Good signs for S'pore's offshore yuan market

[SINGAPORE] The warming of ties between Singapore and London in developing the offshore yuan market together comes as Chinese regulators further ease regulations in the use of offshore yuan in trade settlement, which could pique further interest among corporate clients in the use of the renminbi.

In January, the People's Bank of China (PBOC) removed the quota and documentation required for the conversion of offshore yuan - known as CNH - into onshore yuan, or CNY. Now, as long as a company sets up a business in the Shanghai free trade zone, it can borrow CNH from any of the offshore-yuan markets - mainly Hong Kong, Singapore, London and Taiwan - and use that as payment in the zone.

This eases previous concerns from corporate clients who have been mulling the use of invoices in yuan. If the offshore yuan market is volatile, the worry was that a trading firm would not get the currency at the same rate as its onshore subsidiary, which would have access to the onshore yuan market, said Lee Beng-Hong, Deutsche Bank's head of markets in China. Notably, the offshore yuan tends to moves in lockstep with the onshore yuan, data from the spot market showed.