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The trade boom fuelled by Asia’s economic re-emergence will last at least another 15 years but Australian exporters will have to get much more familiar with transacting in the Chinese currency, according to the Sydney Morning Herald, quoting HSBC.

HSBC forecasts Australia’s trade activity will grow by 129% by 2025, nearly double the world growth rate of 73% over that period and well above the Asia region average of 96%.

It predicts Australia will have the world’s second fastest export growth and seventh fastest import growth between 2010 and 2025. Strong demand from China, India and other Asian countries will drive trade growth.

China’s share of international trade will climb to 13% by 2025 and overtake the US as the world’s top trading nation. But HSBC warns Australian firms will have to become more familiar with making transactions in Chinese currency, called the renminbi or RMB.

“As the use of RMB becomes more commonplace, Australian companies that do not have the capability to transact in RMB may be disadvantaged if Chinese traders prioritise RMB-ready businesses,” said James Hogan, Head of Commercial Banking for HSBC Bank Australia.

Nearly half of Chinese companies surveyed for the report said they are likely to use the renminbi to settle transactions in the next six months compared with only 7% of Australian traders. The Australian proportion was far lower than other markets including Hong Kong, Malaysia and Vietnam in the use of RMB for trade.

“What that suggests to us is that, increasingly, Australian companies will find ways of hedging Australian dollar sales, and start to price more in renminbi to close that mismatch in future,” Hogan said.

“If you are an Australia exporter you need to accept that if you are selling into China you need to be more comfortable with pricing your exports in renminbi.”

HSBC’s forecast echoes thinking by Commonwealth Treasury, that the re-emergence of China and India will have a major impact on the Australian economy over the next 15 years. The HSBC report says Australia’s strongest trade growth between now and 2025 will be in the next five years when it will hit 7.7 % annually, almost four times the world average.

There will be a “sweet spot” over the next two years when trade growth is tipped to reach 8.9%.

Australia’s merchandise trade is set to more than double to $US702.5 billion over the next 15 years, according to the report.

HSBC says China will remain Australia’s largest trade partner with total trade estimated to reach $US148 billion by 2025.

Australia’s trade with India is forecast to grow by 150% to $27.4 billion over the same period.

HSBC forecasts India to post the fastest trade growth followed by China and Indonesia. Trade growth in Latin America is forecast to be 100% in the period, even faster than Asia’s growth.

Source: Sydney Morning Herald


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