Can the renminbi become Asia’s settlement currency?
Discussion about the internationalisation of the renminbi has given rise to dreams about using it to form a regional transaction currency, but there are still more questions than answers about its destiny. June 23, 2011 | Peter HoflichWhile there is much interest among bankers in the internationalisation of the renminbi (Rmb), there is also very little understanding about its pace of liberalisation or the opportunities it may provide—and this understanding seems to lessen the further one gets from the halls of power in Beijing. One of the reasons for this lack of understanding, besides the lack of transparency about the issue from Beijing, is the rapid pace of the liberalisation itself. Starting initially in 2003, when banks in Hong Kong were allowed to take Rmb deposits (but not to lend), the pace of development was slow until July 2009, when the pilot scheme for Rmb cross-border trade settlement opened up, initially only for a certain number of companies in only five cities in China to trade with companies in Hong Kong, Macao and ASEAN markets. Since then, the areas where Rmb trade settlement can be conducted has grown, as has the list of Rmb based services, from basic banking deposits like certificates of deposit to non-deliverable forwards or structured deposits. Renminbi bonds have grown rapidly, as have bond funds; insurance has moved in, and there are new developments in Rmb REITs, Rmb equity and Rmb derivatives. So far, Hong Kong has been the biggest participant/beneficiary, with about 80% of SWIFT letters of credit denominated in Rmb coming into Hong Kong, but Singapore is tipped as the next offshore Rmb clearing centre. “As growth and education take place in the rest of the world, we would expect that this will be expanded, but that Hong Kong will continue to maintain its pole position,” said Kuresh Sarjan, head of Asia trade and supply chain finance, Bank of America Merrill Lynch. at a session on Rmb liberalisation and internationalisation at the Cash, Payments and Trade conference at The Asian Banker Summit in Hong Kong April 7th and 8th, 2011. “If you look at the Asian economies, all of them are net exporters to C... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: China, Hong Kong, Rmb, Trade Finance, Transaction BankingChina,HK,Rmb,Trade Finance,Transaction Banking, China,Hong Kong,Rmb,Trade Finance,Transaction Banking, Keywords:People’s Bank Of China, BofA, China Merchants Bank People’s Bank of China, BofA, China Merchants Bank
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