Singapore, UK plan offshore yuan cooperation

[SINGAPORE] Singapore and the UK will set up a new private sector forum to boost the offshore yuan market outside of mainland China and Hong Kong, a joint statement from the Monetary Authority of Singapore (MAS) and the HM Treasury said yesterday.

The forum will focus on increasing cooperation between the UK and Singapore markets, and comes alongside the establishment of a financial dialogue between the two countries.

The dialogue will provide a platform for "a regular and structured exchange of views on domestic and international financial issues", the joint statement added.

The decision to create a dialogue follows Chancellor of the Exchequer George Osborne's first visit to Singapore this week.

"London and Singapore are integral players in renminbi markets outside of Greater China," said Mr Osborne. "Our financial firms and institutions are leading the way in promoting the use of renminbi and I am pleased to support work to help develop it further."

In the joint statement, Deputy Prime Minister Tharman Shanmugaratnam - who is also Minister for Finance and chairman of the MAS - said the two financial centres can cooperate to promote fungibility of the yuan globally, encourage innovation in yuan-denominated products and services, and meet the growing appetite for yuan-denominated investment instruments.

Three-quarters of all yuan-denominated payments, in value terms, are made in Hong Kong, a January report by the Society for Worldwide Interbank Financial Telecommunication showed. The remaining is carved up mainly between Singapore and London, with the two countries snapping up demand from South-east Asia and Europe, respectively.

Last October, Singapore was roped into China's renminbi qualified foreign institutional investor (RQFII) programme, which allows offshore yuan to be re-routed back into the Chinese market.

Using offshore yuan, Singapore-based investors can buy up to 50 billion yuan (S$10.3 billion) worth of Chinese investment products, according to the allocated quota.

London, the world's biggest foreign exchange and bond trading centre, was given an 80 billion yuan quota.

Applications for this licence were open to Singapore-based and approved financial institutions last month.

"The new private sector forum is yet another positive step in the internationalisation of the RMB and will enable greater knowledge sharing and trade facilitation," said Guy Harvey-Samuel, group general manager and CEO of HSBC Singapore.

Motasim Iqbal, head of transaction banking in Singapore at Standard Chartered Bank, said that the bank is excited to see how this initiative would lift market confidence for the two countries as gateways for the offshore yuan trade in South-east Asia and Europe.