Standard Chartered Bank (Hong Kong) has obtained approval from the People’s Bank of China (PBoC) to become the first commercial issuer of bonds denominated in Special Drawing Rights (SDR) in the country’s interbank bond market.
The entry of the renminbi into the IMF special drawing rights (SDR) on October 1 is stirring up debate for a revised role of the SDR, with some suggesting reform of the currency unit could lead to a more stable international monetary system.
With the renminbi now officially part of the special drawing rights basket, China is set to push on with its goal of making the SDR a real-world investment and reserve asset. But the obstacles to that plan are daunting.
Institutions have spent months preparing for the launch of the new IMF special drawing rights (SDR) basket on October 1 since the decision to include the RMB was made last year. The mechanics include managing divergent onshore and offshore rates, Jukka Pihlman, global head of central banks and sovereign funds, Standard Chartered, and former IMF official, told GlobalRMB.
In just a few days, the renminbi will be officially included in the International Monetary Fund’s Special Drawing Rights basket — a move widely seen as a validation of the currency’s internationalisation. But the actual impact of the development on fund flows is expected to be limited, market participants told GlobalRMB.
The International Monetary Fund (IMF) completed the latest review of the currencies backing its Special Drawing Rights (SDR) facility and has included the renminbi with a weighting of 10.92%. The Chinese currency joins the dollar, euro, sterling and yen, although the new composition will not go live until October 2016. China is now expected to accelerate its economic reforms.
Click below to access IMF documents on the background to the SDR, its 2010 review in which it discussed reasons for not including the RMB at that time, and its justification for adding the renminbi in the 2015 review.
- China’s SDR strategy won’t displace dollar, says top political economist
- RMB in SDR: means but not an end
- RMB starting to challenge global monetary order, says think tank
- BIS, MAS disclose renminbi investments
- SDR and RMB to join forces in bid for global status
- Negative rates add to the attraction of RMB, say reserve managers
- IMF should have used existing formula for SDR review - former official
- IMF staff report sheds light on RMB decision
- Forget SDR, domestic financial reform is the real key
- World Bank brings SDR bonds back to life
- China takes lead on M-SDR agenda
- World Bank releases price guidance for landmark Mulan bond
- SDR bond shows way through China accounting roadblock
- Debut Mulan bond salutes China’s SDR effort, says IBRD
- World Bank roadshows debut SDR bond in China
- World Bank SDR bond caters to Chinese tastes
- China keen on SDR bond before G20 summit
- World Bank to make SDR bonds a reality
China's currency stands a chance this year of being admitted into the select club of those backing the International Monetary Fund's special drawing rights. But at the moment it is not certain that the RMB will be deemed to have made the grade. It should be.
All eyes are on the renminbi this week with the currency set to officially enter the IMF’s special drawing rights (SDR) basket on Saturday. But what does that mean and why should you care? Here’s GlobalRMB’s quick guide to all you need to know.
In April 2015 we surveyed about 1,000 market participants for their views on 12 key topics for the RMB market, including RMB inclusion in the SDR basket of currencies.
Do you expect the RMB to be included in the IMF's Special Drawing Rights basket in this year's review?
Yes - 55%. No - 45%.
Whether the renminbi can get into the International Monetary Fund's special drawing rights basket this year is widely seen as the weather vane of the extent of global acceptance of the currency.
Our survey reflects the general expectation: a little better than a 50-50 chance. The main concern is still full convertibility, as well as the smaller usage of RMB as an investment currency compared to the current SDR basket components. But many point out that China’s rapid and continuous capital account liberalisation, coupled with the RMB’s increasing popularity in international transactions, can serve as a strong argument for inclusion this year.
Assuming it is included in 2015, Société Générale recently predicted it would start with a 7% weighting, lower than yen (9.4%) and sterling (11.3%). But analysts at Bank of America Merrill Lynch estimate its potential weighting could be as high as 13%.
From the archive
- PBoC to issue debut SDR bond as structured note
- Experts have their say on renminbi SDR review
- SDR review: The devil's in the detail
- It's official! RMB to join SDR basket in October 2016
- SDR: The inflows guessing game
- Fed to impact RMB valuation more than SDR inclusion
- RMB fits SDR criteria, says IMF staff
- SDR inclusion and London hub key to RMB FX reform, say experts
- RMB in SDR: Forgone inclusion
- Sibos: RMB entry to SDR will smooth China capital account opening, say experts
- Total Derivatives: Renewed SDR hopes drive CNY offers
- China to sell short-dated govt bonds to aid SDR inclusion
- IMF board approves SDR extension, RMB decision timeline unchanged
- PBoC takes hint from IMF SDR report, upgrades RMB fixing
- The RMB and SDR: It's the report, stupid
- China FX, rate reform recommendations are real story of IMF SDR report
- SDR users ask IMF for more time if RMB approved in 2015
- IMF SDR review set to boost SSA demand for RMB products, hedging
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GlobalRMB Panda Bonds league table
|Rank||Arranger||Share % by Volume|
|1||Bank of China (BOC)||28.62|
|3||China CITIC Bank Corp||9.72|
|4||China Merchants Bank Co||9.18|
|5||Industrial and Commercial Bank of China (ICBC)||7.56|
Panda Bond Database
|Pricing Date||Issuer||Country||Size Rmb (m)|
|1||12-Jan-18||Mitsubishi UFJ Financial Group (MUFG)||Japan||1,000|
|4||22-Nov-17||Province of British Columbia||Canada||1,000|
Offshore RMB Bond Top Bookrunners
|Rank||Bookrunner||Share % by Volume|
|1||Standard Chartered Bank||55.56|
|2||Mitsubishi UFJ Financial Group (MUFG)||22.22|
Latest Offshore RMB Bonds
|Pricing Date||Issuer||Country||Size Rmb (m)|
|1||17-Jan-18||IL&FS Transportation Networks||India||100|
|2||10-Jan-18||IL&FS Transportation Networks||India||900|
|4||30-Nov-17||Ministry of Finance of the People's Republic of China (MoF)||China||7,000|
|5||15-Nov-17||Bank of China Paris Branch (BOC Paris)||China||1,000|