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Singapore eyes regional hub status for offshore RMB

 

Addressing ACI Congress delegates, deputy prime minister and chairman of the Monetary Authority of Singapore talks up Singapore’s ability to facilitate the growth of renminbi trading outside China

Singapore is aggressively seeking to become a major regional hub for offshore trading of Chinese renminbi as the currency gradually becomes more internationally traded, according to the city-state’s deputy prime minister and minister of finance.

Speaking in the opening address at the ACI World Congress in Singapore earlier today, Tharman Shanmugaratnam, who is also chairman of the Monetary Authority of Singapore (MAS), described renminbi as a source of “transformational growth” in Asian finance, stressing Singapore’s ambitions to take a leading role in the currency’s development.

“As an international trading and financial centre, Singapore will seek to support the growth of a resilient offshore renminbi market in the Asia region. Singapore can leverage on its strengths as a key wholesale funding centre to increase liquidity and circulation of renminbi in Asia – it has traditionally supported the liquidity of the Asian markets and can partner China in creating sustainable offshore use of renminbi,” said Tharman.

The explicit commitment to offshore renminbi comes a week after the MAS and the People’s Bank of China expanded their bilateral currency swap facility from 150 billion yuan to 300 billion yuan on March 7, widening its scope to allow the MAS to provide renminbi liquidity to Singaporean banks if necessary for financial stability.

Singapore can act as a test bed for new renminbi products – the development of a wider range of products will create additional ways in which corporates can redeploy renminbi funds in the offshore markets

“This backstop facility will further strengthen confidence in Singapore’s offshore renminbi market and encourage more financial institutions, corporates and investors to step forward and participate in the renminbi market via Singapore,” Tharman explained.

In addition to its strengths as a regional funding centre, Tharman also cited Singapore’s status as a regional treasury centre to a large base of Chinese companies, and its ability to support the integration of offshore renminbi into Asian currency markets.

“Singapore can act as a test bed for new renminbi products – the development of a wider range of products will create additional ways in which corporates can redeploy renminbi funds in the offshore markets and provide additional products for investment. The financial industry in Singapore has good expertise in developing new FX and derivatives instruments, and it is well equipped to develop customised capital market instruments, especially for Asian market participants,” he said.

But Tharman added that, despite the significant potential for growth, less than 1% of global payments are currently settled in renminbi, and the internationalisation needs to be carefully handled, both by market participants and the official sector, to ensure offshore renminbi is accessible to all.

“It will be critical to facilitate the development of a single fungible offshore renminbi market. As the market grows in multiple jurisidictions, regulators and market participants will have to work together to avoid fragmenting liquidity, and to promote efficiency in the offshore renminbi market,” he said.

 

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