Yuan as global currency? Many firms don't see benefits
China's quest to promote the yuan as a global currency still faces headwinds, with many firms abroad still resistant to using the Chinese currency, a new report shows.
According to an HSBC survey of over 700 businesses worldwide, the use of the yuan in trade settlements with the world's second-largest economy remains sparse outside Hong Kong and mainland China.
"I think the main reason why they're not using it is a lack of education to understand how to use it and what are the benefits. It's not a fully convertible currency, there's quite a lot of rules and processes that one has to go through to understand that," said Simon Constantinides, regional head of global trade and receivables finance Asia-Pacific at HSBC.
(Read more: Is it time for China to push the yuan lower?)
The survey showed 52 percent of companies admitting to having a limited understanding of the internationalization of the yuan, while 38 percent said they didn't perceive a clear benefit.
Around a third of respondents said their counter-parties are unwilling to use yuan and another one-third said they haven't fully considered the option.
The use of yuan within the country by foreign firms, however, is gaining popularity. The survey shows half of international companies in Hong Kong and almost a third in China are now using the Chinese currency to conduct cross-border business.
This could be the result of financial perks being offered for using the currency: the survey found that 53 percent of Chinese businesses surveyed would offer their counter-parties discounts of up to 5 percent for transactions settled in renminbi.
(Read more: Yuan as a world currency? Getting there fast)
Going forward, HSBC does expect more companies to use the yuan as they start to realize the convenience of the currency.
"Businesses trading with China that fail to seize the opportunity of using the yuan may be losing out to their competitors - it's not a level playing field," said the report.
Almost a quarter of firms surveyed expect to start using the currency within the next five years. Some 59 percent said they would start in order to mitigate foreign exchange risk while 42 perfect wanted to benefit from better pricing.
(Read more: Here's what China is secretly planning for the yuan)
HSBC remains positive on the currency,expecting it to be fully convertible by 2017 and to become one of three major trading currencies in the short-term.
"In 3 to 5 years, China will become the largest two-way trade market in the world, imports and exports. And as the second-largest economy in the world, its currency cannot sit on the sidelines," it said.
— By CNBC.com's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC