The renminbi-related investment and trading market from centres such as Singapore is surging, highlighting the growing use of the currency by wealth managers and other players.
Offshore renminbi-related trading and investment activity in Singapore is surging since the introduction of the RMB cross-border initiative in 2009, Citi has reported.
Over the past two years, Citi Singapore has seen strong growth in RMB-related transactions, including a doubling of RMB account openings and significant increase in volume of payment processing as more trade transactions between Singapore and China are settled in the currency, the bank said in a statement.
A recent report by Hang Seng bank said that as result of The Mainland’s efforts to internationalise the currency, the RMB is being more widely recognised around the world as an international investment currency and the range of offshore RMB products has expanded to include deposits, bonds, equities, funds, and derivatives.
For instance, the report said Singapore is thought to hold a RMB deposit pool of about RMB60 billion ($9.63 billion) as at June 2012.
"Cross-borders trades are becoming more common and Singapore will certainly attract higher volume of such trades noting the recent appointment of ICBC as the off-shore Yuan clearing bank in Singapore," Stuart McPhee, a senior currency analyst at OANDA, a forex trading and currency information service provider, told this publication.
Anita Loh, head of product management for treasury and trade solutions, Citi Transaction Services for Singapore said: “Singapore houses a number of regional treasury centres of multinational corporations (MNCs) and the further relaxation of China regulations will act as a catalyst for the continued growth of RMB cross-border activities here. This, in turn, will strengthen Singapore’s position as a global trade hub,”
Citi recently completed its first cross-border RMB lending transaction for a European food company which operates its treasury centre in Singapore. The transaction was on the back of the People’s Bank of China’s pilot scheme for RMB cross-border lending which was introduced last year.
The transaction, facilitated end-to-end by Citi China and Citi Singapore, is structured to optimise the surplus liquidity in the European food company’s operations in China, according to the statement. Citi said this is a significant step forward for Singapore companies with subsidiaries in China as they can improve their overall group liquidity position - these companies can now better manage their excess cash and achieve greater efficiency in their global fund usage and allocation.
Suite of solutions
“To serve the needs of companies that have operations in China, a China desk was established in Singapore in 2010. Singapore was one of the first few countries within Citi to have started a China desk to assist our clients to optimise their treasury management which includes the cross-border usage of RMB,” Loh added.
The full suite of offshore RMB solutions that Citi Singapore provides to corporate treasurers today includes current accounts, payments, receivables, time deposits, trade services and trade financing solutions under LC, along with spot and forward foreign exchange transactions, FX hedging solutions and structured deposits.
However, while Singapore continues to ramp up its offshore renminbi-related activities, so does Hong Kong, where the RMB’s journey to the world began.
The city was chosen to run pilot programmes for offshore use of the Chinese currency, allowing its banks to provide RMB deposit, exchange, remittance and credit card services to personal customers in 2004, the first such permission granted at the time.
And Hong Kong is determined to remain the leading offshore RMB centre – at the beginning of the year the Hong Kong Securities and Futures Commission announced plans to introduce a Hong Kong-Mainland fund platform in response to the evolution of renminbi investment products and the development of asset management business.
"I encourage you to start thinking which of your products would be suitable for the Mainland market, why they would be suitable, who your target investors would be, and how your products would help them...this is because the Hong Kong-Mainland fund platform that we are building will likely be Asia’s largest and deepest," SFC’s deputy chief executive, Alexa Lam said.
According to Hang Seng, Hong Kong’s offshore RMB deposits, excluding Certificate of Deposits, could account for over 25 per cent of total deposits in Hong Kong by 2015, from less than 10 per cent at the end of 2012. This would make RMB deposits the second largest source of deposits in Hong Kong, replacing the position long held by US dollar deposits.