IOI to use RMB in palm oil sale to China

KUALA LUMPUR: IOI Corp Bhd will soon quote its palm oil shipments to China in renminbi to help reduce currency risk and hedging costs, says executive chairman Tan Sri Lee Shin Cheng.

Currently, palm oil sold to China is quoted in US dollars and then converted into renminbi.

Similarly, when Malaysia import goods from China, the cargoes are quoted in the greenback before they are converted back to ringgit.

"Now that there is a renminbi clearing house in Kuala Lumpur, we need not convert currencies that many times. There will be some cost savings," Lee told Business Times here yesterday at the sidelines of the Malaysia-China Economic Conference themed 'One Belt One Road' organised by the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM).

When asked for a timeline for IOI Corp to quote its palm oil shipments to China in renminbi, Lee said: "very soon."

For the past decade, China has been Malaysia's biggest palm oil buyer purchasing nearly four million tonnes of this kitchen staple to feed its burgeoning population of 1.36 billion.

At a media briefing, Malaysia External Trade Development Corp (Matrade) urged exporters to quote renminbi in their trade with China to help mitigate the weakness of ringgit against the US dollar.

Matrade chief executive officer Datuk Dzulkifli Mahmud noted the renminbi is a stable currency when exchanged from the ringgit. "Exporters doing business with China can benefit from using the renminbi as it is more consistent."

Also present at the briefing were Malaysian Investment Development Authority Deputy chief executive officer Datuk Phang Ah Tong and Bank of China (Malaysia) Bhd chief executive officer Wang Hong Wei. 

The renminbi overtook the euro in 2013 as the world’s second-most used in trade finance and was the fifth most-popular for global payments, according to the Society for Worldwide Interbank Financial Telecommunications (SWIFT).

Two months ago, China's central bank People's Bank of China noted Malaysia is the second Asean nation to host a renminbi clearing house, after Singapore.

Commercial entity Bank of China (Malaysia) Bhd was appointed by both central banks of China and Malaysia to clear renminbi trades in Kuala Lumpur. The renminbi is now the first foreign currency to be included in the Malaysian clearing system.

By having a clearing house for renminbi in Kuala Lumpur, banks in Malaysia will have direct access to onshore renminbi markets in China without having to route their transactions through a mainland lender.

Dzulkifli noted last year, Malaysia's biggest export component to China was electrical and electronics, followed by chemicals and palm oil. China is Malaysia's largest trade partner, while Malaysia is China's biggest trade partner within Asean. Last year, bilateral trade exceeded US$100 billion. "We have set a goal of reaching US$160 billion by 2017," he said.

China's One Belt and One Road Initiative, a reference to the Silk Road Economic Belt and the 21st Century Maritime Silk Road, aims to revive the ancient trade route between Asia and Europe. The network passes through over 60 countries and regions, with a total population of 4.4 billion.

Mida's Phang noted China's collaboration with so many countries along this Silk Road Economic Belt poses fierce competition in drawing in investments as well as strategic opportunities for Malaysia. "We must be serious in identifying our needs and offerings in order for business collaborations between China and Malaysia to be mutually beneficial, he added.

ACCCIM president Datuk Lim Kok Cheong urged the government to fully exempt visa for business visitors instead of the current practice of confining it to group tours from China. “China estimates 500 million of its people step out of the country to tour the world. Last year, the total number of Chinese tourists leaving China surpassed 100 million," said Lim.