Posted on November 21, 2014

China’s renminbi internationalisation process can be a best opportunity for Qatar to diversify its huge foreign reserves, especially in the event of its growing partnership with the East, said news360. China is fast emerging a big trading partner of Qatar. It makes sense if it decides to diversify a portion of its huge pool of foreign reserves away from dollar, a top expert said yesterday.

“I can’t talk on behalf of Qatar. But I can tell you it makes sense Qatar to have mixed foreign reserves in the long run. The East is emerging as a major trading partner of Qatar. Therefore, it makes sense if they diversify the foreign reserves away from some dollar or other currencies”, Georges Elhedery, Head of Global Banking and Markets, HSBC Mena, told The Peninsula during a special discussion session on the emergence of the Chinese currency, yesterday.

According to HSBC, Qatar is currently sitting on some 43bn net foreign currency reserves and an estimated 200bn in foreign assets in its sovereign wealth fund. The country is the biggest supplier of liquefied natural gas to China. The 35bn RMB currency swap deal signed by Qatar and China is a milestone, helping to position the RMB as the currency of choice for the new Silk Road, noted Abdul Hakeem Mostafwi, CEO, HSBC, Qatar.

Qatar Airways HQ 300x250

There is major shift in the perception of the Chinese Yuan globally, increasingly in the region. If you look at the numbers, businesses have picked up significantly with Qatar. Trade with China has soared, climbing to QR41.9bn in 2013 from just QR1.5bn a decade ago. This is against the backdrop of fifty fold increase in trade between the region and China over the past twenty years. “Qatar companies are now able to weigh up the advantages of financing trade and investment flows in RMB, as opposed to dollars or euros. For instance, paying a China-based trading partner in RMB means that suppliers do not have to bear the cost of converting Qatari riyals to RMB, Georges noted.

RMB is key for Qatar on multi-levels. It’s important for Qatar in terms of settling trade bills, foreign reserves and investments. The Chinese currency is jumping its global ranking position in every two to three months. Over two and half years ago RMB was ranked 22 among the world currencies in the cross-border payments. The currency has emerged as third powerful one in terms of trade.

“China overtook the US in 2013 to become the world’s largest trading nation, with its trading goods passing 4 trillion mark. In 2010, 2.6 percent of import and export goods trade in China was transacted in RMB. In 2011 that proportion rose to 6.4 per cent. Now, that figure stands at 18 per cent”, he said. “This doesn’t mean that the world is heading either for a “currency war” or “Trade war”, Georges said. “As of now, we are far from saying RMB is basically taking over the dollar.”

On China’s agreement on RMB Qualified Foreign Institutional Investor(QFII) scheme to Qatar with the initial quota of RMB 30bn, Georges said the agreement means Qatar will be part of China’s huge growth story.