February, 2013 saw the enactment of a new cross strait currency clearing agreement between banks in Mainland China and Taiwan, with the Bank of China Taipei branch named the clearing bank for renminbi denominated businesses in Taiwan. According to Citibank Securities, the deal is expected to help Taiwan follow a course similar to that of Hong Kong, thereby allowing the jurisdiction to become a major offshore trading center for the renminbi. The new system also gives both sides the ability to freely exchange the yuan and the New Taiwan Dollar, avoiding US dollar conversions and greatly reducing foreign exchange costs.
This month (March), HSBC highlighted the need to reduce companies foreign exchange exposure through a newly launched renminbi cross-border payments and collections solution, recently put into practice for a Fortune 500 company based in China. It will enable the Chinese subsidiaries of the company to settle cross-border payments and collections in renminbi using their parent company overseas treasury centre.
The move not only eliminates foreign exchange exposure and optimizes liquidity management for the company, but it also introduces a model for other multinational companies which will likely boost circulation of the renminbi outside mainland China over time. HSBC head of global payments and cash management in China, Kee Joo Wong, said: he growing need for innovative cross border renminbi cash management solutions reflects the increasing importance of the Chinese currency in the global payments system. HSBC has implemented an innovative renminbi cross border settlement model for our client that other multinationals can also benefit from. /p>
February also saw Singapore became China third offshore yuan clearing center, after Hong Kong and Taiwan, with Singapore expected to become a gateway to Southeast Asia and Taiwan a regional hub for yuan settlement and trading. New rules announced by the Chinese Securities Regulatory Commission earlier this month will provide offshore money managers with ore freedom in deciding where to invest their renminbi holdings, in the latest step to boost the currency global appeal, the Financial Times reported. The regulations are intended to allow offshore funds increased freedom when investing in renminbi-denominated stocks and bonds.
The updated regulations will affect the Renminbi Qualified Foreign Institutional Investor program (RQFII), which is one of the main conduits for foreign investment in Chinese markets. estrictions on asset allocation for RQFII products have essentially been removed (from previously being limited to either a minimum 80 percent fixed income allocation, or index-tracking ETF format), allowing qualified managers to craft a wider variety of products and invest in stock index futures, JPMorgan Jing Ulrich wrote earlier this month. The RQFII program was initially launched as a pilot project exclusively for Hong Kong subsidiaries of PRC securities or fund management firms, whereas it is now open to Chinese insurers and banks Hong Kong units.
Beijing decision to permit certain Hong Kong forms to invest offshore renminbi in mainland markets is a symptom of hina's continued financial liberalization an HSBC report stated. The move is expected to benefit the mainland market by pen[ing] channels for foreign portfolio investors [and] bringing in more demand for equities and bonds, Crédit Agricole CIB strategist, Dariusz Kowalczyk, wrote in a client note.
There is also a chance that the reforms will help Chinese shares to join global equity benchmarks within just three years, Financial Times and Stock Exchange chief executive, Mark Makepeace, said. The last two years have already shown exponential growth in Hong Kong CNH bond market, with outstanding CNH debt rising from RMB 69 billion two years ago to RMB 405 billion by the end of January this year.
