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China has not given up its renminbi internationalisation plans, but the constraints of an under-developed financial system will put the brakes on that process until further reforms are implemented, the chair professor of international economics at City University of Hong Kong told GlobalRMB.
Portugal is considering issuing renminbi-denominated bonds, said the country’s finance minister.
The Panda bond market is set for a surge as more global companies look to boost their presence in China, according to a senior capital markets banker working with the asset class.
Canadian investors may gain a direct route into China’s interbank bond market thanks to a collaboration between TMX Group and Shanghai Clearing House (SHCH) that is set to kick off by Q4 of this year, TMX told GlobalRMB.
FX:
People’s Bank of China (PBoC)'s renminbi fix against the dollar was set at 6.8948 this morning, down 103bp from Thursday. In the spot market, the CNY was trading at 6.9013 as of 10.50am, with the CNH at 6.9025, up 0.03% and 0.02% from their previous close, respectively, according to Bloomberg data.
The dollar index was trading at 99.567 as of 10.40am, down 0.06% from the previous close, according to Bloomberg. The Thomson Reuters CNY reference index closed at 94.21 on Thursday, up 0.03% from its previous close.
In the Russian FX market, RMB-rouble spot trades in April totalled Rb7.8bn ($140m), 40.5% lower than a month earlier, while swap trades for the same pair were Rb11.6bn, down 38.9%.
BNP Paribas has become the first issuer to launch FX warrants with USDCNH underlying in Asia, the bank said in a May 10 press release. The French bank is the first to launch such a product following HKEX’s introduction of USDCNH futures in March this year.
Trade:
The US and China have reached an initial consensus on agricultural trade, financial services, investment, and energy. A joint statement on May 11 said China will allow wholly foreign-owned entities (WFOEs) to provide credit rating services by July 16. China will also issue bond underwriting and settlement licenses to two qualified US financial institutions by that date.
China recorded a current account surplus of $19bn in Q1 2017, according to figures released by the State Administration of Foreign Exchange (Safe) on Monday. Meanwhile, capital and financial accounts recorded a deficit of $19bn in the same period, $100m of which is capital account deficit, with non-reserves financial account deficit making up $21.5bn of the amount. Reserve asset also shrunk by $2.6bn.
Belt and Road:
China will hold its One Belt One Road summit this weekend, with 29 heads of state and government attending as well as the general secretary of the United Nations, a spokesperson for the Chinese foreign ministry said in a May 11 press briefing.
Belt and Road is an important driving force behind renminbi internationalisation, said Bank of China. The bank issued a statement on May 11 detailing its achievements on Belt and Road related projects, noting that it owns 11 of the 23 offshore renminbi clearing houses, and that it underwrote Rmb7.26bn ($105.4m) worth of offshore renminbi bonds in 2016, which is more than any other Chinese bank, the bank claimed.
In an interview with People’s Daily on May 11, Deputy PBoC governor Yi Gang said Belt and Road projects should be funded with local currencies to mobilise local capital and ensure financial stability. Yi noted that China has signed currency swap agreements with 21 countries along the Belt and Road and that six countries covered by the initiative have already acquired renminbi qualified foreign institutional investor (RQFII) quotas.
Hubs:
Hong Kong RMB clearing fell 22.9% in April 2017 to Rmb14.37tr, according to CEIC data. This is the lowest level since February 2015, and a 7.6% drop on a year earlier.
Hong Kong must prepare for the possible issuance of digital renminbi by recognising digital currency, said Financial Services Development Council (FSDC), an advisory body to the Hong Kong government. In a report published on Tuesday, FSDC argued that as PBoC actively considers issuing digital renminbi, it is key for Hong Kong to acquire the capability to handle cross-border payment involving digital currencies.
“If such issuance [of digital renminbi] takes place, there will be an opportunity for Hong Kong to establish itself as the digital renminbi payments rail in and out of Mainland China,” said FSDC.
Renminbi internationalisation can help boost the Kenyan economy, said the chair of the Kenya Bankers Association (KBA), according to a report by Chinese media. Lamin Manjang, who is also the CEO of Standard Chartered in Kenya, said on May 10 that China’s role as a top trading partner of Kenya’s has increased the importance of renminbi in the country.
Agricultural Bank of China opened its first renminbi clearing bank in Dubai, the United Arab Emirates on Wednesday, according to media reports. The move followed an agreement to establish a renminbi settlement hub signed by Abu Dhabi Crown Prince Sheikh Mohamed bin Zayed Al-Nahyan during his visit to China in 2015.