S’pore making strides as offshore yuan hub

SINGAPORE — Activities in offshore yuan markets have gained substantial momentum in the past year and will continue to grow further, with Singapore playing a key role in the internationalisation of the Chinese currency.

This was the consensus of key financial industry figures at a conference on the offshore yuan market yesterday. Among them was Mr Zhang Weiwu, General Manager at the Singapore branch of Industrial and Commercial Bank of China (ICBC), who said he has witnessed an exponential growth in yuan clearing activities here.

In only seven months, between late May when ICBC as Singapore’s sole yuan-clearing bank started clearing the Chinese currency and the end of the year, the volume cleared reached about 2.6 trillion yuan (S$536 billion), said Mr Zhang. And in the first two months of this year alone, clearing volume has already reached 4.2 trillion yuan (S$865.3 billion).

“Taking into account Singapore’s status as a financial hub, you can expect a great part for Singapore to play in the offshore yuan segment,” he said.

China has been stepping up its efforts to promote its currency to foreign investors, with the aim of it achieving a similar status to the US dollar. The yuan has now become one of the world’s 10-most-used currencies for payments, overtaking the Singapore dollar and Hong Kong dollar, according to global transaction services organisation SWIFT.

Singapore’s growth has been helped by a change in Chinese regulations last year that allowed multinational companies operating in China to store excess yuan holdings offshore in order to centralise their cash management.

Yuan deposits in Singapore jumped 70 per cent to about 200 billion yuan in the last nine months last year, the Monetary Authority of Singapore (MAS) said at the conference. In the same period, yuan-denominated loans — mainly trade financing — rose by almost a quarter to more than 300 billion yuan in Singapore, which now commands about 60 per cent of yuan trade finance outside China and Hong Kong.

To build on this, the central bank is focusing on broadening the yuan ecosystem and infrastructure this year, said Mr Leong Sing Chiong, Assistant Managing Director for Development and International Group at the MAS.

“We also aim to facilitate cross-border market access for Singapore-based financial institutions to meet the yuan-financing and investment needs of corporates in the Suzhou Industrial Park and Tianjin Eco-City,” he said. “We are hopeful that the implementation guidelines will be released by the middle of this year.”

Amid the new dynamics, one sector with a bright prospect here is the offshore yuan bond market, Standard Chartered’s Global Head for Debt Capital Markets Henrik Raber told TODAY. The Asia-focused British lender was the first issuer of “Lion City Bonds” in Singapore last year.

“The yuan deposit growth in Singapore is very high — a lot higher than London, in my understanding. These deposits will tend to get invested, and one of the obvious choices is bonds. We think this will continue to drive issuance of offshore yuan bonds here,” he said. With agencies