RMB round-up: Fidelity’s WFOE launches first fund, only two foreign firms receive China investment quotas in April, dim sum stays cold in Q1

China’s global ambitions may become clearer at the Belt and Road conference in Beijing on May 14-15, according to sister publication GlobalMarkets.

Demand for the Hong Kong Exchange's China Ministry of Finance Treasury bond (T-bond) futures will pick up later this year as China opens up its onshore bond market, say experts.

People’s Bank of China's renminbi fix against the dollar was set at 6.8884 on Friday morning, down 73bp from Thursday. In the spot market, the CNY was trading at 6.8949 as of 11.50am in Hong Kong, with the offshore RMB (CNH) at 6.8966, down 0.02% and up 0.06% from their previous closes, respectively, according to Bloomberg data.

The dollar index was trading at 98.780 as of 11.39am, down 0.02% from the previous close, according to Bloomberg. The Thomson Reuters CNY reference index closed at 93.90 on Thursday, down 0.1% from its last close.

The trade-weighted CFETS index recorded a 0.16% monthly fall in April, while the BIS basket and special drawing rights basket lost 0.34% and 0.86%, respectively, according to data from CFETS.

The Taiwan Futures Exchange saw USDCNH options and futures trading decline in April. Futures recorded a monthly volume of just 2,012 contracts, down to nearly half the level from a month earlier, while options volumes dropped 63.5% to 637 contracts in the month.

RMB deposits volume continued to move unevenly across different offshore RMB hubs. In March, South Korea saw deposits rise 15.6% to Rmb9.37bn ($1.4bn), while in Taiwan the pool shrank, although just by 0.3%, to Rmb308.84bn.

China saw cross-border trade settlement in RMB jump in March by 34.9% to Rmb385.80bn, the highest level since November last year. The first quarter of 2017 was weak, however, with total volume of just Rmb994.20bn, down 35.2% on the same period last year.

After a few months of hiatus, PBoC updated the figures relating to the levels of foreign ownership of onshore RMB-denominated assets. The figures paint a largely positive picture, with three of the categories — equities, loans and deposits — rising. Growth at the end of Q1 2017 compared to end-2016 was smaller for RMB deposits, reaching Rmb924.2bn, up less than 1%. The larger jumps were in equities, up 19.7% to Rmb776.82bn, and loans, up 34.8% to Rmb699.5bn. The only category to register a fall was bonds , down 2.7% to Rmb830.1bn.

Fidelity’s WFOE in Shanghai launched its first private fund in China on Friday. The fund, which will be open to eligible Chinese institutional and high net worth investors, will invest in China’s onshore bond markets.

“Undeniably, renminbi bond markets are the future of Asia’s bond markets and will play in global financial markets for many years to come,” said Freddy Wong, fixed income portfolio manager, who will manage the new fund.

Only $500m worth of QFII quotas were given out in April, according to monthly data released by State Administration of Foreign Exchange, with Haitong Bank the sole recipient.

Meanwhile, Malaysian asset manager CIMB-Principal Asset Management was the only recipient of RQFII quotas in April, securing Rmb600m ($87.1m) out of an Rmb50bn country quota. Some Rmb542.004bn in allowances have now been distributed under the scheme, 35.9% of the country quotas established so far.

PBoC governor Zhou Xiaochuan has said that the Belt and Road projects should use local currencies. Writing in China Finance on May 4, Zhou argued that using local currencies can efficiently mobilise capital around the globe and increase confidence in local currencies, maintaining financial stability in these countries. Zhou said the use of local currencies will also reduce their reliance on the dollar — thereby lowering the risk from changes in US interest rates.

Detailed plans for the one-way Bond Connect between Hong Kong and the Mainland will be unveiled in July to coincide with the 20th anniversary of the city’s handover to China, with the formal launch expected to take place in November, according to a May 2 media report.

Only $1.9bn worth of CNH denominated bonds — syndicated as well as private placements — were issued in the first quarter of 2017, marking a 73.9% quarter-on-quarter fall, according to a report by Asia Securities Industry & Financial Markets Association ( Asifma ) on Tuesday. The report also noted the continued shrinking of the dim sum bond market, with total outstanding bonds at $72.8bn in Q1 2017, marking a 7.2% quarter-on-quarter fall.

“As international investors receive progressively easier access to the onshore markets, it does appear that the relentless decline of the offshore dim sum bond market will continue,” said Asifma .

Renminbi internationalisation slowed over the past two years, according to a report from Fitch on Monday, pointing to the falling share of RMB-denominated assets in central bank reserve portfolios.

Fitch attributed the slowdown to government policies to restrict capital outflows and market concerns over the currency’s depreciation. Despite the setback, the ratings agency stayed positive on the RMB’s odds.

“There is still considerable long-term potential for renminbi use as a reserve currency and a medium of international exchange given the global importance and inter-connectedness of China's economy,” wrote Fitch analysts Andrew Fennell and Thomas Rookmaaker. “However, Fitch does not believe the authorities will pursue significant capital account liberalisation if it poses risks to domestic financial stability.”

Capital controls have had little impact on curbing China’s outflows, the Institute of International Finance (IIF) said in a memo published on May 4.

The IIF’s chief economists Robin Brooks and Gene Ma attributed dwindling outflows to a relatively strong dollar.

“Policymakers in Beijing are keenly aware of the limited effectiveness and price paid for capital control measures,” said Brooks and Ma. “If dollar strength resumes, renminbi will likely be under pressure again.”

IIF’s capital flows tracker shows that China recorded $28.8bn of outflows in Q1 2017, compared to $168.4bn of outflows in Q1 2016.

Foreign trade in the Shanghai Free Trade Zone grew by 5.9% to Rmb783.68bn in 2016, according to the FTZ’s website. This marks a yearly growth of 0.9%, as the FTZ made up 27.3% of Shanghai’s total foreign trade in 2016.

Nearly 3,000 Dubai Shanghai gold futures contracts were traded since March 10, when the product first launched, the Dubai Gold and Commodities Exchange (DGCX) said in a May 1 press release.

China could make investments worth as much as $313bn-$502bn in 62 countries along the Belt and Road over the next five years, according to a report by Credit Suisse on May 3. The report noted that the $502bn is 4% of Belt and Road countries' total GDP in 2015, and the Belt and Road projects may create $238bn of GDP growth over time for these countries.