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This week in RMB: January 23, 2017

By Paolo Danese
23 Jan 2017

The Trump presidency begins without China being labelled a currency manipulator, RMB keeps strengthening against the dollar, and the State Administration of Foreign Exchange emphasizes stability over reform.


  • The first day of Donald Trump’s presidency went by without what had been feared could be the first step in China-US trade war, namely Trump calling China a currency manipulator. The dollar index was still trailing down following Trump’s remarks on excessive dollar strength last week, down 0.28% to 100.54.
  • The RMB kicked off the week with a 6.8572 dollar fix, 121bp stronger than Friday’s. In the spot markets, the onshore RMB (CNY) was trading at 6.8373 on Monday, up 0.55%, while the offshore RMB (CNH) was trading at 6.8098, up 0.41% on the previous session as of 10:20am, according to Wind data.
  • China’s efforts at maintaining stability in the currency were visible in the performance of the three indices based on trade-weighted baskets of currencies. The CFETS index ended at 94.87 on January 20, up 0.1%, with equal gains for the Bank for International Settlements index, which closed at 96.31. The SDR basket index, meanwhile, was unchanged in the week at 95.86.
  • Pan Gongsheng, deputy governor, State Administration of Foreign Exchange, met a delegation of the Hong Kong Association of Banks led by Norman Chan, chief executive of the Hong Kong Monetary Authority. The two sides discussed China’s foreign exchange policies, with Pan underlining that capital flow risk is under control and that long-term fundamentals support equilibrium in China’s balance of payments.
    Pan said that Safe is committed to trade and investment facilitation under the existing policy framework, but that the regulator will crack down on foreign exchange irregularities.
  • CFETS gave approval to Industrial and Commercial Bank of China’s Frankfurt branch to participate in foreign currency lending in the onshore FX market.


  • People’s Bank of China Shanghai branch said that cross-border RMB business conducted from the Shanghai free trade zone totalled Rmb2.35tn ($345bn), with Rmb181bn for December 2016. Among the top banks, the first foreign lender was HSBC in fourth position and Citi trailing in fifth position.

Belt and Road:

  • Meanwhile, Bank of China (BoC) inaugurated the first branch by a Chinese bank in Serbia on January 21, the bank said in a statement. BoC said it now has branches in 51 countries, including 20 that fall under the Belt and Road initiative. The bank added that the launch was a result of Chinese president Xi Jinping’s visit to Serbia last year, aimed at strengthening ties with the country under the Belt and Road initiative.
  • In a Belt and Road report published by the German Development Institute, the authors noted that Indonesia and China agreed to a financing framework worth $3bn in 2015, covering 52 projects to be funded by the China Development Bank in co-operation with local Indonesian financing institutions. Part of the financing under the scheme will be in CNH loans, with a similar agreement also reached with Egypt. The report noted that by the end of 2015, China Development Bank had committed to some $190bn in loans in countries along the Belt and Road.
  • The authors added that as small- and medium-sized enterprises seek to expand cross-border trade activities, trade finance offered by Chinese institutions in RMB could lead to greater internationalisation for the currency. However, the limited opening of China’s capital markets this will limit the availability of such financing options.

Market news:

  • Local Chinese media are reporting that the Shanghai International Energy Exchange has shelved plans to create the country’s first RMB crude futures contract. This, however, should hardly be a surprise given that the authorities have been trying to launch the benchmark for years. The main reason for the cancellation was said to be investor worries about not being able to freely exchange the renminbi especially given China’s increased scrutiny on capital outflows this year.

By Paolo Danese
23 Jan 2017