China policy round-up: RMB reserves surge in Q2, new US investment review aimed at China M&A, US Treasury ready to punish China on FX management

IMF data shows the renminbi saw a nearly 40% jump in global foreign exchange reserves in Q2, the US Treasury introduced interim rules to monitor Chinese investment in US firms, and the US Treasury is also likely set to name China a currency manipulator as early as next week.

  • By Paolo Danese
  • 12 Oct 2018
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Global central bank reserves in RMB have seen a significant jump in Q2 2018, rising by 32.6% to $193.4bn, according to data by the International Monetary Fund. The RMB entered the IMF special drawing rights basket in October 2016. This is the largest jump since IMF started accounting for RMB reserves separately in Q2 2017.

Brad Setser, senior fellow for international economics at the Council on Foreign Relations, wrote in a note on October 9 that Russia had reportedly reduced its US Treasuries holdings by around $80bn in the same quarter and that likely meant China had absorbed most of that, meaning that Russia has now substantially increased the share of RMB in its reserve assets.

"Russia, of course, is a unique case," wrote Setser. "It is small enough that China could, more or less, absorb a large portion of Russia’s former dollar reserves. Moreover, it is increasingly becoming clear that China is thinking of ways of absorbing reserve related inflows that wouldn’t require running a current account deficit—it could, with a bit of engineering, use the inflows to fund belt and road related lending in yuan. At least if it can find willing borrowers."


The US Treasury is moving forward with new legislation that will impose much tighter scrutiny on inbound investments in US companies that the government deems sensitive under national security grounds, according to a document drafting interim rules published on October 10. The new rules will amount to a revamp of the existing Committee on Foreign Investment in the United States (CFIUS) reviews and are being seen as specifically targeted to block unwanted Chinese acquisitions of sensitive US technology and intellectual property. The rules are implemented following the introduction of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) at the start of the year.

"These temporary regulations address specific risks to U.S. critical technology while informing the development of final regulations that will fully implement FIRRMA,” said Steven Mnuchin, the US Treasury secretary.


In another signal to China, the US Treasury is set to issue its report on foreign currencies' management next week, with the review being expanded from 13 to 20 currencies. In a report on October 10, Cliff Tan, East Asian head of global markets research for MUFG, said the bank has come to believe the US will designate China as a currency manipulator for the first since 1994.

"[China's designation is] not so much for objective (and defensible) reasons than that such a designation fits in better with the Trump Narrative and how we think the Administration will further escalate its trade war with China," Tan wrote. "As such, you might call currency manipulation the first shot of further escalation."

  • By Paolo Danese
  • 12 Oct 2018

GlobalRMB Panda Bonds league table

Rank Arranger Share % by Volume
1 Bank of China (BOC) 21.17
2 China Merchants Securities Co 17.84
3 Industrial and Commercial Bank of China (ICBC) 14.86
4 Agricultural Bank of China (ABC) 10.81
5 China Securities 9.01

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 17-May-19 Trafigura The Netherlands 540
2 16-May-19 CITIC Pacific China 1,000
3 15-May-19 Republic of the Philippines Philippines 2,500
4 29-Apr-19 Semiconductor Manufacturing International Corp (SMIC) China 1,000
5 29-Apr-19 Semiconductor Manufacturing International Corp (SMIC) China 500

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Standard Chartered Bank 25.05
2 Credit Agricole 7.04
2 HSBC 7.04
4 Bank of China (Hong Kong) (BOCHK) 6.90
4 Bank of Communications Hong Kong Branch (BOCOM HK) 6.90

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 22-May-19 Agricultural Development Bank of China (ADBC) China 3,000
2 16-Apr-19 ICBC Singapore Branch China 1,000
3 10-Apr-19 Bank of China Macau Branch (BOC Macau) China 4,500
4 15-Mar-19 Bank of Communications Hong Kong Branch (BOCOM HK) China 2,500
5 13-Mar-19 Daimler International Finance Germany 1,000