Initiatives to foster greater China-Singapore financial cooperation

INITIATIVES to strengthen cross-border renminbi (RMB) flows and a commitment to collaborate on capital market connectivity between China and Singapore were the major outcomes in financial cooperation from a recent state visit to Singapore by China's President, Xi Jinping.

Three major initiatives were announced to grow channels for cross-border RMB flows to support greater use of the RMB outside China.

First, China and Singapore agreed to extend to Chongqing Municipality certain cross-border RMB initiatives that are already given to Suzhou and Tianjin. As such, Singapore-based banks will be allowed to lend RMB to companies in Chongqing and Chongqing-based companies may issue RMB bonds in Singapore and fully repatriate the proceeds.

Secondly, Singapore's quota under the RMB Qualified Foreign Institutional Investor (RQFII) scheme will be doubled from 50 billion yuan to 100 billion yuan (S$11.1 billion to S$22.2 billion), as a result of robust interest from Singapore-based asset managers and investors keen to invest in China.

Thirdly, the Monetary Authority of Singapore (MAS) and the People's Bank of China agreed to renew and enhance the bilateral currency swap arrangement (BCSA) established between the two central banks. The existing arrangement was signed in March 2013 and is due to expire in March next year.

A new aspect of financial cooperation between the two nations was added via the agreement to enhance capital market cooperation. Two specific initiatives will help to set off this process.

First, there was agreement to institute a regular high-level dialogue between MAS and the China Securities Regulatory Commission (CSRC) to facilitate the exchange of views between the two regulators.

Second, MAS and CSRC agreed to explore product collaboration to broaden capital market offerings, which will put Singapore in greater stead to support the needs of Chinese policy banks.

MAS managing director Ravi Menon said: "In the next phase of our financial cooperation with China, we hope to replicate in the area of capital market development the success we have had in building the RMB ecosystem. There is great scope for China to tap on Singapore's strong institutional investor base and established derivatives markets to facilitate the development of their own capital markets. There are also significant opportunities for exchanges from both sides to collaborate in a mutually beneficial way."