London RMB Business Quarterly - Issue 8: October 2020 - The Global City
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London RMB Business Quarterly Issue 8: October 2020
2 London RMB Business Quarterly Issue 8: October 2020 3 London RMB Business Quarterly Issue 8: October 2020
With thanks to
Chief Editors:
Jin Mei, Chief Representative, Representative Office for Europe,
The People’s Bank of China
Giles French, External Affairs Director,
City of London Corporation
List of Contributors:
Agricultural Bank of China (London branch)
Bank of China (London branch)
Bank of Communications (London branch)
Bank of England
Bloomberg
China Construction Bank (London branch), UK RMB Clearing Bank
EBS
HSBC
ICBC Standard Bank (London branch)
London Stock Exchange Group
National Association of Financial Market Institutional Investors (NAFMII)
PwC
SWIFT
The People’s Bank of China Representative Office for Europe
This report is jointly produced by the City of London Corporation and The People’s Bank of China Representative Office for Europe.
The City of London Corporation is the governing body of the Square Mile dedicated to a vibrant and thriving City, supporting a diverse
and sustainable London within a globally-successful UK. This publication has been prepared for general guidance on matters of interest
only, and does not constitute professional advice. You should not act upon the information contained in this publication without
obtaining specific professional advice.
No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this
publication, and, to the extent permitted by law, the authors and distributors do not accept or assume any liability, responsibility or
duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this
publication or for any decision based on it. All rights reserved. No part of this publication may be reproduced or transmitted in any
form or by any means without permission in writing from the monitoring group.
Contact: Sisi MU (+44 20 7601 6651 / london@pbc.gov.cn).
4 London RMB Business Quarterly Issue 8: October 2020 5 London RMB Business Quarterly Issue 8: October 2020
Foreword
Catherine McGuinness Giles French Jin Mei
Chair of Policy and Resources External Affairs Director, Chief Representative, Representative Office for Europe,
City of London Corporation City of London Corporation The People’s Bank of China
The world is coming to terms with the unprecedented challenge posed
by the spread of COVID-19. Now more than ever, the UK’s global
outlook and reach, and understanding of major partner markets, We are very pleased with the partnership between offshore market which is correlated to the COVID-19
has significant value in connecting markets and supporting resilience. the City of London Corporation and the People’s pandemic. The report also discusses the recent
As we look ahead to global recovery, the depth and breadth of UK Bank of China Representative Office for Europe on developments of blockchain in the RMB market,
financial and professional services (FPS) expertise mean we will have the London RMB Business Quarterly report. and new opportunities for the RMB to support the
a key role to play in supporting rebuilding and growth worldwide. It highlights the UK’s influence as a leader in RMB development of the UK as a Regional Corporate
internationalisation outside Greater China and the Treasury Centre, as well as, the opportunities for
The London RMB Business Quarterly report aims to help us maintain
PBoC’s efforts to develop and sustain the RMB at the UK offshore RMB market to support the green
the UK’s position as a leading RMB hub outside Greater China,
home and abroad. recovery and economy.
providing an overview of the market for the Chinese currency in the
UK. Whilst there has been a slowing of activity in the UK RMB offshore
The City of London is home to over 30 Chinese The London RMB Business Quarterly report serves to
market during this turbulent period, the report demonstrates the
financial and professional services firms which joined contribute to the understanding of the UK’s offshore
UK’s FPS sector’s resilience, showing that UK retains its position as
the UK’s financial market to build their international market, providing the most recent data, policies and
the leading RMB trading hub outside Greater China.
presence. The RMB is an important global currency commentaries from market participants. In addition,
and it is natural, as home to the world’s largest it aims to promote the healthy and sustainable
FX market, that the UK monitors its use and development of the UK’s offshore RMB market by
innovations closely. monitoring and providing feedback to regulatory
bodies in both countries.
With access to onshore RMB investments in China
rapidly increasing, opportunities for new products We would like to thank all our valued partners
and ways to manage currency exposure are also who have contributed to the eighth issue of the
growing. This makes for exciting times for the City London RMB Business Quarterly report. Your
of London and international investors. In the eighth contributions play a major part in the success of this
issue of the London RMB Business Quarterly we quarterly report.
see that there has been slow activity in the UK RMB
6 London RMB Business Quarterly Issue 8: October 2020 7 London RMB Business Quarterly Issue 8: October 2020
Market
Overview
The Lloyd’s Building, London
Since the May report, London RMB offshore market London RMB Foreign Exchange Market value of RMB deposits reached RMB74.23 billion, UK’s Rank as Offshore RMB Centre
has remained stable despite the ongoing pandemic. About 33% of all CNH spot trading on EBS took down 1.9% QoQ and up 22.69% YoY. The outstanding The UK remained the biggest RMB FX centre globally
Between March and July, new Dim Sum bonds issued, place during EMEA trading hours in July, the same amount of RMB loans were RMB64.26 billion, down and payments centre outside of Greater China. In
RMB deposit, RMB loan, and RMB Clearing, were all percentage from February 2020. In Q2, 2020, the 13.24% QoQ and up 8.31% YoY. July 2020, offshore RMB FX spot transactions in
significantly ahead of the prior year period. RMB average daily CNH FX trading volume in London the UK represented 34.40% of the total of offshore
cross-border settlement between China and UK decreased to GBP65.6 billion, down 22.85% YoY. London RMB Clearing transactions, slightly down 2.92% from this February.
rocketed by 169% YoY, with a net inflow of RMB12.2 Between March to July 2020, the cumulative clearing
billion from China to UK. However, the average London RMB Bond Market volume reached RMB4.68 trillion, up 7.59% YoY, and RMB in Global Currency Reserves
daily turnover volume of RMB FX in London market the average daily clearing volume was RMB45.87
Between March and July 2020, 22 new Dim Sum According to International Monetary Fund (IMF), RMB
declined to GBP65.6 billion in Q2, down 22.85% YoY. billion. By the end of July 2020, the total accumulative
bonds were listed on the London Stock Exchange, accounted for 2.05% of global currency reserves as of
According to SWIFT, the UK maintained its position of RMB clearing volume climbed to RMB48.45 trillion.
with a value of RMB7.2 billion, a significant increase Q2 2020, up 0.11% from Q4 2019. When the currency
having the largest share of RMB FX spot transaction
of 71.8% YoY. At the end of July 2020, a total of 130 was first included in the special drawing right (SDR)
in the world, although its share dropped from 43.43% China-UK RMB Cross-Border Settlement
Dim Sum bonds were listed on the London Stock basket, the share registered at 1.07% in Q4 2016.
July, 2019 to 34.40% July this year. From March to July 2020, corss-border RMB
Exchange with an outstanding value of RMB45 billion,
and an average coupon rate of 3.9%. transactions between China and the UK registered at
RMB633.6 billion, up 169% YoY. Among them, cross
London RMB Credit Market border RMB receipts and payments were RMB310.7
In the first half year of 2020, RMB deposits and RMB billion and RMB322.9 billion respectively, indicating a
loans in London were both ahead of the same period net flow of RMB12.2 billion from China into the UK.
of the last year. By the end of Q2, 2020, the amount8 London RMB Business Quarterly Issue 8: October 2020 9 London RMB Business Quarterly Issue 8: October 2020
RMB Exchange Rate The Onshore-Offshore Interest Rate Spreads RMB Interest Rate
CNH Hibor and 7-Day Repo Rate Spreads
The RMB appreciated against USD, export volume exceeding import’s. FX Interest rate differentials between US and
and the spread between CNH and CNY reserves for Q2 shown an upward trend SPREAD (LHS) Hibor (HICNH1W) (RHS) 7-Day Repo Rate (RHS) China increased, and the gap between
tended to narrow. Since March 2020, due to favourable FX valuation against CNH rate and CNY rate narrowed.
Covid-19 has dragged the global economy the weaker USD. CNY strengthened 2 5 In Q2 2020, the Chinese economy
into a downtrend and there is still a from 7.15 to 6.98 against the dollar from outperformed market expectations,
second wave happening and impacting May to July 2020. From March to July GDP grew by 3.2% YoY, beating analysts’
1 4
some parts of the world. Impacted by 2020, the average FX spot rate of USD/ expectations and rebounding from the
the insufficient global demand and the CNH in the offshore market was 7.0634, first quarter’s contraction. The PBoC
tensions between the United States and with the USD/CNY onshore FX spot rate continued to conduct sound monetary
%
0 3
China, the offshore RMB FX rate was a bit 7.0563. The spread between offshore policy in a more flexible and appropriate
weaker than the onshore price. Since June and onshore in this period was +71 basis manner to support the real economy.
%
2020, the stabilised A-share and widening points, while the spread of the same -1 2 The PBoC promoted the Loan Prime Rate
CGB-UST yield spread was expected to period last year was +82 basis points. (LPR) reform, guided the market rates
continue encouraging capital inflow to to move downward and kept liquidity
-2 1
RMB assets. China’s export and import adequate maintaining a reasonable level.
19/11/19
03/12/19
17/12/19
31/12/19
14/01/20
28/01/20
11/02/20
25/02/20
01/03/20
01/01/19
15/01/19
29/01/19
12/02/19
26/02/19
12/03/19
26/03/19
09/04/19
23/04/19
07/05/19
21/05/19
04/06/19
18/06/19
02/07/19
16/07/19
30/07/19
13/08/19
27/08/19
10/09/19
24/09/19
08/10/19
22/10/19
05/11/19
24/03/20
07/04/20
21/04/20
05/05/20
19/05/20
02/06/20
16/06/20
30/06/20
14/07/20
28/07/20
have picked up since June 2020, with The offshore and onshore interest rate
curves experienced a modest spike in
Source: Bloomberg, CCB March 2020. As USD liquidity improved
significantly and China quickly recovered
The Onshore-Offshore Exchange Rate Differential from covid-19 pandemic, these curves
USDCNH-USDCNY FX Spot Rate saw a significant turning point since April
Term Structure of RMB-Offshore Interest Rate Spreads 2020. Meanwhile, central banks in major
CNH-CNY SPREAD (LHS) USDCNY (RHS) USDCNH (RHS) Offshore Interest Rate (London) Onshore Interest Rate CNH Hirbor economies maintained interest rates
around zero-bound and scaled up asset
7.2 3.5%
0.06 purchases. Interest rate differentials
3.0% increased, the USD/CNH futures swap
7.1
0.04 premium also increased, and 3M Shibor
2.5%
7.0
stayed uptrend. The gap between CNH
2.0% rate and CNY rate narrowed. In July 2020,
0.02
RMB/USD
6.9 the 1Week and 2Weeks of the onshore
1.5%
interest rate were 2.236% and 2.247%,
0.00 6.8 1.0% the spread with offshore interest rate
0.5%
were +114 basis points and +103 basis
6.7
-0.02 points in contrast to the spread for the
0% same period last year which were -323
6.6 0N 1W 2W 1M 3M 6M 9M 12M
-0.04
and -179 basis points.
Source: Bloomberg, CCB
02/01/19
02/02/19
02/03/19
02/04/19
02/05/19
02/06/19
02/07/19
02/08/19
02/09/19
02/10/19
02/11/19
02/12/19
02/01/20
02/02/20
02/03/20
02/04/20
02/05/20
02/06/20
02/07/20
02/08/20
Source: Bloomberg, ABC10 London RMB Business Quarterly Issue 8: October 2020 11 London RMB Business Quarterly Issue 8: October 2020
London RMB Foreign Average Daily Turnover of RMB FX in London Dim Sum Bond Issuance and Average Coupon Rate London RMB Bond Market
Exchange Market as of July 2020 on LSE
LHS: issuance mln RMB
Between March and July 2020, 22 Dim
Spot Forwards Swap Option Others
In the first half of 2020, the volume of Sum bonds were newly listed on the
London RMB FX turnover showed a Issuance Coupon rate London Stock Exchange, with a total
downward trend as opposed its upward 90 issuance size of RMB7.2 billion, and
trend of last year. The average daily 8 7% weighted average coupon rate of 3.7%.
80
turnover volume of RMB FX in London 7
The value of new Dim Sum bonds issued
6%
market was GBP72.1 billion in Q1, up 70 from March to July 2020 increased by
6
8.68% QoQ and down 7.76% YoY. In the 60
5% RMB3 billion compared to the same
second quarter, it fell to GBP65.6 billion,
5
period last year, an increase of 71.8%.
Thousand
Billion (GBP)
4%
50
down 8.98% QoQ and down 22.85% YoY. 4 At the end of July 2020, a total of 130 Dim
3%
The distribution of RMB FX turnover by 40 3 Sum bonds were listed on the London
counterparty sectors was unchanged: 30 2
2% Stock Exchange with an outstanding value
RMB FX turnover with other sectors took of RMB45 billion, and weighted average
1%
1
the greatest share, accounting 41.9% in
20
coupon rate of 3.9%.
0%
Q1 and 44.6% in Q2; followed by RMB FX 10
0
1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7
turnover with non-resident deposit-taking 0
2016 2017 2018 2019 2020
corporations, making up 38.6% in Q1 and
2015 Q1
2015 Q2
2015 Q3
2015 Q4
2016 Q1
2016 Q2
2016 Q3
2016 Q4
2017 Q1
2017 Q2
2017 Q3
2017 Q4
2018 Q1
2018 Q2
2018 Q3
2018 Q4
2019 Q1
2019 Q2
2019 Q3
2019 Q4
2020 Q1
2020 Q2
Source: LSE
35.4% in Q2; RMB FX turnover with UK
deposit-taking corporations accounted for London RMB Credit Market
the smallest proportion at 19.5% and 20% Source: Bank of England (BoE)
in Q1 and Q2, respectively. In the first half year of 2020, both RMB
RMB Deposits in London
deposits and RMB loans in London saw
In July 2020, the proportion of the RMB Deposits in London Share of RMB Deposits in Foreign Currency Deposits (RHS) a rise from the same period last year.
offshore RMB FX trading in London RMB FX Turnover by Counterpart Sector Share of RMB Deposits in Total Deposits (RHS)
Total London offshore RMB deposits
market remained the same from February balance reached RMB74.23 billion in
2020. Trading data from EBS revealed 90 Q2, down 1.9% QoQ and up 22.69%
44.6%
that the proportion of spot CNH trading Other sectors 80
1.2
YoY. The proportion of RMB deposits of
volume in EMEA trading hours was 33% 70 1.0 UK’s total deposits balance and of UK’s
in July, the same percentage as that in 35.4% 60 total foreign currency deposits balance
February. Specifically, Asia, EMEA and Non-resident deposit-taking
0.8
remained stable. The total of London
Billion (RMB)
50
corporations
Americas trading hours registered 60%, 0.6 offshore RMB loans balance hit RMB64.26
%
40
33% and 7% of total CNH spot trading billion at Q2, down 13.24% QoQ and up
30 0.4
volumes, compared with a distribution of 8.31% YoY, mainly due to the changes of
20
60%, 33% and 7% in February 2020, and 0.2 interbank lending.
10
59%, 34% and 7% a year ago. 0 0.0
2015 Q2
2015 Q3
2015 Q4
2016 Q1
2016 Q2
2016 Q3
2016 Q4
2017 Q1
2017 Q2
2017 Q3
2017 Q4
2018 Q1
2018 Q2
2018 Q3
2018 Q4
2019 Q1
2019 Q2
2019 Q3
2019 Q4
2020 Q1
2020 Q2
20.0%
UK deposit-taking
corporations
Source: Bank of England (BoE)
Source: Bank of England (BoE)
Spot CNH Volume Distribution by Hour on EBS RMB Lending in London
Asia EMEA Americas Interbank Lending Lending to Clients by UK Banks
80
13.8
14
70
12
10.4 60
10.0
9.6 9.5
10
Billion (RMB)
50
08 40
6.5
06
%
4.9 5.1 30
3.6 3.7 4.0
04 2.9 2.9 3.1 20
2.3
1.9 1.8
02 1.1 1.0 10
0.7 0.4
0.04 0.1 0.3
00 0
2015 Q2
2015 Q3
2015 Q4
2016 Q1
2016 Q2
2016 Q3
2016 Q4
2017 Q1
2017 Q2
2017 Q3
2017 Q4
2018 Q1
2018 Q2
2018 Q3
2018 Q4
2019 Q1
2019 Q2
2019 Q3
2019Q4
2020 Q1
2020 Q2
00:00
01:00
02:00
03:00
04:00
05:00
06:00
07:00
08:00
09:00
10:00
11:00
12:00
13:00
14:00
15:00
16:00
17:00
18:00
19:00
20:00
21:00
22:00
23:00
Hour (GMT)
Source: EBS Source: Bank of England (BoE)12 London RMB Business Quarterly Issue 8: October 2020 13 London RMB Business Quarterly Issue 8: October 2020
London RMB Clearing RMB Clearing Volume of the Designated UK Clearing Bank RMB’s share as a global payments currency The International Status of the
Between March 2020 to July 2020, the July 2018 London Offshore RMB Market
2015 2016 2017 2018 2019 2020
accumulative RMB clearing volume 40 According to SWIFT, RMB share as a
was RMB4.68 trillion, up 7.59% YoY, 1,600 domestic and international payments
while average daily clearing volume 30
currency (customer initiated and
1,400
was RMB45.87 billion. Accumulated institutional payments) in July 2020 was
20
transaction number counts stood at
%
1,200 1.86%, down from 2.21% in February
35,680. By the end of July 2020, the 10 2020. RMB share as a global currency
1,000
total accumulative RMB clearing volume
Billion (RMB)
in trade finance market was 1.84% in
reached RMB48.45 trillion since China 800 0 July, up 0.01% from February 2020. The
Construction Bank (CCB) London Branch
USD
EUR
GBP
JPY
CNY
CAD
HKD
AUD
CHF
SGD
THB
SEK
NOK
PLN
MYR
ZAR
DKK
MXN
NZD
TRY
600 RMB remained as the fifth biggest global
obtained its authorization to become the payment currency, and the UK retained
July 2020
RMB clearing bank in the UK in June 2014. 400
its position of having the largest share
The Bank remained the largest clearing 200 40 of RMB FX in the world and largest
bank outside Asia. payments outside greater China. The
0 30
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
top three countries or regions executing
RMB FX transactions in July 2020 were
20
%
Source: CCB London Branch the United Kingdom, China and the
China-UK RMB Cross-Border 10 United States. The United Kingdom
accounted for 34.40% of the total in July,
Settlement
0 a slight decline from February (37.32%).
From March to July 2020, cross-border
USD
EUR
GBP
JPY
CNY
CAD
HKD
AUD
SGD
THB
NOK
CHF
SEK
PLN
DKK
MYR
NZD
ZAR
MXN
CLP
China, the US and Hong Kong SAR’s
China-UK Cross-Border RMB Payment and Receipt
RMB transactions between China and share of FX transactions in RMB all saw
the UK surged to RMB633.6 billion, up Payment Receipt Source: Watch – Powered by SWIFT BI an increase from February to July 2020,
169% YoY. Among them, cross-border and registered at 16.72%, 12.16% and
250
RMB receipts were about RMB310.7 9.87%, respectively.
billion while payments reached RMB322.9
billion, representing a net inflow of 200
RMB’s share as a global currency in trade finance market
RMB12.2 billion from China to UK, up
Billion (RMB)
150 July 2018 July 2020
RMB1.8 billion from the same period
last year. Cross-border RMB receipts
100 90 90
and payments of Sino-British bilateral 80 80
goods trade totalled at RMB32.7 billion, 70 70
50 60 60
accounting for 5.2% of the total amount 50 50
of receipts and payments during the
%
%
40 40
0 30 30
same period, indicating a declining 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 20 20
trend. Meanwhile, the share of RMB 2016 2017 2018 2019 2020 10 10
0 0
receipts and payments under capital
USD
EUR
JPY
CNY
AED
IDR
CHF
SAR
GBP
PKR
USD
EUR
JPY
CNY
IDR
SAR
AED
GBP
AUD
PKR
accounts continued to increase in line Source: PBoC
with the further opening-up of China’s Source: Watch – Powered by SWIFT BI
financial market.
China-UK Cross-Border RMB Payment
and Receipt Under Merchandise Trade Top Countries (Regions) FX Transaction in RMB
United Kingdom China United States Hong Kong SAR France Others
Payment Receipt
20 February 2020 July 2020
15
21.95% 37.32% 19.38% 34.40%
Billion (RMB)
10
8.42% 7.56%
5
8.84% 9.78%
14.04% 16.72%
0 9.43% 12.16%
2017 2018 2019 2020
Source: PBoC Source: Watch – Powered by SWIFT BI14 London RMB Business Quarterly Issue 8: October 2020 15 London RMB Business Quarterly Issue 8: October 2020
RMB in Global Official Foreign Exchange Reserves by Currency
Currency Reserves
Claims Claims Claims of Claims of Claims of Claims of Claims of Claims Claims Total Foreign
According to IMF, RMB took up 2.05% of of U.S. of Euro Japanese Pounds Chinese Australian Canadian of Swiss of other Exchange
Dollars Yen Sterling Renminbi Dollars Dollars Francs currencies Reserves
global currency reserves as of Q2 2020,
up 0.11% from Q4 2019. When it was
included SDR basket, the share registered 12,000
at 1.07% in Q4 2016. USD’s share of
global reserves saw a slight increase of
0.54% in Q2 2020 from Q4 2019, reaching 10,000
61.26%. The share of Euro, JPY and GBP
fell from 20.58%, 5.89% and 4.64% in Q4
2019, to 20.27%, 5.75% and 4.46% 8,000
in Q2 2020.
Billion (USD)
6,000
4,000
Allocated Reserves by Currency for 2020Q2
Allocated Reserves - Allocated Reserves - Allocated Reserves - Allocated Reserves - Allocated Reserves -
2,000
Shares of U.S. Dollars Shares of Euro Shares of Japanese Yen Shares of Pounds Sterling Shares of others currencies
Allocated Reserves - Allocated Reserves - Allocated Reserves - Allocated Reserves -
Shares of Chinese Renminbi Shares of Canadian Dollars Shares of Australian Dollars Shares of Swiss Francs 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q4 Q1-Q2
1.89% 1.69%
2.05% 0.15%
Source: International Monetary Fund
2.48% 61.26%
4.46%
5.75%
20.27%
Source: International Monetary Fund16 London RMB Business Quarterly Issue 8: October 2020 17 London RMB Business Quarterly Issue 8: October 2020
Industry update
Blockchain, Trade and RMB internationalisation
HSBC
Development of Blockchain technology HSBC world’s first cross-border RMB- c) no ‘instant messaging system’ to give buyer/seller transaction, which has become even more important
denominated Blockchain Letter of Credit a real time update of LC progress; and during a pandemic like COVID-19.
Blockchain is a technology that features a
decentralized, distributed ledger of transactions on HSBC has taken a lead on promoting the application
d) No common platform for the various involved The platform is currently operated by an independent
which the transactions are stored in a permanent and of blockchain-based documentary trade technology;
parties (i.e. banks and corporates) to manage legal entity, incorporated in Singapore and jointly
near immutable way. Authentication of transactions and pioneered the world’s first cross-border
the workflow of the overall transaction and the owned by its bank members and delivery partners.
is achieved through cryptographic means and a RMB-denominated blockchain Letter of Credit (LC).
presentation of digital documents. By early 2020, Contour had conducted 16 pilot
mathematical “consensus protocol” that determines
transactions through its client centric development
the rules by which the ledger is updated, which allows The transaction involved MTC Electronic Co Limited
Just the presentation of supporting documents process with geographical coverage over 10 countries
participants with no particular trust in each other to (MTC) based in Hong Kong, who exported a shipment
process usually takes 5 to 10 working days through in Asia, Middle East and Europe and wide range
collaborate without having to rely on a single trusted of raw materials to its Shenzhen parent company.
traditional channels or even longer if discrepancies of industries coverage including soybean meal,
third party. HSBC Hong Kong and HSBC China were the
are identified. petrochemicals, retail goods, textiles and metals.
nominated bank of the seller and the issuing bank
Blockchain first appeared in 2008 within the of the buyer respectively. The transaction was conducted on Contour, a The blockchain platform and RMB
cryptography community and was quickly blockchain-based, bank-agnostic network with a LC Internationalisation
implemented in 2009 as a core component of the If the transaction were conducted by conventional
application designed to improve the issuance, advise,
development of cryptocurrency (Bitcoin). Until the last paper-based LC, it would have required multiple Going forward, with further scaling up of the
amendments, and presentations of documents
few years, various consortia were formed to develop documentation exchanges between buyer/seller blockchain platform involving various important trade
for all parties. HSBC China used Contour to issue
bespoke solutions to satisfy the needs of businesses and their processing banks. The main points being: stakeholders including banks, technology partners,
this digitised LC on behalf of Shenzhen MTC to
including applications in trade finance, cross-border and corporates joining the network to become
HSBC Hong Kong. MTC then reviewed, verified and
payments, insurance and e-commerce. a) time-consuming and labour intensive an eco-system, it is anticipated that it will drive
uploaded their own trade documents to the platform
processes in amendments, discrepancy significant efficiency improvement, reduce costs
to complete the transaction. This exchange of fully
The adoption of blockchain technology in management, authentication and presentation/ and further promote international trade.
electronic documents was completed in under
international trade finance will help digitalise document exchange;
24 hours.
conventional documentary trade as demonstrated in In particular, given China’s significant position in
the below diagram. b) potential of damage or loss of documents in the global commodities trade, there are strong incentives
The Contour platform successfully eliminates
courier process; for Chinese buyers to choose RMB-denominated
aforementioned pain points by:
trade finance and the blockchain platform is well-
positioned to facilitate such needs.
a) removing paper documents to speed up the
Traditional Model Blockchain Model presentation leg of the transaction;
Besides, it is anticipated that trade related services
can be integrated, innovated and delivered digitally.
b) connecting all relevant parties in a secured and
For example, trade payments on the blockchain
1. Sales contract decentralised network where relevant documents
platform are currently settled through SWIFT. Going
can be issued, reviewed, exchanged and approved
5. Shipment forward, it could potentially be settled in other
Importer Exporter Importer Exporter instantly; and
payment systems, such as the Cross-border Interbank
c) minimizing unnecessary operational/human error Payment System (CIPS) for RMB-denominated trade
6. Present documents
given both issuing bank and nominated bank are
2. Request for letter
9. Documents and
in paper-based document handling.
claim of payment
CIPS participants. The blockchain platform can even
or credit (LC)
4. Deliver LC
Permissioned distributed ledger The Contour network (platform) was initiated expand to cover RMB recycling opportunities for its
Hashed/ encrypted documents, by seven founding member banks, including users, including trade account netting-off, liquidity
Smart contracts to automate payments Bangkok Bank, BNP Paribas, CTBC, HSBC, ING, management, FX risk management and so on.
SEB and Standard Chartered, in partnership with
Bain, CryptoBLK and R3. Citi, HD Bank and DBS For London, as a key RMB offshore centre, an active
subsequently joined Contour and the network promotion and a wider adoption of the blockchain
3. Importer’s bank issues LC platform will boost the regional trade with China
continues to grow. The platform is designed to
improve the trade finance process by connecting both with more RMB-denominated trade and settlement
8. Document control, release
of payment at maturity bank and corporate participants on one network to opportunities and it will in turn further strengthen its
Importer’s Exporter’s Importer’s Exporter’s simplify various trade finance processes, delivering position as the second largest RMB offshore payment
7. Present documents centre in the world and further pave the way for
Bank Bank Bank Bank improved user experiences, shorter settlement times,
quicker discrepancy resolution and a fully paperless development of RMB internationalisation.18 London RMB Business Quarterly Issue 8: October 2020 19 London RMB Business Quarterly Issue 8: October 2020
Renminbi and The Rise of Regional Treasury Centres in London
PwC
The treasury functions of non-financial corporations Coupled with this, the internationalisation of the Such arrangements can be single currency, or multi funds from the group head office may be sent to the
have always been attracted to the London market. RMB, and the introduction of RMB clearing in key currency. They can be provided as automated RTC as a holding location before they are invested. In
The market’s position as a leading location for international locations made it possible for Chinese solutions by the leading banks, or can be operated such cases, it may be strategically appropriate for the
clearing non-local currency is a key ingredient to this. corporates to manage RMB effectively in locations manually by the RTC’s treasury team. In either case, RTC to invest these funds on behalf of the group, so
In particular, Renminbi is part of that narrative. other than China. the pool benefits from the depth of liquidity, range of that the RTC’s objectives become obtaining yield as
currencies, and ease of access which London’s cash well as preserving liquidity. This represents a further
Since the 1980s, as treasury and treasury Consequently, over recent years there has been markets provide. RMB in particular is well supported expansion of an RTC’s role. Not all companies would
management became recognised as a distinct a clear trend for Chinese corporations to set up a by London’s infrastructure, and this is evidenced by want to do this, but in cases where it makes strategic
discipline and business function, and currency separate treasury function in the EMEA region itself the size and depth of the market. As a consequence, sense, it enables the RTC’s financial and human
controls in European and American markets were to manage cash and other treasury activity for such London’s role as a centre for international cash resources to be used for maximum impact.
gradually eased, large corporations based in the operations: these are typically designated Regional management enables is particularly attractive to
UK, Europe and the US set up specific functions to Treasury Centres (“RTC”). London is a natural hub for RTCs where Chinese cash flows are significant. As noted above, these functions can in theory be
manage cash globally. As London’s banking and cash this generally, and its pre-eminence in international Depending on the company’s situation, the reason conducted from almost anywhere in the world.
market developed, these functions often were based RMB clearing makes it particularly relevant to for cash concentration including RMB may vary. Groups have generally started by carrying out such
in the UK or other territories in North West Europe, Chinese corporations In some cases the company may be pooling cash functions in their head office. However, the trend
and dealt with banks based in London. Waves of remitted from Chinese business operations with that for a RTC in a different region is clear. It enables the
product innovation (such as the various forms of The scale and functions of an RTC varies from other operations worldwide; in other cases, company’s treasury to operate in a similar region
international cash pooling products offered by significantly, depending on the needs of the group the focus may be on taking excess cashflow from and time zone to the operating units it supports,
some banks) and technological innovation (bespoke in question. However they tend to have some core European operations, and making it available to the which facilitates cash transactions via banks and
Treasury Management Systems which enable a single common features: parent in China, or a global treasury centre in Hong payment authorisations, and it gives the group’s
centralised function to oversee and manage cash Kong, to be deployed in other markets. worldwide finance function easy access to the
across a large number of entities and territories) Management and oversight: the key individuals in the local market for other matters, such as derivatives,
have increased the ability of these functions to RTC have visibility of cash and treasury transactions Hedging and risk management: Some RTCs expand insurance or investment. The availability and ease
manage risks, and optimise cash use, across a for the region. Typically, they have real time their operations further, and take responsibility of clearing of non-local currencies such as RMB
wide area. information regarding all bank balances, payments, for hedging and risk management, entering into fx is an intrinsic part of this ecosystem, and is a key
receipts and derivative positions across the region. hedges or interest rate swaps, to reflect the needs of ingredient to the efficiency of the RTCs. It forms part
More recently, this trend has continued, as Chinese In addition, there may be processes and controls their regional operating units. Typically the RTC has of the clear package of incentives for non-European
corporations have expanded their European over matters such as payments, particularly large or the mandate and legal status to enter into derivatives companies to locate in cities such as London
operations. International corporations based in unusual ones, so that the RTC management acts as a with market counterparties, and then enters into for this purpose. The infrastructure is there - in
China have always needed to manage their non- control function for operating units within the region. “back to back” positions to pass the exposure to terms of the availability of banks and other service
Chinese cash from outside mainland China; Hong the relevant operating business. A few RTCs have providers, as well as the practical matters such as
Kong has for many years been the natural location Cash pooling: taking the oversight of cash a wider responsibility for risk, and take on regional a good environment for key staff to live and work.
for that activity. step further, for many groups it makes sense to management of matters such as group insurance Consequently, the trend is set to continue.
formally pool cash through an RTC. The cash in the or pensions.
However, geographic distance, time zone difference operating units is combined, so that excess cash in
and other practical factors tend to make it more operating units is sent to the RTC, and overdrafts in An RTC with sufficient remit and expertise can also
difficult for a treasury centre in the Asia Pacific operating units can be financed from the RTC. The take a wider role within the group, and move from
region to be effective and efficient in managing consequence is that cash is deployed effectively and being a support function to being a profit centre in
cash in Europe, Middle East and Africa (“EMEA”). the cost (in terms of finance charges and other bank its own right. For example, a natural consequence
Having a permanent presence on the ground in the fees) is minimised. of cash management and concentration is that over
UK or Europe also may make sense for legal, tax time, cash representing the region’s accumulated
and regulatory reasons, offering greater access to profits may accumulate in the RTC. Alternatively,
financial products in the region.20 London RMB Business Quarterly Issue 8: October 2020 21 London RMB Business Quarterly Issue 8: October 2020
Sustaining Green Shoots of Recovery
ICBC Standard Bank
The COVID-19 pandemic has accelerated acceptance The ESG in China’s economic policies Demand-side recovery requires Emerging Market Focused Green
of the relationship between economic stimulus and industry-led innovation Finance Investment Index
Beijing is focused on directing credit towards
sustainable growth, challenging public and private
industries that further efforts to either counter Domestic policies may be unique to countries’ ICBC is in the process of launching the Belt and
sectors globally to reassess their priorities. For many,
the impact of climate change or building resilience domestic needs. But international cooperation is Road Green Finance (BRGF) Investment Index3
realising Environmental Social and Governance
to it. Monetary policy aims to lower the cost crucial to align global efforts. As part of the TCFD as a proposed international framework towards
(ESG) standards is a new pathway towards
of financing for industries compliant with ESG pilot2, ICBC has made progress in its ESG-based recognising and building green and sustainable
sustainable recovery.
standards. China’s Green Finance Committee has credit rating framework which encompasses banking, financial capacity in emerging markets (EMs). London
encouraged improvements in the financial sector’s insurance and asset managers. Partnerships will likely remain a key financial transaction centre
China’s economic recovery gained firmer footing
ESG disclosure. A significant indicator is that A-share with London-based financial institutions form for EM assets.
in the second quarter. But beyond the headlines,
market performance has been found to be positively internationally recognised ESG-standards, which is
Beijing’s policy emphasis has remained maintaining
correlated to ESG ratings.1 crucial to the further development in greening the Data across 79 countries along the Belt and Road
stability while keeping in step with the longer-term
RMB bond market. were compiled, with more to add over time.
economic structural shift towards a more sustainable
To guide the flow of domestic green bond issuances According to the World Bank’s classification by per
growth model.
in China, the People’s Bank of China (PBoC), National With the continued opening up of CIBM (China capita GNP, 19 are high-income countries, 29 are
Development and Reform Commission (NDRC) and Interbank Bond Market) access channels, and middle- and high-income countries, and 31 are low-
In line with the four other countries and monetary
China Securities Regulatory Commission (CSRC) familiarity with CIBM – including assets with and middle-income or low-income.
union with currencies in the IMF’s Special Drawing
jointly issued the Green Bond Endorsed Project recognised ESG credentials, offshore RMB hedging
Right (SDR) basket (US, Euro area, Japan and UK),
Catalogue (2020 edition). The Catalogue seeks to demand will likely pick up. London continues to play The BRGF Index has two dimensions. The first –
China is accelerating reforms in its domestic capital
guide both domestic and international investors an important role in transacting these FX volumes. Green economy performance (GEP) – aims to give
and financial markets with ESG capacity in mind.
on green performance at a project level, as well as an indication of the current green development
To help build this capacity, further opening up
the ESG performance of the issuer. The initiative In Q2 2020, China green bond issuance began to of BRI countries. The second – Green Growth
markets and encouraging internationally recognised
not only seeks to further boost China’s green bond show signs of revival after falling to its lowest level Capacity (GGC) – assesses the policy, technological
standards to facilitate corporate disclosure on
market but also global green bonds, as more Chinese in over 3 years in Q1, as China regains control over landscape and financial depth of countries in the
ESG impacts is crucial. As such, Beijing’s continued
corporates issue offshore. the COVID-19 outbreak. In July, China Development sample. These two dimensions in aggregate give a
collaboration with London will be mutually beneficial.
Bank (CDB) issued the first globally certified green comprehensive perspective on the future demand
In late September 2020, during the UN assembly, bonds and made them available for interbank on the environment and resources. See Figure 1 for
Closely correlated to China‘s macro fundamentals,
China announced aims to have CO2 emissions and exchange markets investors. Being the first a summary of the overall Index structure.
the offshore RMB market is likely to mirror the
peak before 2030 and to achieve carbon neutrality of its kind, the CNY 10 billion CDB green bond
structural shift towards sustainable growth. London
before 2060. This endeavour to bring forward a was simultaneously displayed on CIBM (through Emerging Markets are increasingly issuers of Green
– as a leading financial innovation centre and home
strengthened national plan is a major boost to the Shanghai Clearing House) and the Shanghai Bonds. According to data compiled by Climate Bonds
to some of the largest asset managers – will play an
China’s ESG efforts, bringing a significant contribution Stock Exchange for investors with direct accessing Initiative (CBI) and Moody’s, in 2018, there were
important role in directing offshore RMB liquidity
towards the transition towards a low-carbon channels, and on Luxembourg Green Exchange (LGX) USD167.6 billion green bonds in the world (Figure
towards sustainable financing and investments.
global economy. for overseas investors. 2), a continuous increase compared with those in
2017. In 2019, green bonds issuance hit a new global
record of USD 250 billion. While China and the US
remained the most active issuers, the issuance of
green bonds by countries along the Belt and Road
has grown rapidly in recent years. For example,
Indonesia, Thailand, Seychelles and Lebanon, issued
green bonds for the first time in 2018.
Recognising the green financing and investment
opportunity and capacity in EMs is important for
both policymakers looking to build domestic financial
depth and investors seeking yield.
2
The Task Force on Climate-related Financial Disclosures (TCFD) was established the Financial Stability Board (FSB) supported by G20
Finance Ministers and Central Bank Governors. The TCFD programme develops recommendations for more effective climate-related
disclosures that could “promote more informed investment, credit, and insurance underwriting decisions”, and in turn, “would enable
stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system’s
exposures to climate-related risks.”
1
An Evolving Process: Analysis of China a-share ESG Ratings 2020, SynTao Green Finance, 2020 3
https://v.icbc.com.cn/userfiles/Resources/ICBC/haiwai/StandardBank/Download/2020/2020AugustICBCBRI.pdf22 London RMB Business Quarterly Issue 8: October 2020 23 London RMB Business Quarterly Issue 8: October 2020
London has an important role to play Figure 1: Overall framework of the Belt and Road Green Finance (BRGF) Index
Recognised as one of the most international, open With a preferential time-zone and hosting the
and innovative financial centres with an established headquarters of many top global asset managers,
and transparent institutional framework valued EM multi-assets are both domiciled and transacted BELT AND ROAD GREEN
across the world, London will witness growth in in London. It would only be natural that the same FINANCE (INVESTMENT) INDEX
both demand and supply of green or ESG-based applies for green and ESG-compliant EM assets.
financial capacity.
As a centre of excellence for setting and monitoring
In the recent 2020 RMB Internationalisation Report global standards, it seems appropriate that the seven
published by the PBoC, London is still recognised guiding principles behind greening investments along GREEN ECONOMY PERFORMANCE GREEN GROWTH CAPACITY
as the largest RMB offshore clearing centre outside the Belt and Road – Green Investment Principles
of Asia. With the increasing attractiveness of the (GIP)5 – were born in London.
Environmental efficiency Financial depth
RMB for financing4 it would be a fair assumption
that RMB would also play an important role in ESG Integrating sustainability and ESG-standards will – Emissions – Sovereign rating
based financing. become the new normal for monetary and fiscal – Air pollution – Credit supply
policy making. In turn, ESG-themed financing or – Deforestation – Green credit and bond issue
The London Stock Exchange (LSE) was the first investments will ultimately cease to be alternative
– Air and water quality
major global exchange to launch a Green Bond solutions. Conversely, mainstream asset allocation
segment in 2015 and further extended the platform will conform towards globally recognised
as the dedicated Sustainable Bond Market (SBM) ESG standards. Environmental governance Policy and technology landscape
in late 2019. Since then, London has hosted many – Recycling rate – Fossil fuel subsidies
landmark green issuances from China, including the Looking ahead to a post-pandemic world, while – Consumption of meat – Emission reduction target
largest ever green bond listing on the LSE, the first emerging economies have an opportunity to lead
– Municipal waste – Environmental protection expenditure
sustainability bond, the first international green bond the world towards an economic recovery, mature
and the first green covered bond. Over the past five international financial centres will need to prove – Green building – Afforestation
years, seven different Chinese issuers have already themselves worthy of their leading positions. Thus,
chosen the LSE as their global partner to maximise collaboration and engagement between emerging
the profile and extend the global reach of their green and mature financial centres will be key to a green
and sustainable bonds. and sustainable global recovery.
FUTURE DEMAND OF ENVIRONMENT AND RESOURCE
Urbanisation Industrialisation
Source: ICBC
Figure 2: Issuance of green bonds by country in 2019 (USD bn)
United States China France
Germany Netherlands Rest of the world
51.3 USD bn (19.8%)
112.4 USD bn (43.4%) 31.3 USD bn (12.1%)
30.1 USD bn (11.6%)
4
PBoC report cited a survey showing that 82% of foreign industrial and commercial enterprise respondents said that they would consider 15.1 USD bn (5.8%) 18.7 USD bn (7.2%)
using the RMB for financing while encountering tight liquidity of international currencies such as the USD and the EUR. This ratio has
come to a new high since 2016, indicating that the attractiveness of the RMB for international financing has gradually emerged.
5
https://www.ukchinagreen.org/green-finance/green-belt-and-road/text-of-the-gip/ Source: Climate Bonds Initiative24 London RMB Business Quarterly Issue 8: October 2020 25 London RMB Business Quarterly Issue 8: October 2020
Latest Policies and
Major Events
Shanghai Tower, Shanghai
On 13th June, the People’s Bank of China (PBoC) and expand opening, accelerate the unveiling and financial opening-up.” He suggested continued On 18th June, CSRC announced the approval of
announced the approval of the Express (Hangzhou) implementation of financial reform and opening-up efforts should be made to promote opening-up JPMorgan’s application to operate the first fully
Technology Services Company application to set up a measures, and protect the lawful rights and interests through multiple channels while work should be foreign-owned futures business in China.
bank card clearing business and granted a bank card of foreign invested enterprises. China will create sped up to advance higher-level opening-up of
clearing license to the company. Express Hangzhou conditions and environments, expunge interference, onshore markets. On 23rd June, the PBoC issued RMB10 billion
is a joint venture established in China by American jointly implement the Sino-US Phase-1 Trade Deal. RMB-denominated central bank bills in Hong Kong,
Express. American Express could increase its In June, Yi Huiman, chairman of the China Securities with a term of six months and a rate of 2.21%. The
membership, authorize the issuance and processing On 18th June, Yigang, PBoC governor; Pan Gongsheng, Regulatory Commission (CSRC) said, “CSRC would issuance was well received by overseas investors,
of its branded bank cards in China after obtaining the PBoC Deputy Governor and State Administration continue to improve the basic system of China’s with the total bid amount exceeding RMB34 billion,
license. They are expected to start their bank card of Foreign Exchange (SAFE) Administrator also capital markets, including the reform of the capital or 3.4 times the issued amount. Subscribers included
clearing business within six months after obtaining addressed at the 12th Lujiazui Forum. Yi elaborated markets, the cross-border investment and financing, commercial banks, central banks, funds and other
the license. on the “Five Centres” to focus on building Shanghai transaction settlement and other systems.” CSRC institutions from America, Europe and Asia as well as
as an international financial centre, this included would also continue to deepen all-level international international financial organisations.
On 18th June, Liu He, China’s Vice Premier addressed RMB-denominated asset allocation centre, risk cooperation, including improving the Shanghai and
a written speech to the 12th Lujiazui Forum in management of RMB-denominated financial assets Shenzhen-Hong Kong Stock Connect mechanism, On 29th June, the PBoC, the Hong Kong Monetary
Shanghai. In the speech, he highlighted Five Key centre, financial opening-up, high-quality business the Shanghai-London Stock Connect mechanism, the Authority and the Monetary Authority of Macao
Work Points for the Financial System which included environment centre and Fintech centre. Pan said cross-border Exchange-Traded Fund (ETF) exchange implemented the cross-border wealth management
deepening reform and opening-up. He stressed that “Shanghai has become an important hub of RMB mechanism, and China-Europe financial cooperation. connect pilot scheme in the Greater Bay Area (GBA).
China would firmly and unswervingly deepen reform internationalisation, always at the forefront of26 London RMB Business Quarterly Issue 8: October 2020 27 London RMB Business Quarterly Issue 8: October 2020
On 16th July, the PBoC governor Yi Gang wrote an On 13th August, the PBoC released 2020 RMB On 6th September, President Xi Jinping said “China On 25th September, CSRC, PBoC and SAFE release
opinion piece in the Financial Times stating that an Internationalisation Report. The report covers a wide would remain steadfast in opening its door wider the Measures for the Administration of Domestic
issuance of SDRs – the IMF’s internal monetary unit range involved in the performance of international to the world” at China International Finance Annual Securities and Futures Investment by Qualified
– is needed to help countries to contend with the use of the RMB from all aspects, relevant policies Forum 2020. China’s financial authorities also sent Foreign Institutional Investors and RMB Qualified
COVID-19 pandemic. and reform progress, the status of global major further opening-up signal, and measures like revised Foreign Institutional Investors. The policy, which will
economies, trend outlook and some other main rules on qualified foreign institutional investors, take effect on 1st November, 2020, combines the
On 19th July, the PBoC and CSRC approved ideas, which contains detailed data and elaborated expanding the scope of investments allowed in the QFII and RQFII into a single ‘qualified foreign investor’
interconnectivity cooperation between relevant columns on key issues. Stock Connect program link with Hong Kong. regime, aiming to further ease foreign access to
infrastructure institutions in the interbank bond China’s capital markets.
market and the exchange-traded bond market. On 26th August , the PBoC held a symposium on On 14th September, the National Interbank Funding
Infrastructure institutions, such as bond registration, facilitating corporate trade and investment with Centre, China Central Depository & Clearing Co and
custody and settlement institutions in the interbank cross-border use of the RMB. Participants of the Shanghai Clearing House announced the extension
bond market and the exchange-traded bond market, symposium gave credit to PBoC’s cross-border of bond trading until 8:00 p.m. (1200 GMT) by
may jointly provide issuers and investors with bond RMB policies and pandemic containment and three hours from 21st September , helping foreign
issuance, registration, custody, clearing, settlement, work resumption measures implemented. The investors and boosting further opening China’s
interest payment and redemption services. participants including enterprises and banks also capital markets.
shared feedback and suggestions concerning how
Up to July 2020, 4,325 companies have benefited to improve the use of cross-border RMB; such as, On 21st September, the PBoC and SAFE sought
from a cross-border financial blockchain platform further optimising of cross-border RMB business the public’s opinion on the Fund Management
launched by SAFE, among them 75% were SMEs. policies, strengthening the infrastructure for cross- Regulations of investment of Overseas Institutional
Specialising in blockchain technology to deal with border RMB use, and supporting the growth of Investors in China’s Bond Market (Draft). It will
cross-border financing issues, mainly for banks and offshore RMB markets. relax the limits on cross-border capital flows and
SMEs, the platform can reduce heavy work of printing further open up the onshore bond market to
documents and manual submissions for enterprises On 28th August, CSRC and the Hong Kong Monetary foreign institutions.
and the risk of financing for banks. It was launched in Authority approved four Exchange-Traded Funds
2019 as pilot and then was expanded nationwide. By (ETFs) to be listed in Shenzhen and Hong Kong under On 21st September, Hong Kong’s CSOP Asset
the end of July 2020, more than 250 banks had joined a new ETF connectivity scheme, which provides Hong Management and ICBC Wealth Management listed
the platform. They handled 41,679 loans totalling to Kong and mainland investors with more investment the ICBC CSOP FTSE Chinese Government Bond
USD38.78 billion. opportunities and product choices through access to Index ETF on the Singapore Exchange. The ETF has
each other’s market. gathered subscribers’ interest with nearly USD700
On 3rd August, the PBoC held the video conference million in assets under management (AUM) drawn
on work in H2 2020. It was stressed during the On 31st August, the PBoC published the White Paper from both institutional and retail investors.
conference that the financial opening-up will be Participating in International Benchmark Interest
advanced in a prudent and orderly manner in H2 Rate Reform and Improving China’s Benchmark On 23rd September, SAFE released the latest data
2020. The PBoC would continue to implement Interest Rate System. The White Paper gives a showed that it had granted USD3.36 billion quotas
existing financial opening-up policies and fully comprehensive introduction to China’s progress to 18 institutions under its outbound Qualified
implement the pre-establishment national treatment and plan to participate in international benchmark Domestic Institutional Investor (QDII) scheme since
and negative list management systems. They would interest rate reform, to summarise the current April 2019.
promote RMB internationalisation and capital development of China’s benchmark interest rate
account convertibility in an active and prudent way system, and to study and further promote the On 24th September, global index provider FTSE
and unify foreign exchange administration policies soundness of the benchmark interest rate system. Russell announced to add Chinese government
for the opening-up of the bond market. bonds (CGBs) to its flagship World Government Bond
On 2nd September, the PBoC, CSRC, SAFE sought Index (WGBI) next year. The inclusion is scheduled
On 13th August, the PBoC issued two sets of public opinion on the Investment of Overseas for October 2021.
RMB-denominated central bank bills in Hong Kong, Institutional Investors in China’s Bond Market.
including RMB20 billion three-month bills and RMB10 On 24th September, the PBoC issued RMB10 billion
billion one-year bills, both with a rate of 2.70%. The On 2nd September, Citigroup Inc., announced it RMB-denominated central bank bills in Hong Kong,
issuance was well received by overseas investors, received a domestic fund custody license from the with a term of six months and a rate of 2.68%. The
with a total bid amount around RMB62.4 billion, CSRC — becoming the first U.S. bank and the first of issuance was well received by overseas investors,
nearly 2.1 times the issued amount. Subscribers the top five global custodians to do so. This license with a total bid amount exceeding RMB35 billion,
included commercial banks, central banks, funds allows Citibank (China) to provide custody-related about 3.6 times the issued amount. Subscribers
and other institutions from America, Europe and services to both mutual funds and private funds included commercial banks, central banks, funds and
Asia as well as international financial organisations, domiciled in China. other institutions from America, Europe and Asia as
demonstrating the strong attraction of RMB assets to well as international financial organisations.
overseas investors and reflecting the confidence of
global investors in China’s economy.You can also read
