RMB internationalization still in its infancy stage: DBS Bank

China's currency RMB is not expected to lead to the substitution or marginalization of the Hong Kong dollar, according to a new survey.

The survey conducted by Hong Kong DBS Bank also found that the internationalization of RMB is "still in its infancy stage." Fieldwork for the first quarter of 2013 DRIVE report was conducted through telephone interviews with business owners and decision makers of over 200 companies in Hong Kong.

The DBS RMB Index for VVing Enterprises (DRIVE), which is specifically designed to gauge the level of RMB usage, acceptance and penetration among companies registered in Hong Kong, shows that it is widely believed that RMB appreciation will aid its internationalization at the macroeconomic level. While at the micro level, many companies reckon that appreciation will negatively impact business.

"Appreciation alone doesn't guarantee a quicker speed of internationalization," said Chris Leung, Executive Director and Senior Economist at DBS Bank (Hong Kong) Limited.

"This is exactly the case in Hong Kong as RMB penetration has increased only marginally despite quicker RMB appreciation in the first quarter this year," he said.

The current data show that RMB is ranking No.13 with a tiny share of 0.6% as a global payment currency. This contrasts sharply with the 40.2% and 33.5% share of the euro and USD respectively, the two most-used currencies for global transactions.

The index also shows that HKD and USD remain the preferred currencies for trade settlement, financing and day-to-day business transactions in Hong Kong. "The use of RMB in Hong Kong is not expected to lead to the marginalization of HKD," Leung said. "Hong Kong local companies' preference to use RMB may be affected by their trading partners' willingness to accept or make payments in RMB."

He further added that without an additional policy push by Beijing, the share of companies whose preference is for using RMB will be stable but low.

In the first quarter of 2013, the internationalization of RMB has achieved many milestones. Taiwanese banks started accepting RMB deposits in February, while the People's Bank of China designated a Chinese bank in Singapore to undertake RMB clearing services.

RMB activities have clearly expanded to regions like Taiwan and Singapore, Leung said and added that there is still ample room to deepen RMB penetration in Hong Kong.

To quicken RMB penetration locally, he said, Hong Kong needs to enhance a self-sustainable cycle of RMB alongside with more repatriation channels for offshore RMB.