· On December 2, the People’s Bank of China (PBoC) published guidelines on what banks, corporates and investors can expect in the Shanghai Free Trade Zone (FTZ). The guidelines say that individuals and corporates will be able to open bank accounts in the area, which can be used for cross-border financing and guarantees in both renminbi and foreign currencies. The central bank will also allow corporates to engage in cross-border direct investment, and will give individuals working in the pilot zone the ability to invest overseas. Organisations in the FTZ can also borrow renminbi and foreign currencies from lenders offshore.
· Agricultural Bank of China (ABC) UK and Standard Chartered UK signed a memorandum of understanding on December 2 to launch clearing services in the UK market for the first time. The agreement aims to give financial intuitions and corporates the ability to process clearing transactions between 2 a.m. and 5 p.m. Greenwich Mean Time. Unlike clearing banks in Hong Kong, Macau, Singapore and Taiwan, ABC and Standard Chartered’s clearing arrangement does not include a direct liquidity facility from the PBoC.
· The renminbi has overtaken the euro to become the second most used currency in trade financing, Swift reported on December 3. Increased usage in traditional trade finance – such as letters of credit and collections – helped to propel the renminbi’s rise, having grown from 1.89% of global activity share in January 2012 to 8.66% in October 2013. The renminbi only ranks behind the US dollar for trade financing, which remains the leading currency with a share of 81.08%.
The top five countries using renminbi for trade finance in October 2013 were China, Hong Kong, Singapore, Germany and Australia, according to Swift.
· On November 25, Hong Kong Exchanges and Clearing (HKEx) soft-launched OTC Clearing Hong Kong Limited (OTC Clear) to provide clearing services for over-the-counter derivatives. OTC Clear’s initial clearing members comprise three commercial banks, and its services include inter-dealer interest rate swaps denominated in RMB, HKD, USD and EUR. It also provides and inter-dealer non-deliverable forward referencing for the RMB, TWD, KRW and IDR.
HKEx plans to formally introduce the clearing system in 2014 after the amended Securities and Futures Bill is in place.
· The Hong Kong Monetary Authority (HKMA) saw renminbi-denominated deposits rise 0.8% in Hong Kong month-on-month to Rmb781.6 billion in October.