Can we become a renminbi hub?

Singapore, the major commodities trading partner with China and regional treasury centre for multinationals, is following Hong Kong to become the second overseas RMB trade hub. However, experts believe that in the foreseeable future, Singapore will unlikely replace Hong Kong’s position as the primary RMB trade centre. 

Although Hong Kong – being part of China – is obviously the most ideal location for the country to experiment in its RMB liberalisation, China is now making attempts to take its local currency trading outside the country and Singapore is one of the best choices.  

The MAS also said that Singapore is well-prepared to facilitate trade-linked business flows with Mainland China. As Asia’s largest foreign exchange trading centre after Japan, Singapore houses many multi-national corporations’ treasury centre as well as offshore trading operations, and has all the necessary financial infrastructure needed to conduct and boost RMB trading. Besides several banks in Singapore have begun offering RMB banking services to their clients and expanded their product offerings to retail investors. 

Analysts believe Singapore possesses huge potential to become another RMB trading hub, not only because the pie of the offshore yuan business has grown so big – around 7 % of China’s international trade was settled in RMB during the first quarter of this year, but also because the Chinese government will not want to leave Singapore out as a centre to facilitate its trading ties with the whole Southeast Asia. However, in the mean time, they pointed out that Hong Kong will remain as the paramount RMB trading centre, due to both political and economic reasons. 

From the political side, the Chinese government still wants to take the yuan liberalisation slowly and keep it under control. A rapid yuan appreciation will likely harm numerous Chinese businesses that have long-term sales contracts denominated in U.S. dollars. 

From the economic side, Hong Kong has taken an early bird advantage, since it is so far the only jurisdiction outside Mainland China with an RMB clearing banking presence. Thanks to that, Hong Kong banks took the major share of RMB deposit flows from Mainland China through trade channels. 

Whatever it is, this is an exciting time for us!!!As Singapore’s RMB ambitions grow and China looks to expand RMB’s international influence, the two governments are taking further steps to promote RMB settlement in Singapore. Hmmm.... time to stock up? ....lol....