for our clients, enabling greater transparency and efficiency in a field that is still too often murky and unnecessarily complex. 10 As the new currency agreement between Australian and China comes into effect, what is the potential impact on the USD? If the RMB payments are accepted by more and more Australian exporters, is it necessary for Australian exporters to hold amounts of RMB as a foreign exchange reserve for RMB payments? With Western Union Business Solutions, it s not a requirement for a business to hold currency it s transacting in. With the GlobalPay solution, all payments are processed via a single platform, eliminating the difficulties associated with handling multiple foreign bank accounts. It s a true one-stop shop. (The End ) Thanks Page 6