China policy round-up: Japan gets RQFII quotas, Yi Gang bullish on opening up, PBoC sets RMBi goals

Japan receives a renminbi qualified foreign institutional investor (RQFII) investment quota, People’s Bank of China chief backs greater liberalisation of domestic financial sector and RMB exchange rate, and the central bank outlines key objectives for RMB internationalisation in 2018.

  • By Noah Sin
  • 11 May 2018
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  • China is allocating Rmb200bn ($31.5bn) of quotas under the RQFII scheme to Japan-based investors for the first time, according to a May 9 statement by the Chinese government.
    The move was first announced by Li Keqiang, the Chinese premier, in a May 8 opinion article published in Japanese media, and was confirmed during a meeting between Li and Shinzo Abe, the Japanese prime minister, in Tokyo on the following day.
    The overall size of allocated RQFII quotas stood at Rmb605bn as of May 11, across 196 participating firms, according to GlobalRMB data.
    China is also supportive of the idea of setting up an RMB clearing bank in Tokyo, according to the statement. The two countries agreed to sign a local currency swap agreement at the meeting. The Chinese and Japanese central bank governors agreed to promptly finalise the swap line in a separate meeting on the same day, according to the PBoC.

  • Yi Gang, governor of the PBoC, made a renewed call for the opening up of China’s financial sector.
    “The problem of China’s financial industry is not opening too much but not enough,” he said in an interview with local media, published on May 7. “Further opening up is an inevitable trend and meets China’s needs for economic development and transformation. The direction is definite.”
    Yi also argued that neither Chinese nor foreign banks should have anything to fear from liberalisation, given that the former have an edge in asset size and network while their international peers are better at risk management, compliance and research and development.
    While the trajectory of opening up is clear, market participants should not mistake such a trend for an endorsement of deregulation across the board.
    “The capability to prevent financial risk is decided by the supervisory system, institutions’ risk control ability and the effectiveness of the market,” said Yi. “Chinese regulators will also enhance cooperation with foreign counterparts to enhance oversight of cross-border capital flow [and] prevent regulatory arbitrage and risk contagion.”
  • China will reform the RMB exchange rate and push for greater capital account convertibility to promote RMB internationalisation in 2018, Pan Gongsheng, deputy governor of the PBoC, told a May 7 meeting.
    Pan described the RMBi project as a bright spot of China’s financial reform over the past decade, and said the central bank will continue to improve its policies and infrastructure to support the expansion of cross-border RMB business in 2018.
    Pan’s comments were echoed by PBoC’s Yi, who told local mediathat it is best for the markets, not regulators, to decide where the RMB should trade. He noted that the work on setting the exchange rate free is already underway.
    “The PBoC hasn’t intervened in the foreign exchange market over the past 12 months,” he said. “Its next step is to push forward further exchange rate reforms to make the renminbi’s exchange rate regime a flexible mechanism based on market supply and demand.”
  • By Noah Sin
  • 11 May 2018

GlobalRMB Panda Bonds league table

Rank Arranger Share % by Volume
1 China Merchants Securities Co 14.44
2 Industrial and Commercial Bank of China (ICBC) 11.65
3 Bank of China (BOC) 10.33
4 CITIC Securities 8.41
5 Agricultural Bank of China (ABC) 7.17

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 17-Jan-19 Everbright Water China 700
2 10-Jan-19 Beijing Enterprises Water Group China 2,000
3 18-Dec-18 Bank of China Group Investment China 2,000
4 17-Dec-18 Hungary Hungary 2,000
5 06-Dec-18 China Gas Holdings China 1,300

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Standard Chartered Bank 30.97
2 HSBC 18.82
3 Societe Generale 3.85
4 Bank of China (BOC) 3.68
5 Bank of Taiwan 3.30

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 03-Dec-18 Huzhou Communications Investment Group China 500
2 22-Nov-18 Bank of China Tokyo Branch (BOC Tokyo) China 800
3 15-Nov-18 RusHydro Russian Federation 1,500
4 13-Nov-18 Bank of China (Hong Kong) (BOCHK) China 1,000
5 19-Sep-18 Agricultural Development Bank of China (ADBC) China 1,200