The bank speculated that a deliverable renminbi market in Singapore could be available as early as 2012, setting a template for further expansion of the offshore RMB in other jurisdictions.
Chinese authorities recently announced that a third Renminbi clearing bank would be established in Singapore after BoC (HK) and BoC (Macau). This would provide an important foundational element for an eventual offshore RMB trading platform as it would allow local banks to deposit RMB reserves locally and facilitate cross-border RMB trade settlements- both of which currently require the use of a Hong Kong platform.
The developments also indicate that Singapore will be the first jurisdiction outside of Hong Kong to see the offshore deliverable RMB market exparenmimbi and offshore renmimbi market regime currently in place in Hong Kong, rather than create separate competing systems as this is already freely transferrable offshore.”
“Hence, the offshore RMB exchange rate, known unofficially as CNH, will be applicable in Singapore and other eventual trading centres,” a spokesperson added.
HSBC predicted that Hong Kong would likely remain the dominant offshore RMB centre for some time given its concentration of offshore entities of mainland corporates and institutions.
Since inception last August, the pace of organic growth of the CNH market has been rapid and sustained. The CNH deposit base grew at a 251% annualized pace, to over CNH 450 bn by the end of March, putting it on track to reach CNH800 bn – 1.2 trn by year end.
Liquidity has grown at a 27% monthly pace with spot USD-CNH seeing around USD1 bn daily turnover.
It is expected to eclipse the non-deliverable forward (NDF) market in liquidity in the coming few years as the overall deposit base of CNH increases.
Cross-border trade settlement reached RMB 360bn, or 7% of total trade in the first quarter of 2011, having grown from 5% in the final quarter of 2010 and gross bond issuance has clocked RMB 48 bn in 68 issues this year, surpassing 2010’s issuance.
