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Cross-border yuan rules now cover all of Suzhou, Tianjin
THE international use of the renminbi (RMB) was given another shot in the arm on Tuesday when Singapore and China agreed on new initiatives that will broaden the cross-border RMB channels between the two countries.
The agreement was reached at the 12th Joint Council for Bilateral Cooperation (JCBC) meeting, co-chaired by Singapore Deputy Prime Minister and Coordinating Minister for National Security Teo Chee Hean and China's Vice-Premier Zhang Gaoli.
The existing cross-border RMB rules that apply within the two bilateral projects, namely China-Singapore Suzhou Industrial Park (SIP) and Singapore-Sino Tianjin Eco-City (SSTEC), will be expanded to the cities of Suzhou and Tianjin.
This means that banks in Singapore will be able to lend RMB, or yuan, to corporates across Suzhou and Tianjin; corporates in Suzhou and Tianjin will be able to issue RMB bonds in Singapore and they will be allowed to repatriate 100 per cent of the proceeds raised.
The Monetary Authority of Singapore (MAS) said that this would offer more financing options to Suzhou and Tianjin corporates as well as provide financial institutions and investors in Singapore additional avenues to deploy their growing RMB liquidity in Singapore.
The latest initiatives drew swift applause from industry players.
OCBC head of China Business Office Benjamin Quek noted that the expansion of the cross-border RMB initiatives will be a boon for banks as they will be able to support many more businesses that previously were unable to access offshore funding.
"With the scope expanded to cover the cities of Suzhou and Tianjin in this latest initiative, it will give us greater impetus to extend our comprehensive suite of RMB financial solutions to more companies in these cities," he added.
According to MAS, lending rules within the two bilateral projects will be further relaxed. Corporates in SIP will be allowed to borrow from Singapore-based companies, besides the banks. This will facilitate SIP corpo-rates' overseas expansion through Singapore and provide a stronger incentive for them to set up finance and treasury centres in Singapore.
Qualifying privately owned banks in SSTEC will also be allowed to borrow from Singapore-based banks. This will lend support to the development of privately owned banks in SSTEC and allow such banks in SSTEC to establish commercial relationships with banks in Singapore.
MAS managing director Ravi Menon said: "The initiatives announced today are a testament to the excellent relations between MAS and our counterparts in China. We look forward to strengthening these relations and forming new pathways as we grow our financial markets together."
Apart from Hong Kong being the de facto offshore RMB centre, Singapore and London are racing to become first runner-up, while more cities such as Paris and Frankfurt are also looking to corner a share of the burgeoning offshore yuan market.
During the JCBC meeting, Singapore also expressed support for the inclusion of the RMB in the International Monetary Fund's Special Drawing Rights basket of currencies, given the rapidly growing use of the RMB for payments, trade settlement and investments globally.