ENGLEWOOD, Colo. — February 27, 2012 — Western Union Business Solutions, a business unit of the
Western Union Company, a leader in global payment services, today announced results of a survey of
Chinese companies which found that by settling transactions with Chinese exporters in U.S. dollars
(USD) instead of Chinese yuan (CNY) American businesses paid approximately $2.4 billion in fees to
account for foreign exchange risk.
[1] <#_ftn1>
“The U.S. is the number one export destination for companies based in China,” said Alfred
Nader, Vice President of Corporate Strategy & Development at Western Union Business Solutions.
“To date, the vast majority of transactions between companies based in the U.S. and China have been
settled in U.S. dollars. It is time to take a step back and evaluate to what extent it makes
sense for American companies to continue to pay Chinese exporters in something other than their
preferred local currency.”
Western Union Business Solutions’ survey of more than 1,000 Chinese companies who are able to
settle merchandise exports in CNY (known as mainland designated enterprises, or MDEs) reveals a
desire in China to receive payments in their home currency. The results show that more than
one third (36%) would prefer to be paid in CNY, with over 20% naming exporter convenience and
reduced foreign exchange risk as the main drivers for that preference.
Despite this appetite, however, 42% of those who would prefer to receive payments in CNY
never ask their overseas trading partners to pay in yuan due to perceived buyer reluctance.
Companies in China largely attributed this reluctance to inconvenience (33%) and the seemingly
difficult process experienced by partners in obtaining CNY for payment purposes (20%).
To account for the foreign exchange risk associated with settling in currencies other than
CNY, one in five companies surveyed said they add fees of, on average, 3% of the total transaction
cost.
“Chinese exporters would prefer that their trading partners pay in yuan, but most are afraid
to ask because they think they will be rebuffed,” said Mr. Nader. “There are easy and
inexpensive ways for companies in the U.S. to settle transactions without using USD, which could
generate increased goodwill and loyalty among their Chinese trading partners, not to mention cut
the cost of doing business.”
Another key finding of the survey is that companies in the U.S. are seen as far more
unwilling to settle in CNY than those based in Europe. In fact, the U.S. was named as the
most reluctant market (42%) with Europe (23%) and South East Asia (13%) placing second and third.
Japan (8%) and Australia (2%) were seen as the least reluctant.
“Importers that are flexible and savvy in their approach to cross-border payments will find
themselves well-placed to compete in today’s global marketplace,” added Mr. Nader. “Adapting
to the ongoing liberalization of the CNY is especially significant when one considers the growth
opportunities that exist for companies that do business with China. The goodwill and supplier
loyalty that would be created by American companies who offer to pay in yuan present a real
opportunity for them to gain a competitive advantage when trading with the world’s second largest
economy.”
[1] <#_ftnref1> 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 the U.S. Census Bureau figures for 2011, there
was $399 billion worth of merchandise imports from China into the United States. On this basis the
value of FX related fees charged by Chinese exporters is approximately $2.4 billion, or three per
cent of the value of one-fifth of the United States’ total imports from China.
Posted on March 21, 2012
Source: Western Union Business Solutions
