China
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As offshore renminbi assets expand, a fund management industry dedicated to buying them is also emerging. It’s still early days, but the growth potential of these funds is sizeable. Chris Wright reports. -
The People’s Bank of China (PBoC) has chosen to cut the bank required reserve ratio (RRR) by 50 basis points. This is the first cut for three years and marks an important shift in monetary policy.
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The offshore renminbi deposit base declined in October but not as much as originally expected, suggesting a convergence in spread between CNH and CNY, says the British bank.
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Hong Kong witnessed a large net outflow of renminbi last month under the new trade settlement scheme causing anxiety from some pockets that CNH liquidity will suffer.
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As China seeks to persuade the world that its markets are developing in a responsible fashion, one word has gained increasing traction: transparency.
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Baosteel Group Corp became the first Chinese company to directly issue bonds in the offshore renminbi market last week, when it sold a three-tranche issue worth Rmb3.6bn ($564.86m). Bankers think the deal will lead the way to issues from other state-owned corporations.
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The country’s major corporates will increasingly look to raise funds in US dollars next year as they seek to fund themselves amid a continuingly tight onshore lending environment.
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Market experts predict the renminbi corporate bond market should expand to reach Rmb15 trillion in nine years, as the country continues to encourage its development.
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The development bank intends to return to the offshore renminbi bond market as soon as it has permission from the Hong Kong authorities.
