KUALA LUMPUR, Aug. 10 (PNA/Bernama) — China’s initiative in pushing hard its overseas investment strategy, which would simultaneously advance the internalization of the renminbi, would be of benefit to Malaysia.
HSBC Bank Malaysia Bhd, in a statement, said the expansion abroad and a transformation of the economy by China, emphasized higher-value production and services as a tool to make domestic consumption a bigger engine of economic growth.
“Malaysia is in the prime position to benefit from these changes. It is China’s largest ASEAN trading partner since 2008, and its third biggest trading partner in Asia after Japan and South Korea,” it said.
It said trade between both countries nearly quadrupled between 2004 and 2014, rising from USD 26.3 billion to USD 102 billion.
The trade is expected to grow to USD 160 billion by 2017, bolstered by some of the “One Belt, One Road” projects, which will be a major catalyst for driving manufacturing and construction-related services and investment into Malaysia.
HSBC Malaysia said the globalization of China’s capital investments would also lead to an increased use of the renminbi in the offshore market.
“Given the extent of trade and investment flows between Malaysia and China, Malaysia is well positioned to develop itself into an offshore renminbi centre and to build up trade financing, investment and other renminbi-denominated financial products over time,” it said.
In a recent HSBC Malaysia survey, 14 per cent of Malaysian businesses were using renminbi for cross-border business, while 35 per cent of businesses expected an increase in international cross-border business with China within the next 12 months.
“Malaysia will be able to utilize this advantage (renminbi adoption) to facilitate greater regional trade and investment in their extensive network in ASEAN, thus strengthening Malaysia’s position as a gateway for renminbi flows in the region.
“We forecast that China will achieve full capital account convertibility within two years,” HSBC Bank Malaysia Deputy Chairman and Chief Executive Officer Mukhtar Hussain said.
He said over time, the renminbi would expand its role in the international trade, investment and its use as a reserve currency.
“This is important to the Malaysian financial system as it will cater for the ever rising bilateral trade, investment and financial flows between the two countries, thus minimizing financial friction and maximizing the benefits of efficient payment and cash management,” Mukhtar added.
Given the vital role China plays in Malaysia and ASEAN economic future, HSBC Malaysia would be hosting the Renminbi and China’s Global Future Forum in the capital on Aug 17.