This week in renminbi: May 15, 2017
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This week in renminbi: May 15, 2017

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China pledges fresh cash for One Belt One Road (OBOR), KraneShares plans to launch Chinese bond fund, and CFOs are becoming more positive on China’s outlook.

FX:

  • People’s Bank of China (PBoC)'s renminbi fix against the dollar was set at 6.8852 this morning, down 96bp from Friday. In the spot market, the CNY was trading at 6.8996 as of 10.03am, with the CNH at 6.8999, flat and down 0.02% from their previous close, respectively, according to Bloomberg data.

  • The dollar index was trading at 99.209 as of 9.53am, down 0.04% from the previous close, according to Bloomberg, while the Thomson Reuters CNY reference index closed at 94.00 on Sunday, down 0.2% from its previous close.

  • The trade-weighted index by CFETS stood at 93.06 on May 12, up 0.06% from the previous week, with the BIS basket and special drawing rights basket at 93.99 and 94.36, up 0.1% and 0.3%, respectively.

One Belt One Road:

  • Chinese president Xi Jinping pledged an additional Rmb100bn ($14.5bn) for the Silk Road Fund, he said at the Belt and Road Forum for International Cooperation, which opened on Sunday in Beijing.

  • “China will scale up financing support for the Belt and Road Initiative by contributing an additional Rmb100bn to the Silk Road Fund, and we encourage financial institutions to conduct overseas renminbi fund business with an estimated amount of about Rmb300bn,” said Xi.

  • Xi also announced that China will provide Rmb250bn and Rmb130bn of renminbi loans for OBOR projects via China Development Bank and the Export-Import Bank of China, respectively.

  • Yi Gang, deputy governor of PBoC, noted China was expecting to invest in commercially viable projects.

  • “The free flow of funds is very important to building the One Belt One Road,” he told local media. “It is important to note that the Silk Road fund is an investment fund […] our investment will have commercial returns and [the fund] will be sustainable.”

  • Director of the international monetary fund (IMF), Christine Lagarde, met with PBoC governor Zhou Xiaochuan on Sunday. The pair signed an agreement for the IMF and PBoC to co-operate on capacity building for Belt and Road projects.

Regulators:

  • China should allow some financial institutions to go bust, PBoC’s head of research, Xu Zhong, said on May 12. Speaking at Peking University, Xu argued that propping up failing financial institutions will only increase the systemic risk for the financial sector, according to media reports.

  • “Not a single Chinese financial institution has gone bankrupt [...] are China’s financial institutions really so good that not even a single one has gone bust?”, said Xu. “The real problem is that some authorities and local governments don’t want to open the jar.”

Investment:

  • KraneShares is planning to launch a bond fund targeted at domestic Chinese bonds. According to a prospectus filed with US Securities and Exchange Commission. The KraneShares Bloomberg Barclays China Aggregate Bond Index ETF’s constituents will include bonds that have at least one year of remaining maturity available in the China’s interbank bond market (CIBM), but will exclude bonds issued by China’s Ministry of Finance.

  • CFOs based in China are becoming more bullish on China’s outlook in 2017, according to a survey by Deloitte conducted between January and March 2017. Deloitte found that 26% of respondents are optimistic on the prospects for the Chinese economy, compared to just 8% in the previous survey conducted in Q3 2016.

Hubs:

  • Bank of China has become the first Asian-headquartered direct participant in CHAPS (the Clearing House Automated Payment System), the UK’s electronic same day payment system, according to Chinese media reports. The bank’s entry brought the number of CHAPS participants to 25.

  • “After joining CHAPS, we [Bank of China] have completed another vital step towards the internationalisation of our direct clearing network, now covering the world's major currencies,” said Sun Yu, general manager of Bank of China’s London branch.

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