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Singapore to launch overnight yuan liquidity facility in July

SINGAPORE — The Republic’s position as an offshore yuan hub is set to receive an additional boost with the launch of a facility to provide overnight liquidity as trade transactions using the Chinese currency rise.

SINGAPORE — The Republic’s position as an offshore yuan hub is set to receive an additional boost with the launch of a facility to provide overnight liquidity as trade transactions using the Chinese currency rise.

The facility, offering up to 5 billion yuan (S$1 billion) in overnight funds on any given day to financial institutions in Singapore, will be launched on July 1, the Monetary Authority of Singapore (MAS) said yesterday.

“As the volume of yuan activities grows in Singapore, the overnight yuan liquidity facility will help alleviate end-of-day funding strains of financial institutions. This will provide a conducive environment for the continued expansion of yuan activities in Singapore,” MAS deputy managing director Jacqueline Loh said.

Meanwhile, the People’s Bank of China Nanjing branch also announced yesterday that it would allow eligible companies and individuals in the Suzhou Industrial Park (SIP) to conduct cross-border yuan transactions with Singapore.

These two developments come at a time when global financial centres are jockeying for position as the leading offshore yuan centre as China accelerates efforts to promote its currency beyond its shores.

Mr Neeraj Swaroop, chief executive of Standard Chartered Bank, Singapore, welcomed the latest additions to the local yuan trading landscape.

“As a bank with strong presence in both Singapore and China, serving individual clients and corporates in both markets, these initiatives will allow us to better support their use of the yuan between Singapore and China.”

Mr Jason Ho, head of asset liability management at OCBC Bank, added that the liquidity facility should have a positive impact on trading volumes in Singapore.

“We should see an increase in yuan activities with some yuan flows that could be diverted from Hong Kong to Singapore with this latest development.”

Singapore’s journey as an offshore yuan centre started in February last year when the People’s Bank of China appointed Industrial and Commercial Bank of China’s local branch here as the yuan clearing bank for Singapore.

Since then, various products and facilities have been introduced to the market as demand for exposure to the Chinese currency grows.

And there may be more in the pipeline. Commenting on the cross-border transactions with SIP, Ms Loh said: “We look forward to similar arrangements being put in place in the near future to allow cross-border yuan transactions between Singapore and Tianjin Eco-City.” AGENCIES

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