thecorporatetreasurer.com

The international

2015

RMB road map

12 corporate treasurer December 2015 / January 2016

Dec 2003 Jul 2007

renminbi deposit accounts for individuals allowed in Hong Kong

First dim sum bond issued by china Development bank

cross-border trade settlements in renminbi allowed

Jul 2009 Sep 2010 Jan 2011 Oct 2011

Offshore banks given access to china’s onshore bond market

The first foreign-issued dim sum bond by a non-financial company (mcDonald’s)

renminbi outward direct investment allowed

Offshore renminbi funds officially allowed for FDI in china

The IMF has endorsed the renminbi as a freely usable currency, recognising China’s increased importance in the global financial market. The renminbi’s journey to attaining this status was never straightforward Ann Shi reports

the rmB international journey Before 2015

aug 2010

*Sources: central banks, HSbc, anZ, The Corporate Treasurer

thecorporatetreasurer.com December 2015 / January 2016 corporate treasurer 13

rmB internationalisation

China’s grand plan is to secure the renminbi’s status as a global reserve currency and all the hard work has paid off. On November 30, the IMF pledged to include it in the special drawing rights (SDR) basket, as good as confirming it as a foreign exchange reserve asset.

While the SDR inclusion might not directly affect corporate treasurers (although many predict there will be increased currency volatility), the effort to get here has clearly made using the renminbi a lot easier.

However, the pace of regulatory change has left many desperately trying to keep up. For example, in February, China allowed the Shanghai free-trade zone to offer unfettered access to raising renminbi funds offshore; in August, the People’s Bank of China (PBoC) changed how the renminbi’s reference rate is calculated; and in September, the central bank raised the ceiling on cross-border renminbi fund flows for multinationals via two-way cross-border renminbi cash pooling.

In a bid to help you chart the renminbi’s internationalisation more easily, The Corporate Treasurer has selected the decisive policy changes China made in 2015 that are shaping the international future of the world’s fourth most-used currency. n

A s a world payments currency, the renminbi ranks fourth in value behind the US dollar, the euro and the British pound, according to Swift.

Its rapid rise is a product of the vast levels of trade the country conducts globally, combined with an extensive and strategic opening up of the current and capital accounts.

Through initiatives such as the qualified foreign institutional investors (QFII) and renminbi QFII schemes and their domestic equivalents, the opening of the China interbank bond market, and Hong Kong-Shanghai stock connect, the country widened the channels to draw domestic and foreign capital to the renminbi.

mar 2012

Pboc bilateral currency swap arrangement with rba worth rmb200 billion

renminbi and Japanese yen direct conversion

Jun 2012 Dec 2012 apr 2013 Jun 2013 Oct 2013 mar 2014 Oct 2014 nov 2014 Dec 2014

renminbi clearing in Taiwan

renminbi and australian dollar direct trading

Pboc currency swap arrangement with boe of rmb200 billion

Pboc currency swap arrangement with ecb of rmb350 billion

renminbi trading band widened to 2% from 1%

renminbi and Singapore dollar direct trading

renminbi clearing in australia

renminbi-Thai baht swap agreement extended to rmb70 billion

thecorporatetreasurer.com14 corporate treasurer December 2015 / January 2016

11 Doha

[apr 14] Qatar opens the middle east’s first centre for clearing transactions in renminbi.

12 nairoBi

[jul 23] a branch of the national bank of Kenya becomes the first clearing house to allow the settlement of renminbi trade deals in the country.

13 johannesBurg

[jul 8] china’s central bank authorises the bank of china’s Johannesburg branch to serve as the clearing bank for renminbi businesses in South africa. In april, the Pboc also signed a bilateral currency swap agreement worth rmb30 billion with the South african reserve bank.

14 lonDon

[oct 20] The Pboc and the bank of england extend their currency swap agreement from rmb200 billion to rmb350 billion for three years. china also announces it will establish a renminbi “asset trading centre” in London.

on the map: rmB footprints in 2015

9 Kuala lumpur

[apr 14] Prime minister najib razak says the country will become a major offshore renminbi clearing centre.

10 syDney

[apr 8] australia and china sign a rmb200 billion currency swap deal for three years, extending a previous arrangement that expired on march 22.

1 Beijing

[Dec 11] The Pboc approves renminbi capital account convertibility within a prescribed limit of $10 million for companies registered in the Tianjin, Guangdong, and Fujian free-trade zones (FTZs).

[oct 8] The Pboc launches the china International Payment System (cips), with 19 participant banks. cips is the nation’s new clearing network for international renminbi payments that originate from or end in china.

2 shanghai

[oct 30] The Pboc makes Shanghai’s FTZ the first region to fully liberalise the capital account.

3 hong Kong

[est. 2016] Following the link between Shanghai and Hong Kong in 2014, the latter is set to launch Hong Kong-Shenzhen Stock connect. Originally mooted for 2015, technical issues have been blamed for the 2016 expected deadline. The government intervention of summer 2015 may have also played a role.

4 taiwan

[oct 26] Taiwan’s central bank expands renminbi usage by allowing companies to buy forwards and swaps via their banks to pay for services and goods, and for trade or direct investment.

5 toKyo

[jun 24] bank of Tokyo-mitsubishi uFJ issues Japan’s first renminbi-denominated bonds, raising rmb350 million, marking the country as another source of offshore renminbi funding.

6 seoul

[oct 31] china and South Korea agree to trade Korean won and renminbi directly via the china Foreign exchange Trade System. The scheme has yet to launch.

7 singapore

[nov 9] cross-border renminbi initiatives between Singapore and china now include Suzhou, Tianjin and chongqing. Singapore-based banks can lend renminbi to companies in those cities, and companies based there can issue renminbi bonds in Singapore and repatriate the proceeds.

8 BangKoK

[jan 6] renminbi clearing settlements become available in Thailand with Icbc (Thai) appointed as the clearing bank by the Pboc.

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thecorporatetreasurer.com December 2015 / January 2016 corporate treasurer 15

rmB internationalisation

15 franKfurt

[oct 29] Deutsche börse and the Pboc’s agree on a joint venture to develop renminbi-denominated currency and interest-rate trading in europe – the first authorised platform dedicated to renminbi trading outside mainland china. chinese companies may be allowed to list renminbi-denominated stocks in Frankfurt next year, also.

16 Zurich

[nov 10] The renminbi and Swiss franc can now be directly traded with each other in the inter-bank foreign exchange market. china construction bank is the authorised renminbi clearing bank.

17 BuDapest

[apr 7] The national bank of Hungary says it intends to build a chinese bond portfolio. In June, Hungary also sets up a renminbi clearing bank.

on the map: rmB footprints in 2015

18 toronto

[mar 23] Toronto becomes the first renminbi trading hub in north america with permission to be a clearing house for the americas.

19 washington

[nov 30] The ImF includes renminbi in its special drawing rights currency basket, with the transition set for October, 2016. at least $1 trillion of global reserves are estimated to switch to chinese assets.

20 santiago

[may 25] During chinese Premier Li Keqiang’s visit, chile and china agree on a currency swap, a quota of rmb50 billion for chile’s QFIIs, and the appointment of china construction bank as the first renminbi clearing bank in Latin america.

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