UK retailers cut costs by paying in yuan to Chinese suppliers

Chinese suppliers have seen a sharp increase in British retailers making payment in yuan, a move designed to cut costs and eliminate currency fluctuations, according a report by China Daily.

Moreover, British retailers get a larger base of Chinese suppliers to choose from if they pay in yuan, and are now  able to pick the most cost-effective ones, the Chinese paper reported.

UK retailers source a high percentage of goods from China, a most important source of cheap goods, using yuan helps in cutting cost, said the report.

"Businesses have been talking about the possibility of paying in local currency since the yuan's peg was relaxed in June 2010," Sam Ford, head of Risk Solutions at Barclays Capital, the investment banking division of Barclays, told China Daily in an exclusive interview.

Barclays Capital estimates British traders are achieving savings of up to 8 per cent by making payments in the Chinese currency, as Chinese suppliers cut the risk of foreign exchange risks, while being paid in yuan.

Since June 2010, the yuan appreciated at least 7 per cent against the US dollar, and Chinese suppliers have introduced a cushion into dollar-denominated deals to safeguard themselves against further yuan appreciation.