Greater China

China is set to establish an offshore renminbi hub in Switzerland during a visit by prime minister Li Keqiang on January 20-21, according to domestic Chinese media reports. A Memorandum of Understanding (MoU) of official RMB clearing arrangements is expected, along with a Rmb50bn ($8.05bn) quota for the Renminbi Qualified Foreign Institutional Investors (RQFII) scheme.

The latest dataset for Bank of China’s Cross-border RMB Index (CRI) is out, showing a monthly rise of 2.4% in November to 251 points. The result is the second highest on record and also indicates the RMB might have overtaken the Australian and Canadian dollar to be the fifth most used currency for payments.

The China-Hong Kong Mutual Recognition scheme, which will allow funds in China to team up with funds in Hong Kong to market each other's products in their respective markets, could prove to be a crucial part of China's capital account opening. When it finally launches, it will open up a Rmb30tr ($4.8tr) industry to foreign fund managers. And for domestic buyers, mostly retail, it will create a new offshore channel.

Alternative Investment Funds (AIFs) and funds governed by European Union directives on Undertakings for Collective Investment in Transferable Securities (Ucits), can now trade A-shares through the Shanghai-Hong Kong Stock Connect scheme thanks to the development of a solution at Citi's depositary bank business, the firm said on January 16.

In this round-up, Taiwan deposits rise 0.5% in December 2014, China cross-border trade settlement is up 10% in the last month and the Stock Connect see two consecutive days of negative net trading this week.

Two international banks announced this week that they had helped clients complete two way RMB sweeping transactions outside the Shanghai pilot free trade zone (FTZ). Chinese regulators expanded the pilot scheme to the entire country in November 2014.

HSBC has completed the first issuance of asset backed securities by a foreign bank in China, at a time when the government is trying to foster more issuance from domestic banks.

The renminbi has grown as an international trade, investment and reserve currency at breakneck speed over the past few years. But in many eyes, the very programmes set up to loosen capital account restrictions are now working against very purpose of creating offshore RMB liquidity – key to the currency’s internationalisation. A couple of developments this year may help.

Australia and New Zealand Bank (ANZ) has mandated five banks to run meetings with fixed investors for what looks to be the first Basel III bond from a non-Chinese bank in the offshore renminbi market.

Belarus's request for proposals this week for a $1bn bond issue has once again highlighted the ethical dilemmas investment banks face when working in and for countries with tarnished human rights records.

Ask analysts what would take the international presence of the renminbi to the next level, and many identify the currency's inclusion in the basket that determines the value of the International Monetary Fund's Special Drawing Rights (SDRs). Research this week from Bank of China (Hong Kong) not only said such a move would be a breakthrough but also noted that the lack of full convertibility should not prevent it.

HSBC has completed the first issuance of asset-backed securities by a foreign bank in China, at a time when the government is trying to foster more issuance from domestic banks.