Australian businesses open to trading in yuan

Retailers may be able to get a better deal by trading with Chinese suppliers in yuan instead of US dollars, but experts have warned that it won’t work for all businesses.

Ian Murray, executive director of the Australian Institute of Export, says he’s seen more companies heading this way and believes “the market is now talking about it”.

“Over time, this is going to happen. There is no doubt in my mind the banks are gearing up for it, and I can’t see anyone racing into it, but it’s China many businesses are dealing with and that’s where it’ll happen.”

Linen House executive director Gordon Duncan told the Australian Financial Review this morning he believes his company will begin moving away from American dollars to yuan within the next 12 months, and is even speaking with ANZ about it.

The benefits, he says, are numerous.

“Ever since we’ve been able to, we’ve had suppliers put it to us to buy in yuan. The suppliers will get their money quicker, and it will be somewhat cheaper for them because there’s less paperwork, so there may be a small advantage in negotiating prices with them in that manner,” he said.

Australian Retailers Association executive director Russell Zimmerman also told the publication that he would encourage others to follow suit if it saved them money.

“What we’re seeing in China is increases in the cost of labour and materials, so retailers and wholesalers are looking at ways they can minimise their price rises. And I guess one of the ways they can do that is buy in Chinese yuan rather than paying in US dollars, where there might be a higher cost of conversion, and other added-on costs,” he said.

Murray says he has no doubt it will happen eventually.

“The market is now talking about it, the banks are talking about it. I wouldn’t say they’re preparing for an onslaught, but a situation whereby they are dealing with that currency fairly often.”

City Index analyst Peter Esho says trading in yuan often saves suppliers money, but for Australian retailers, they really need to judge whether it’ll be worth it in the long run.

“It can create opportunities for Australian customers in that suppliers look more favourably towards the Chinese currency. But you have to look at it from two sides… and it can very much be an individual thing.”

However, it appears more retailers are open to the idea. Ruslan Kogan, head of Kogan Tech, says his company would move from trading in American dollars to yuan if the situation was right.

“The American dollar has been good for us. It’s a lot easier to trade in that now, but whatever currency you trade in makes no difference.”

“It’s all in the global market. At the moment you can’t find a single bank that won’t trade in US dollars, but it can change. It’s what the global market wants at the time.”