ICBC inaugurated as yuan-clearing bank in S’pore

SINGAPORE — Singapore took an important step towards becoming a major offshore yuan hub yesterday, with the official inauguration of the Industrial and Commercial Bank of China (ICBC) as the clearing bank for offshore yuan in the Republic.

A Memorandum of Understanding between the Monetary Authority of Singapore (MAS) and the People’s Bank of China (PBOC) was also signed yesterday, framing the cooperation between both regulatory bodies in reviewing the conduct of yuan-denominated business and clearing arrangements here.

Singapore is now the first country outside Greater China to host a yuan-clearing bank. It also marks a symbolic moment for Singapore as it competes with rival financial hubs, such as London and Sydney, for a greater share of the offshore yuan market.

Reports on Singapore potentially becoming the second offshore yuan centre after Hong Kong surfaced in 2011 amid China’s growing intention to globalise its currency, which is also known as renminbi (RMB).

But the first breakthrough came in July last year, when Singapore granted Qualifying Full Bank privileges to the local branches of ICBC and Bank of China. In February, the PBOC named ICBC’s branch in Singapore as the clearing bank for yuan in the Republic.

For China, having a yuan-clearing bank in Singapore will help encourage greater use of its currency among South-east Asian businesses and tap on trade between ASEAN and China, which rose to a record US$400.9 billion (S$496.2 billion) last year. In Singapore, the development addresses the demand for yuan trade services among both local and international companies.

“With the new RMB clearing arrangements, we can expect financial institutions based in Singapore to reach out to local and regional corporates and investors, and encourage greater participation in the offshore RMB market,” MAS Managing Director Ravi Menon said at the inauguration ceremony yesterday. “We can expect the range of RMB-denominated product offerings to expand ... to tap on the strong investor base in the region.”

Companies here are already selling yuan-denominated bonds, and the Singapore Exchange has announced that it is ready to quote, trade, clear and settle yuan-denominated securities. These developments will reinforce Singapore’s status as a leading financial centre, said OCBC economist Tommy Xie Dongming.

“As RMB gradually becomes an international currency, it’s important for Singapore to have the capabilities for RMB transactions. It’s also a boost to Singapore’s branding — a sign welcoming businesses and investors around the world to come here for RMB-denominated businesses.”