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RMB Tracker
SIBOS special edition
Sydney shines the spotlight on
innovation, payments and RMB
Contents
Foreword 3
1. Executive summary & key insights 4
2. Australia deepens financial integration with China 5
2.1 China & Australia grow economic partnership through trade relations 5
2.2 Sydney’s RMB offshore centre delivers RMB capabilities for Australian corporates 8
2.3 ASX’s RMB Settlement service powers Australian RMB offshore settlement capabilities 9
3. Australia – A dynamic and innovative payment landscape 10
3.1 Australia’s New Payments Platform (NPP) – the new normal for domestic real-time payments 10
3.2 Real-time & gpi delivers payments in seconds 11
3.3 Sydney’s fintech capability – A vibrant and robust ecosystem 12
4. Payments made in RMB offers numerous opportunities for corporates 13
5. Australia’s economic linkages with China and the Asia Pacific 17
6. Appendix: RMB payments guide for corporates 19
SWIFT Note to the reader
Leah Capili Please note that RMB and CNY
Sarah L’Ortye are mentioned in this analysis. The
Laetitia Moncarz Renminbi, RMB in the short form, is
Michael Moon the official currency of the People’s
Astrid Thorsen Republic of China.
Eric Yang
The yuan is the basic unit of the
renminbi, but is also used to refer to the
Chinese currency generally.
CNY is the ISO code for Renminbi.
2Foreword RMB Tracker
SIBOS special edition
I am delighted to present a special edition Globally, China continues to grow its influence,
of the SWIFT RMB Tracker for Sibos 2018, mainly through infrastructure development,
which takes place in Sydney from 22-25 a key component of the massive Belt &
October. The tracker offers a monthly ranking Road Initiative (BRI) that was launched in
of the Renminbi (RMB) in relation to other 2013. Through the financing of projects and
currencies worldwide. Special editions, such companies involved in the BRI, the initiative
as this report, provide in-depth insights is set to increase financial and payment
into how currencies are used for payments flows along the maritime and Silk roads, and
in a particular segment of the market or eventually lead to an acceleration in RMB
geographical area. This SIBOS special edition internationalisation. SWIFT has an important
focuses on the RMB and its adoption for hand to play in this and provides the financial
global trade. and digital infrastructure necessary for the
development of businesses and trade growth
Alain Raes This report delivers an overview of the across BRI markets, in the following areas:
Chief Executive, APAC & EMEA, SWIFT Australian payments landscape, a highly- • Reach and connectivity: Financial
innovative ecosystem that boasts an institutions across the BRI are connected
increasingly diverse and dynamic profile to SWIFT and use SWIFT gpi for efficient
of fintechs. It is an ecosystem that has and fully-traceable payments transactions.
welcomed a number of payment technologies • Optimised products and services:
in recent years, such as SWIFT’s Global SWIFT offers a suite of business
Payment Innovation (gpi), the New Payments intelligence, reference data, financial crime
Platform (NPP) and the ongoing instant cross- and compliance services. These serve
border SWIFT gpi payments pilot. This report as important tools for strategic decision-
also provides key insights into flows between making, and also allow financial institutions
China and Australia, and RMB usage between to monitor their transactions.
both countries. • Community and standards: Through
the SWIFT community, financial institutions
Australia is a strong advocate of the RMB enjoy standardised messaging and
as a payment currency, as evidenced by regulator engagement.
the dynamism of its RMB offshore centre in
Sydney and the Austraclear RMB platform This special edition includes an RMB
which is serviced by the Australian Securities Payments Guide for corporates, an initiative
Exchange (ASX). Usage of the RMB for that was jointly developed by Bank of
payments between the two countries is China (Hong Kong), BNP Paribas, Citi,
growing steadily, and now accounts for Commerzbank, Deutsche Bank, HSBC,
13.89% of all payments between Australia and Standard Chartered Bank and SWIFT, to
either China or Hong Kong. The strong trade explain the main features of the RMB as
relationship between both countries (almost a a payment currency and to address the
quarter of trade volumes in Australia) has complexities surrounding it.
led to increased RMB usage in Australia.
Another key growth driver of RMB usage is I hope you find this special edition of the
the China-Australia Free Trade Agreement SWIFT RMB Tracker insightful.
(ChAFTA), which came into force in 2015.
31. Executive summary & key insights
From a payment perspective, Australia The initial trial focuses on cross-border The RMB offshore centre in Sydney was
is a highly-innovative ecosystem. Recent payments going into Australia’s NPP, and launched in 2015, following the appointment
developments include the launch of the the service has been designed to scale of the Bank of China in Sydney as the RMB
New Payments Platform (NPP) and the and integrate with other real-time payment clearing bank for the local RMB market in
implementation of SWIFT gpi by four of the systems globally. Initial test results will be Australia. The offshore centre is the eighth
country’s largest banks1, and many branches shared at Sibos 2018, in Sydney. largest globally, and accounts for 1.08% of all
or subsidiaries of foreign banks2. global RMB offshore flows.
The two-ways trade relationship between
As an extension of SWIFT gpi, SWIFT is now Australia and China reached A$174 billion ASX RMB Settlement Service, on the other
working with these Australian banks and a (US$125 billion) in FY2016/174. This accounts hand, allows payments that are initiated
group of banks from China, Singapore and for almost a quarter of total trade volumes within the country to be settled domestically
Thailand to test a new cross-border real-time in Australia. The trade relationship between through ASX’s Austraclear settlement platform
payments service over gpi. The test sees both countries is also reflected in the keen in just seconds, and to and from Hong Kong
the introduction of a set of incremental rules RMB internationalisation efforts in Australia, and China within minutes. The ASX RMB
that has been defined on top of SWIFT gpi. comprising mainly of two models that facilitate Settlement Service plays an important role as
The rules remove residual friction normally RMB payments with Australian counterparties. a platform to connect the banks and offset
encountered in cross-border payments, They are Sydney’s RMB offshore centre and different transactions processed during the
and allows these payments to extend into the Austraclear RMB platform serviced by day.
domestic real-time payment systems. ASX.
23% Trade3 between Australia and China reached A$174 billion in 2016/17, accounting
for 23% of total volume in Australia4.
98% China Briefing reported that more than 98% of Australian goods exported to
China are duty-free or enter a preferential rate because of the ChAFTA.
31.46% The Australian dollar is the main currency used for payments between Australia
and either China or Hong Kong. The RMB is now used for 13.89% of total
payments.
5th The RMB is ranked fifth as an international payment currency, accounting for
1.89% of the value of institutional and commercial payments.
RMB 6 billion4 Over RMB 6 billion has been settled through the ASX RMB Settlement Service
in FY2017/18. The number of transactions settled is four times what was settled
in the year before.
1
The Australia and New Zealand Banking Group (ANZ), Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Westpac Banking Corporation (WBC)
2
Such as Bank of China or HSBC
3
Two-way trade between Australia and China
4
https://www.austrade.gov.au/News http://www.china-briefing.com/news/2018/05/28/china-australia-opportunities-for-trade-and-investment.html/Economic-analysis/
australias-export-performance-in-2016
42. Australia deepens financial integration with China RMB Tracker
SIBOS special edition
2.1 China & Australia grow economic Austrade observed that the composition of
partnership through trade relations Australian exports is dominated by resources
and fuels, and in the case of China, this is
a. Trade made up largely by iron ore, coal and natural
Despite the recent strain in relations between gas exports.
Australia and China, trade between both
countries continue to thrive. According to the Reserve Bank of Australia
(RBA) and the Australia Bureau of Statistics,
Two-way trade between Australia and China services-related exports between Australia
reached A$174 billion (US$125 billion) in and China are on an upwards trend, reaching
FY2016/17, accounting for 23% of the total US$11 billion in FY2016/17. This makes
trade volumes in Australia5. This figure is more China the largest services export market for
than double the two-way trade figures for the Australia.
country’s next-largest trade partners, Japan
and the United States, which registered A$68 The Reserve Bank of Australia governor,
billion and A$66 billion, respectively. Philip Lowe said in May 2018 that China is
likely to remain as Australia’s largest export
Australia’s exports to China totalled A$110 destination. Lowe also shared optimism
billion in FY2016/17, or about 30% of around the broadening and deepening of
the country’s entire exports, according to Australia’s economic relationship with China.
Austrade6. The value of these exports has
grown significantly, rising by 37% from last
year. China is also Australia’s largest source of
imports, with volumes totalling A$64 billion.
Australia: Direction of exports, 2016 - 2017
One of the key drivers of growth is the China-
Australia Free Trade Agreement (ChAFTA),
which came into force in December 2015, and NZ 3.8% RoW
which has dramatically expanded trade and 9.9%
India 5.1% ASEAN 11.3%
investment levels between the two countries.
China Briefing7 reported that more than 98%
US 5.6% Japan 12.0%
of Australian goods exported to China either
enter country duty-free or at a preferential rate Other NE Asia
because of the ChAFTA. EU 9.8% 13.0%
NE Asia*
Australian exports such as coking coal, 65.9%
China
wine, beef, and dairy are expected to grow 29.6%
substantially as tariffs are gradually eased.
New opportunities are likely to open up for
exports such as pharmaceuticals, vitamins,
and health products once tariffs are fully
eliminated in January 2019. Australian Trade Source: ABS and Austrade. Other NE Asia comprises
Minister Steve Ciobo reaffirmed Australia’s South Korea, Hong Kong and Taiwan.
commitment to strengthen the trade
*NE stands for North East
partnership between the two countries during #
RoW stands for Rest of the world
a recent visit, reported China Briefing7.
5
Two-way trade between Australia and China
6
https://www.austrade.gov.au/News/Economic-analysis/australias-export-performance-in-2016
7
http://www.china-briefing.com/news/2018/05/28/china-australia-opportunities-for-trade-and-investment.html
52. Australia deepens financial integration with China
(continued)
Lowe explained that there are many
misconceptions around the Australian-China
trade relationship, such as the common adage
that Australia exports resources to China and
in return, import manufactured goods. But this
is a misconception. Even though resources
account for about two-thirds of Australia’s
exports to China, trade remains diverse across
many individual categories.
Major corridors with Australia for Traditional Trade Finance
Live and delivered, MT 700 and 760 sent or received, excluding central banks, by volume
Australia now exports more to China than to
any other single destination. In tourism, for YTD Aug 2018
instance, Chinese visitors tend to stay longer Top countries where Australia is importing from
in Australia and spend more money than other (Message sent)
visitors. Tourism Research Australia statistics
In Thousands
2
indicate that Chinese spending now accounts 1.8
for around 25% of total visitor expenditure in
Australia. Meanwhile, education exports to 1.6
China make up around one-third of Australia’s 1.4
total education exports. China has also
1.2
become the largest single export market for a
range of Australia’s manufactured food items. 1
0.8
Australia consistently ranks as the second-
0.6
largest recipient of global Chinese direct
investment8. Aside from commercial real 0.4
estate and infrastructure, Chinese investors 0.2
are increasingly focusing on consumption-
related sectors such as healthcare and 0
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From a global trade perspective, China may
be Australia’s most important partner by far. Top countries where Australia is exporting from
(Message received)
Despite being in decline, traditional
6
documentary trade finance remains core part In Thousands
of the underpinning trade flows. When we take
a closer look at Australian flows for traditional 5
documentary trade instruments such as letters
of credit, we are seeing a different picture. 4
SWIFT data shows that Australia is mainly
importing goods and services from China,
3
South Korea and Taiwan.
According to World Top Exports9, the most 2
important goods imported are: vehicles,
machinery (including computers) and mineral 1
fuels (including oil).
0
From an export perspective however, South
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important partners of Australia for traditional
So
trade. Source: SWIFT BI Watch
According to Austrade reports, Chinese investment into Australia reaching approximately US$65 billion in 2016
8
http://www.worldstopexports.com/australias-top-10-imports/
9
6RMB Tracker
SIBOS special edition
b. Payments Top corridors of Australia for commercial payments
Live and delivered, MT 103 sent and received, excluding central banks, by volume
i. Payment trends by currency and payments YTD Aug 2018
in and out of Australia
The United States is Australia’s most Top countries where Australia is receiving
payments from
important partner when it comes to payments United
and accounts for 22.35% of its total payments States
22.35%
volume, according to SWIFT data. In second
place is the United Kingdom at 17.87%. China Others
39.20%
ranks third at 10.38%.
United
Kingdom
However, there is a disparity between 17.87%
payment and trade numbers. This could
be due to the need for documentary trade China
10.38%
products when it comes to managing
Singapore
commercial relationships in some countries. 4.63%
New Zealand
5.58%
SWIFT gpi, launched in 2017, has seen
strong adoption in both Australia and China
and has allowed for cross-border payments Top countries where Australia is sending
payments to
between both countries to become more
efficient, transparent and traceable. The four
United
major banks in Australia are now operating on States
Others
SWIFT gpi, and in China more than 70 banks 34.87%
36.60%
have joined SWIFT gpi.
ii. A closer look at the RMB as a payments
currency United
Germany Kingdom
3.94% 12.42%
SWIFT YTD August data shows that 13.89%
Hong Kong
of payments between Australia and China & 4.35%
New Zealand
Hong Kong are now settled in RMB. This is 7.81%
higher than expected, given that global RMB
usage makes up just 1.89% (YTD September Top currencies used for commercial
2018). As mentioned earlier in the text, the payments between Australia and China/Hong
strong trade relationship between both Kong
countries (almost a quarter of trade volumes Live and delivered, MT 103 sent and received,
in Australia) has led to increased RMB usage excluding central banks, by value
in Australia. YTD Aug 2018
For comparison, the US dollar which registers
a 38.66% share of global payment flow, sits at Others
just 23.87% on the same corridor. 11.25%
JPY
AUD 31.46%
The Australian dollar is the most widely- 7.55%
used currency along the Australia-China and
Australia-Hong Kong corridors at 31.46%. HKD 11.97%
CNY 13.89%
USD 23.87%
Source: SWIFT BI Watch
72. Australia deepens financial integration with China
(continued)
2.2 Sydney’s RMB offshore centre Top 15 offshore RMB economies by weight - YTD Aug 2018 vs YTD Aug 2017
delivers RMB capabilities for Australian MT 103 and MT 202 sent and received. Based on value. Excluding China.
corporates
In 2015, the Bank of China in Sydney was Hong Kong 75.33%
designated as an RMB clearing settlement 76.22%
bank. The market has since grown
significantly, and in 2015, the government
United 5.79%
of New South Wales announced a target to Kingdom 5.42%
settle 20% of Australian business transactions
with China through the RMB by 202010.
Singapore 4.59%
According to SWIFT data, the Sydney offshore 4.37%
centre is the eighth RMB offshore centre
globally by volume, and manages 1.08% of United States 2.49%
global RMB offshore flows. 2.54%
Australian corporate treasuries have South Korea 2.44%
incorporated the RMB into their existing suite 2.9%
of global currencies, for trading, investing and
financing, servicing both direct and indirect
Taiwan 2.34%
flows with China, in the same way other global
2.29%
treasuries have done.
In addition, Australian banks play a key role France 1.43%
in bridging the knowledge gap and acting as 1.54%
an intermediary, to bring together an essential
cohort of expertise necessary to support the Australia 1.12%
expansion of Australian corporates into China. 0.93%
The fast expansion of Australian companies Japan* 0.79%
into Asia has led to the establishment of 0.77%
regional offices in markets like Hong Kong,
Singapore and China by major Australian
banks in order to better support their Germany 0.76%
customers. 0.65%
Initially, the usage of RMB was driven by Luxembourg 0.48%
one-way settlement of imported goods from 0.33%
Chinese suppliers. Over time, the changes
made to China’s regulatory policy on trade and Belgium* 0.30%
the increased number of Australian companies 0.29%
operating within China, have led to an larger
demand for structure trade finance, discounting Netherlands* 0.28%
documentary letters of credits and trade 0.29%
advances denominated in RMB.
Macau 0.26%
Australian banks have limited access to liquidity 0.24%
instruments denominated in RMB intraday
within the Sydney Financial Centre, and as a YTD Aug 2018
Canada 0.26%
result there is a high dependency and in some YTD Aug 2017
0.24%
cases, an increased need for Australian banks
to work with more liquid offshore hubs such as
*Non Clearing centres
Hong Kong and Singapore. Source: SWIFT BI Watch
According to the New South Wales Premier Gladys
10
Berejiklian at the first RMB Global Cities Dialogue in
Sydney in 2017
8RMB Tracker
SIBOS special edition
2.3 ASX powers Australian RMB offshore
settlement capabilities
Launched in 2014 with Bank of China
(Sydney), the official RMB clearing bank, the
Australian Securities Exchange (ASX)’s RMB
Settlement service is well positioned to help
facilitate the burgeoning levels of Australia-
China trade and investments. Over RMB 6
billion has been settled through ASX RMB
Settlement Service in FY2017/18 and the
number of transactions settled is four times ASX RMB Settlement Service flows
what was settled the year before11.
Customer Customer
The ASX RMB Settlement service differentiates (In Australia or China) (In Australia or China)
itself with its multi-currency capabilities,
forthcoming SWIFT gpi functionality and
near real-time payments settlement finality.
Payments in RMB are settled domestically
Austraclear Participant Austraclear Participant
in Australia over the ASX RMB Settlement with RMB account at Bank of China with RMB account at Bank of China
Service within seconds, and to and from Hong (bank or customer) (bank or customer)
Kong and China within minutes12.
ASX is also looking to further complement the
Austraclear AUD and RMB settlement platform SWIFT
with the US dollar. (transfer and confirmation)
Users of the service will be able to link up
Austraclear
to SWIFT’s gpi and SWIFT messaging is Credit Debit
Participant cash record Participant cash record
used for the transactional link between ASX
Real-time settlement
and the Bank of China (Sydney) as well as
for the messaging interface for Austraclear
participants. The Austraclear platform will be
able to pass on the gpi Unique End to end
Transaction Reference (UETR) information Participant account Bank of China Participant account
from November 2018. This will add to the
cross-border settlement efficiency that the
platform already brings to its users.
Source: ASX
In addition, ASX will also enhance the
Austraclear platform by adding a new RMB
depository capability, enabling Austraclear
participants to issue, hold and transact in
RMB-denominated securities directly over
Austraclear. As further currencies are added
to the payments platform, Austraclear will also
support issuing, holding and transacting in
that currency.
11
Austraclear statistics provided by ASX
12
From actual observed client usage
93. Australia – A dynamic and innovative payment landscape
3.1 Australia’s New Payments Platform The NPP is a major industry initiative
(NPP) – the new normal for domestic real- collaboratively developed by 12 financial
time payments institutions14 and the Reserve Bank of Australia
(RBA). SWIFT helped to design and build
The payments landscape in Australia is the NPP, and continues to play a key role in
evolving rapidly, and 2018 has seen a operating the infrastructure.
multitude of developments in the payments
industry. According to consulting firm PWC, the NPP
could become an alternative to credit card
One of its largest initiatives was the public scheme transactions in the long run, due to its
launch of Australia’s New Payments Platform open and flexible design.
(NPP) in February 2018, which vaulted
Australia into a leading position globally for An equally or perhaps more important
real-time consumer, business and government feature of the NPP is its enablement of
payments. The NPP enables the near real-time data-rich payments, allowing senders to
transfers of money at any time of the day provide up to 280 characters of remittance
using simple addressing known as PayID, information, compared to the original 18
which is a proxy for a BSB13/Account number characters. This allows processes such
using an email address, phone number, as payment reconciliation to be simplified,
Australian Business Number or Business and insights could be used to provide more
Identifier. The NPP also takes advantage of targeted or customised offerings in sectors
the ISO 20022 standard to offer enriched data such as healthcare or superannuation, for
throughout the entire payment journey, from example. The RBA also noted that the NPP
payer to payee. infrastructure supports the development of
Overlay Services to offer innovative payment
options to end-users.
Overview of NPP infrastructure
Ordering Beneficiary
Customer Customer
Orderer’s Participant Bank Beneficiary’s Participant Bank
Branch Addressing Database Branch
Mobile Clearing Request & Notification Mobile
Payment Payment
Phone Gateway 1 Gateway Phone
Internet Internet
2
Services Services
Applications Applications
Settlement Request & Notifications
Payer bank Payee bank
Payment Gateway
Basic
Infrastructure
Reserve B
Bank
k off A
Australia
13
BSB stands for Bank state branch
Australia and New Zealand Banking Group, the Commonwealth Bank of Australia, the National Australia Bank,
14
Westpac Banking Corporation, Australian Settlements Limited, Cuscal, Indue, Bendigo and Adelaide Bank,
Citigroup, HSBC Bank Australia, ING Australia, Macquarie Bank and the Banking department of the Reserve Bank.
10RMB Tracker
SIBOS special edition
3.2 Real-time & gpi delivers payments in While other real-time systems will be added
seconds in due course, this initial trial is focussed on
cross-border payments going into Australia.
Australia and China enjoy a strong economic Domestic payment processing will be
relationship, in part due to the sizeable enabled through the NPP, Australia’s new
Chinese community living in Australia. real-time payments system. Cross-border
Excluding the British, the Chinese are the payments from China to Australia and also the
oldest continuous immigrants to Australia, with Singapore-Australia and Thailand-Australia
the arrival of the first migrations dating back to corridors will be tested, and initial trial results
the early 1800’s. will be announced at Sibos 2018.
The Chinese community in Australia is also The service leverages existing investments,
growing as a result of the healthy numbers standardises connectivity across multiple
of mainland Chinese students entering the markets and drives efficiencies in support
country on a short term basis to study in of cross-border trade. Once live, the service
educational institutions around Australia. will introduce significant benefits that extend
Chinese tourists are also contributing beyond gpi banks and their customers – in
significantly to cross-border flows. In 2017, time resulting in a complete real-time cross-
Australia welcomed over 1.3 million Chinese border payments experience for all bank
visitors. customers in the region, improving customer
experience and allowing for faster peer-to-
Aside from corporates-related commercial peer remittances and SME trade settlement.
flows, there is a pressing need for an efficient
network to support retail payments flows
such as the remittance of university fees and
expenses incurred by Chinese tourists. SWIFT “We are continually looking for
gpi real-time offers a fast and transparent
means to do so. opportunities to deliver better customer
SWIFT gpi is already fast, with payments
experiences, and are pleased to be
being credited to end beneficiaries in minutes, taking a lead role in developing real-
even seconds. SWIFT is now starting to
test its new instant cross-border SWIFT gpi time cross border payments. NAB’s
payments service in the Asia Pacific region15.
The trial follows workshops held earlier this
24/7 real time clearing capability
year with leading banks from China, Australia, through NPP will allow international
Singapore and Thailand, which will use a
set of rules defined in consultation with the payments to be processed outside
banks. These rules are incremental to the
gpi rulebook and removes residual friction usual business hours, and crucially will
in cross-border payments to enable faster allow us to support later cut-off times
straight-through processing.
for same day payments from many
Today a payment from China into Australia
sent at the end of the day is typically settled time-zones.”
the next day, however this new service will
provide near-instant availability of funds – even Paul Franklin, General Manager Payments, NAB
with transactions made after usual business
hours.
Press release - SWIFT tests instant cross-border gpi
15
payments in Asia Pacific - 23 August 2018
113. Australia – A dynamic and innovative payment landscape
(continued)
3.3 Sydney’s fintech capability – A vibrant four banks pass on their transaction, deposit,
and robust ecosystem and debit and credit card data to other
accredited financial services providers by July
Alongside Singapore and Hong Kong, Sydney 2019.
is recognised as an important fintech hub in
the Asia Pacific. A global industry challenge was organised in
Singapore last year which saw five fintechs
Nearly two-thirds of Australian fintechs are spending two days in a problem-solving
based in Sydney, according to KPMG’s report workshop with 40 senior payments executives
‘Scaling the Fintech Opportunity’ published in from SWIFT gpi banks globally. Two winners
2017, and the number of Australian fintechs were selected out of the five and are now
increased from 100 companies in 2014 to working on a Proof of Values for two gpi
579 by mid-2017. This growth was largely overlay use cases. One of them is Assembly
driven by local companies, with Australian Payments, a fintech based in Australia that
firms representing nearly 90% of fintechs in specialises in payments solutions via APIs.
Australia. Regtech, payments, and blockchain SWIFT, Assembly Payments and a group of
are key fintech areas where Australia has the gpi banks are currently developing a Proof
potential to become an industry leader in. of Value for a Cross-border Request for
Payments overlay service.
KPMG said that investment in Australia’s
fintech sector saw an upwards tick of global
growth patterns in the first half of 2018, with
US$63 million invested, up from US$56 million
in the second half of 201716.
The advent of the Open Banking framework
released by RBA was a key development
in 2018 that could drive even faster growth
in the fintech industry. Open banking will
be a “game-changer for consumers and
businesses”, Fintech Australia chair Stuart
Stoyan told Banking Tech, and it will “drive a
new wave of fintech innovation and growth”.
The government has urged banks to introduce
the first phase of open banking reform within
12 months. This will let customers of the big
16
https://home.kpmg.com/au/en/home/media/press-
releases/2018/08/investment-continues-to-grow-in-
australias-fintech-sector-1-august-2018.html
124. Payments made in RMB offers numerous opportunities for RMB Tracker
SIBOS special edition
corporates
The RMB might appear more complex than More convenience: Chinese buyers who
other currencies. However, it has matured opt to use the RMB, their home currency,
significantly, providing interesting opportunities to transact with offshore companies will find
for corporates such as FX17 optimisation and that this simplifies the process to provide
the facilitation of commercial discussions. supporting documents to their banks for the
payment.
With the growing importance of China in the
global economic landscape and particularly Better customer relationships: With the
in the context of the Belt and Road Initiative, wider choice of invoicing currencies, Chinese
more opportunities will emerge and the buyers enjoy greater flexibility and also higher
RMB and reinforced its role as the preferred satisfaction from them.
currency for Chinese companies.
Increased customer base: This will broaden
customer base and business opportunities
Advantages of paying in RMB as the overseas company can now access a
larger pool of buyers onshore.
The advantages of paying in RMB are manifold
when it comes to trade with China: Faster payment collection cycles: The
simpler trade documentation process involved
Reduce costs: As there is no currency when using the RMB allows a corporate to
translation for the Chinese counterpart, the expedite their collection cycles.
RMB is seen as a natural currency hedge to
cover import-export flows. Increased flexibility: Offshore-based
corporates (with the exception of countries
Facilitate commercial discussion: From a with local regulatory restrictions on foreign
negotiation perspective, the RMB improves currency control) will find it possible to
price transparency and facilitates commercial redeploy the RMB received with more
discussions with the Chinese counterpart, as flexibility: holding deposits and thus earning
well as offers possible supplier discounts. interest, or investing in RMB products (e.g.
onshore/offshore capital markets) for yield
Provide access to a larger supplier enhancement or for RMB payables. Hedging
base in China: Some suppliers only accept RMB exposure is also made easier by
payments in RMB. leveraging the depth and breadth of CNY and
CNH FX markets for optimal rates.
Simplify internal processes: Trading in RMB
offers a simpler trade documentation check Please refer to the Appendix “the RMB
process (versus foreign currency). payment guide for corporates” a joint initiative
by Bank of China (Hong Kong), BNP Paribas,
Citi, Commerzbank, Deutsche Bank, HSBC,
Standard Chartered Bank and SWIFT to
Advantages of being paid in RMB
explain the main features of the RMB as
a payment currency and demystify the
Optimising FX risk management: Mainland
complexities surrounding it.
China-based companies that use the RMB
to sell goods will see savings made as
no conversion costs are incurred. These
savings could be substantial when dealing
with currencies that have no direct quoted
exchange rate with the RMB. Furthermore,
there are additional savings to be made on
FX hedging fees as receivables denominated
in RMB offer a natural hedge with payables in
RMB.
17
FX stands for Foreign Exchange
134. Payments made in RMB offers numerous opportunities for
corporates (continued)
There are three ways for offshore banks to pay The most important markets outside of Hong
or be paid in RMB. Kong are London and Singapore. Commercial
• Correspondent bank model banks will use these RMB-clearing banks to
• Clearing bank model process payment transactions. Cross-border
• CIPS model transactions will be sent to the mainland office
of the RMB-clearing bank, which will then
In the correspondent bank model, route the transactions via CNAPS2 or CIPS
commercial banks willing to make a payment depending on whether the beneficiary bank is
in RMB will use an offshore18 correspondent a CIPS-direct participant.
who will then work with an onshore19
correspondent (part of the same or different For offshore-to-offshore payments, clearing
banking group). Either CIPS, the cross- can be done directly with the support of a
border payment system of RMB payment clearing bank.
or CNAPS2, the domestic RTGS of RMB
payments will be used to reach the beneficiary Most banks require a CIPS onshore
bank. This is dependent on a number of participant, such as a bank in mainland
factors such as whether the beneficiary bank China, to make a payment in RMB. In the
is a CIPS-direct participant. third model, the CIPS model leverages CIPS
capabilities which make offshore participation
The second model is known as the clearing possible.
bank model. In offshore locations, official
RMB-clearing banks appointed by the
People’s Bank of China (PBoC) offer RMB-
clearing capabilities to commercial banks.
Three different models for offshore banks to pay or be paid in RMB
1 2 3
Correspondent bank model Clearing bank model CIPS Model
Offshore banks who want to pay RMB
RMB offshore centre / RMB
clearing bank appointed by
Bank of China Offshore CIPS Offshore
Offshore Correspondent PBoC
(e.g CCB london, ICBC (Hong Kong) Bank participant
Offshore Singapore, BOC Sydney）
Onshore
Mainland branch of CIPS Onshore
Mainland Correspondent Participant
RMB clearing bank
SWIFT
Others CIPS* CIPS
Settlement in CNAPS2
(i.e. domestic RTGS)
(*) : optional
Offshore stands for outside of mainland China
18
Onshore stands for in mainland China
19
14RMB Tracker
SIBOS special edition
Global RMB usage and the United Kingdom are not far behind.
Corporate RMB usage has increased RMB cross-border transactions are largely
significantly over the past two years, made for trade settlement and trade
according to research firm East & Partners financing as well as foreign exchange and
Asia, based on an international survey of risk management, Yoong added, with the first
2,500 corporate treasurers and CFOs. usage coming in top in every country except
The top six economies using the RMB for for the United Kingdom.
cross-border trade, East & Partners analyst
Sangiita Yoong noted, are Taiwan, Hong According to SWIFT data, RMB usage
Kong, Singapore, Australia, South Korea and accounted for 1.89% of domestic and cross-
the United Kingdom. She said the proportion border payments in September 2018. When
of businesses that use the RMB is higher looking at cross-border payments only and
than those that do not in Taiwan, Hong Kong, excluding intra Eurozone payments, the share
Singapore and Australia, and South Korea, for RMB is even lower (1.13%).
RMB’s share as a domestic and international payments currency
Customer initiated and institutional payments.Messages exchanged on SWIFT. Based on value.
September 2016 September 2018
1 USD 41.08% 1 USD 38.66%
2 EUR 31.24% 2 EUR 34.65%
3 GBP 7.77% 3 GBP 7.26%
4 JPY 3.53% 4 JPY 3.53%
5 CNY 2.03% 5 CNY 1.89%
6 CAD 1.90% 6 CAD 1.80%
7 AUD 1.57% 7 AUD 1.61%
8 CHF 1.45% 8 HKD 1.51%
9 HKD 1.15% 9 CHF 1.44%
10 THB 1.05% 10 SGD 1.03%
11 SEK 1.04% 11 THB 0.97%
12 SGD 0.91% 12 SEK 0.83%
13 NOK 0.73% 13 NOK 0.77%
14 PLN 0.54% 14 PLN 0.55%
15 ZAR 0.46% 15 MYR 0.40%
16 DKK 0.43% 16 ZAR 0.39%
17 MYR 0.40% 17 NZD 0.35%
18 NZD 0.37% 18 DKK 0.32%
19 MXN 0.32% 19 MXN 0.31%
20 TRY 0.23% 20 RUB 0.19% Source: SWIFT BI Watch
RMB’s share as an international payments currency
Customer initiated and institutional payments. Excluding payments within Eurozone
Messages exchanged on SWIFT. Based on value.
September 2016 September 2018
1 USD 42.14%
1 USD 44.01%
2 EUR 36.60%
2 EUR 32.87%
3 JPY 4.23%
3 JPY 4.63%
4 GBP 4.08%
4 GBP 4.11%
5 CAD 2.61% 5 CAD 2.21%
6 CHF 2.46% 6 CHF 1.92%
7 AUD 1.55% 7 AUD 1.54%
8 CNY 1.48% 8 CNY 1.13%
9 HKD 0.90% 9 HKD 0.95%
10 SEK 0.73% 10 SEK 0.67%
11 NOK 0.57% 11 NOK 0.61%
12 DKK 0.48% 12 SGD 0.46%
13 NZD 0.46% 13 MXN 0.45%
14 MXN 0.46% 14 NZD 0.41%
15 SGD 0.41% 15 PLN 0.38%
16 TRY 0.40% 16 DKK 0.34%
17 PLN 0.39% 17 TRY 0.30%
18 ZAR 0.27% 18 RUB 0.25%
19 RUB 0.24% 19 ZAR 0.24%
20 CZK 0.20% 20 CZK 0.23% Source: SWIFT BI Watch
15SWIFT BI Watch
RMB adoption across financial institutions The wider usage of RMB for payments will
continues to grow. In terms of RMB usage benefit China, which will naturally prefer to
globally, according to SWIFT data, the number use RMB for the cross-border payments with
of financial institutions using the RMB for countries along the BRI.
payments have been increasing steadily over
the last two years.
In August 2018, SWIFT data showed that
more than 2,191 financial institutions made
worldwide payments in RMB:
• 1,429 of these institutions made RMB
international payments involving China or
Hong Kong, representing a 14% increase
compared to August 2016. These 1,429
institutions are profiled in the chart below;
• Over 765 banks use the Chinese currency
for payments without a leg with China or
Hong Kong.
Number of financial institutions using RMB for payments with China and Hong Kong
Live and delivered, MT 103s and 202, in RMB sent and received directly with China and Hong Kong
+14%
Source: SWIFT BI Watch
1,429
+19% 1,247
749
+5%
629
415
394
+4%
+36%
132 137
125
92
Aug 16 Aug 18 Aug 16 Aug 18 Aug 16 Aug 18 Aug 16 Aug 18 Aug 16 Aug 18
Share of
RMB users 33% 46% 43% 52% 43% 48% 38% 44% 40% 48%
Africa - Middle East Asia Pacific Americas Europe World
165. Australia’s economic linkages with China RMB Tracker
SIBOS special edition
and the Asia Pacific
Conclusion
The BRI is making waves in China and
throughout the rest of the region. According
to the Centre for Strategic & International
Studies, China plans to finance more than
US$1 trillion in ports, bridges and roads
across the globe in the coming decade20.
The initiative has ambitions to link China to
many of its major markets by land and by
sea routes, establishing new pathways for
the global economy.
Meanwhile, the trade relationship between
Australia and China is vibrant and continues
to grow rapidly. From increases in traditional
trade categories such as commodities and
agricultural products to the evolution of new
catalysts such as the BRI, growth looks set
to continue.
The rising usage of the RMB has made
trade easier, as both Australian and Chinese
firms can make payments in their currency
of choice. Innovations from the many
fintechs based in Sydney provide a greater
range of options to support cross-border
trade as well.
Sibos in Sydney this year provides a superb
opportunity for key players to learn more
about these key developments and to build
the relationships that can take trade to even
greater heights.
https://www.csis.org/analysis/how-big-chinas-belt-
20
and-road
17About SWIFT and RMB Support your RMB strategy with FX Performance Insights
Internationalisation fact-based insights
Since 2010, SWIFT has actively supported The growing importance of the RMB The FX market is one of the largest in the
its customers and the financial industry currency and its role in financial markets is world but as a decentralised market it is very
regarding RMB internationalisation through evident. Because of this, financial institutions difficult to compile accurate amalgamated
various publications and reports. Through its and corporates have already started to metrics. There isn’t one “exchange” where
Business Intelligence Solutions team, SWIFT build their RMB strategy or are planning every trade is recorded. At Sibos 2016,
publishes key adoption statistics in the RMB to do so in the near future but need more SWIFT announced a new FX service that
Tracker, insights on the implications of RMB fact-based information to identify where their allows its customers to continuously measure
internationalisation, perspectives on RMB organisation stands. their FX business performance and make
clearing and offshore clearing guidelines, more informed strategic decisions, based
as well as engaging with offshore clearing To support banks’ strategic development, on metrics derived from actual transactions
centres and the Chinese financial community SWIFT Business Intelligence provides rather than survey-based information
to support the further internationalisation of insights into the use of all currencies,
the RMB. including the RMB. In order to obtain
–– SWIFT FX Performance Insights
more granular market information on the
enables you to continuously measure
SWIFT fully supports global RMB internationalisation of the RMB as well
your FX business performance against
transactions through its global network as a competitive framework, SWIFT has
those of your peers, and so make
and messaging services, as well as RMB- developed three solutions:
more informed strategic decisions,
focused value added services. SWIFT
based on metrics derived from actual
also has strategic collaboration with CIPS,
–– The Watch platform, a portfolio of transactions rather than survey-based
facilitating more efficient RMB cross border
online reporting and analytical tools information.
payment transactions.
that allows banks to access unique
–– This benchmarking service can be
analysis and insights into their
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market analysis using unique data
of monthly reports provided in a
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PDFbased layout. Individual details on
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each of the peers, anonymised except
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Watch@swift.com
18RMB Tracker
SIBOS special edition
RMB payments guide
for corporatesContents
Introduction 20
1. Using RMB for trade settlement 21
1.1 Advantages of paying in RMB 21
1.2 Advantages of being paid in RMB 21
1.3 Considerations of adopting RMB for trade settlement 21
1.4 A corporate treasurer‘s perspective 22
2. RMB features 23
2.1 RMB & yuan 23
2.2 CNH /CNY 23
2.3 Regulations 24
3. Information required with payment instructions 25
4. Additional useful information to be provided 26
Appendix 27
Purpose of payment - List 27
RMB Internationalisation - Milestones 28
Glossary 31
Disclaimer
This publication is intended solely for the purpose of highlighting features of the Renminbi (RMB) for information, and should not be
regarded as a comprehensive research report, nor be used to provide financial, legal or regulatory advice. Nothing in this publication
is intended or can be construed as constituting a commercial offering from any banks participating in this guide. Should you have any
questions or issues relating to this publication, please contact your bank’s RMB competence centre, or your local SWIFT representative.
SWIFT or any bank participating in this guide accepts no liability for any direct or consequential losses arising from any action taken in
connection with or reliance on the information contained in this document even where advised of the possibility of such losses.
20Introduction RMB Tracker
SIBOS special edition
The RMB might appear more complex than other currencies. However, it has matured
significantly, providing interesting opportunities for corporates.
The purpose of this RMB Payments Guide for Corporates is to explain the main features of the
RMB as a payment currency and demystify the complexities surrounding it. This document
is intended for corporates outside of China that have not used the RMB as a payment
currency to transact with suppliers and other commercial partners.
This guide is a co-initiative led by SWIFT and banks (listed below) willing to better assist their
corporate customers transacting in RMB.
In terms of scope, please note that this document covers payments for goods and services only,
and excludes payments like dividends, FDI, capital injection, etc.
211. Using RMB for trade settlement
The growing importance of China in the global Provide you access to a larger supplier enhancement or for RMB payables. Hedging
economic landscape and its role in the Belt base in China: Some suppliers only accept RMB exposure is also made easier by
and Road Initiative (BRI) have given rise to the payments in RMB. leveraging the depth and breadth of CNY and
number of opportunities around the RMB, and CNH FX markets for optimal rates.
reinforced its role as the preferred currency for Simplify internal processes; Trading in RMB
Chinese companies. offers a simpler trade documentation process
(versus foreign currency). 1.3 Considerations of adopting RMB for
The strong support from banks for China’s trade settlement
Cross-border Interbank Payment System
(CIPS) and SWIFT gpi have also led to 1.2 Advantages of being paid in RMB The entire trade cycle including pricing
a general increase in efficiencies around liaison and documentations, as well as the
transacting payments in RMB. More than Optimising FX risk management: Mainland processing procedures and IT systems
70 Chinese Banks have joined SWIFT gpi, China-based companies that use the RMB involved to support the trade transactions,
representing more than 90% of SWIFT RMB to sell goods will see savings made as no have to be reviewed and aligned prior to re-
cross-border payments with mainland China. conversion costs are incurred. These savings denominating trade into RMB:
Today, RMB payments are processed faster, could be substantial when dealing with
with full transparency of fees and end-to-end currencies with no direct quoted exchange • IT Systems (TMS/ ERP) need to be enabled
traceability. In July 2018, SWIFT, along with rate with the RMB. Furthermore, there are to support RMB as a payment currency
a number of corporates and banks, started additional savings to be made on FX hedging and distinguish the onshore and offshore
to test an enhanced multi-bank standard to fees as receivables denominated in RMB FX rate curves (CNY / CNH) for recording/
further improve the cross-border payments provide a natural hedge with payables in RMB. processing FX transactions.
experience for multi-banked corporates. This
enhanced standard streamlines the process More convenience: Chinese buyers who • A review of the pricing with your trade
for corporate treasurers by allowing them to opt to use the RMB, their home currency, counterparties will be necessary to set the
initiate and track gpi payments to and from to transact with offshore companies will find price quotation in RMB.
multiple banks in a single format and integrate that this simplifies the process to provide
gpi flows in ERP and Treasury Management supporting documents to their banks for the • Trade documents have to be revised to
Systems1. payment. include RMB as a trading currency – e.g.
payment terms, settlement accounts,
Your Bank will be able to provide you with Better customer relationships: With the intercompany agreements, invoice
advisory and adequate support on the benefits wider choice of invoicing currencies, Chinese adjustments etc.
of using the RMB for trade transactions and buyers enjoy greater flexibility and have higher
funding needs. satisfaction.
Increased customerbase: Furthermore,
1.1 Advantages of paying in RMB it will broaden customer base and business
opportunities as the overseas company can
As a corporate trading with China, the access a larger pool of buyers onshore.
advantages of paying in RMB are manifold:
Faster collection cycles: The simpler trade
Reduce costs: As there is no currency documentation process involved when using
translation for your Chinese partners, the RMB the RMB allows a corporate to expedite their
is seen as a natural currency hedge to cover collection cycles, compared with using foreign
your import-export flows. currencies (FCY).
Facilitate commercial discussion: Increased flexibility: Offshore-based
From a negotiation perspective, the RMB corporates (with the exception of countries
improves price transparency and facilitates with local regulatory restrictions on foreign
the commercial discussion with your Chinese currency control) will find it possible to
partners with possible supplier discounts. redeploy the RMB received with higher
flexibility: holding deposit earning interest
or investing in RMB products (e.g.
onshore/offshore capital markets) for yield
1
Press release - Brussels, 25 July 2018 - Corporates
pilot to start testing new multi-bank payments tracking
on SWIFT gpi
22RMB Tracker
SIBOS special edition
1.4 A corporate treasurer’s 1. What was the trigger for your company
perspective to use RMB as payment currency?
There were three main triggers. First, onshore
forward market is restricted by very specific
regulations, so we were looking to get our
FX risks offshore for hedging by the global
treasury of the company. Second, this
helped us to reduce our offshore FX risks
considerably. Lastly, many of our customers
and suppliers in mainland China preferred to
use the RMB. In fact, some suppliers may
charge more to compensate for the FX risks
invoiced when being paid in other currencies.
2. What was the main impact internally
(procedures/ TMS etc)?
The initial problems were due to the different
yield curves for onshore and offshore (i.e.
CNH pricing is a little bit different than CNY).
David Blair
As CNH “doesn’t exist” legally, only CNY can
Managing Director, Acarate Consulting,
be input. This also impacts external audits,
Singapore
making it more complicated.
3. What is the main benefit for your
25 years of management and treasury company to pay or be paid in RMB?
experience in global companies If you are a Chinese company, this could
mean no or reduced FX risks. If you are a
David Blair was formerly the vice-president of foreign company, transacting in RMB helps
treasury at Huawei where he led a treasury you to better manage your offshore FX risks.
transformation for this fast-growing Chinese
infocomm equipment supplier. Before that
David was group treasurer at Nokia, where
he built one of the most respected treasury
organisations in the world. He has previous
experience with ABB, PriceWaterhouse,
and Cargill. David has extensive experience
managing global and diverse treasury
teams, as well as playing a leading role in
e-commerce standard development and in
professional associations.
232. RMB features
2.1 RMB & yuan To further illustrate how this works for RMB
payments from overseas moving into China,
• The Renminbi, or RMB as it is abbreviated, let’s consider a scenario where an overseas
is the official currency of the People’s importer wants to send CNY 10,000 from
Republic of China. an overseas bank account to their seller’s
account in China.1 2 3
• The yuan is the basic unit of the renminbi, USD Bank A CNY Bank B CNY
Importer Seller
but it is also used to refer to the Chinese 1 (Importser’s bank2 (Seller’s bank 3
(Outsdide China) (In China)
currency in general. outside China) in China)
USD Bank A CNY Bank B CNY
Importer FX Spot CNY 10,000bank CNYbank
10,000 Seller
(Importser’s (Seller’s
• The ISO currency code of Renminbi is (Outsdide China)
USD / CNH
(In China)
outside China) in China)
“CNY”.
FX Spot CNY 10,000 CNY 10,000
USD / CNH
2.2 CNH /CNY The overseas importer converts USD into
RMB through Bank A using the offshore
Globally, the RMB is represented by one RMB FX rate USD/CNH to get CNY 10,000;
ISO currency code - “CNY”. However, two and then instructs Bank A to make an RMB
designations are commonly used: CNY and payment of CNY 10,000 to Bank B in China in
CNH. When the currency is circulated outside favour of the seller in China.
of mainland China, CNH is used. It includes
c b a
offshore markets such as Hong Kong,
Singapore and Taiwan. On the contrary, when Raw Material EUR EUR Bank B CNY
Bank C Seller
the currency is circulated within mainland Provider
(Europe) c b (Seller’s bank a (In China)
China, CNY is used and it usually refers to the (Europe) in China)
Raw Material EUR EUR Bank B CNY
onshore market. The inherent value of CNH Bank C
EUR 2,000 EUR 2,000 Seller
Provider (Seller’s bank FX Spot
and CNY is actually the same. (Europe)
in China)
EUR / CNY (In China)
(Europe)
In the event the seller in China has to make a
While China is gradually opening up its capital separate payment in EUR 2,000
EUR 2,000to Europe for EUR 2,000 FX Spot
EUR / CNY
account, there are restrictions on RMB raw materials procurement, the supplier will
flows in and out of China. Cross-border convert RMB into EUR through Bank B using
payments are subject to underlying purpose the onshore RMB FX rate EUR/CNY to get
of the payments. Current account-related EUR 2,000; he then instructs Bank B to pay
trade payments are generally permitted with EUR 2,000 to Bank C in Europe in favour of
supporting documents, whereas capital the raw material provider.
account related items may require pre-
approval from the authorities or are restricted
to certain quota requirements. Under this
backdrop, the onshore RMB FX market and
offshore RMB FX market have their own RMB
FX curves, although these curves may be
influenced by each other.
To distinguish these two sets of rates, the
market typically denotes the China onshore
RMB FX market rates as “CNY” rates whereas
the offshore RMB FX market rates as “CNH”
rates. For example, on 5th September, 2018,
the spot rates between USD and RMB for
onshore and offshore FX markets were:
USD/CNY 6.8384 (Onshore China FX
market)
USD/CNH 6.8618 (Offshore FX market
outside China)
24RMB Tracker
SIBOS special edition
2.3 Regulations China’s central bank, the People’s Bank of
China (PBoC) is the main regulator responsible
Current accounts in RMB are completely for drafting and enforcing regulations related
liberalised thus the RMB can be used to settle to RMB.
all current account transactions between
mainland China and other parts of the world. Payments in RMB from offshore to offshore
Trading of goods is a type of current account accounts are allowed and not regulated by
transaction: an offshore company may use the PBoC. Some local regulations may apply
RMB to pay for the purchases of goods from depending on each individual country where
mainland China, and may receive RMB for the the offshore accounts are located.
sale of goods to mainland China.
Regulations issued by PBoC concerning RMB Cross-Border Trade settlement
July 2009 Announcement Scheme on Settlement of Cross-Border Trade in RMB commenced
No. 10 [2009] between approved areas of mainland China (Shanghai, Shenzhen,
Guangzhou, Dongguan, Zhuhai) and selected areas outside the Mainland
(Hong Kong, Macau, ASEAN) for some 365 pilot companies
June 2010 Announcement Approved areas and companies extended: between 20 provinces in
No. 186 [2010] mainland China and all countries worldwide
July 2011 Announcement Settlement of Cross-Border Trade in RMB available throughout the entire
No. 203 [2011] mainland China
March 2012 Announcement Settlement of Cross-Border Trade extended to all companies involved in
No. 23 [2012] import and export trades
Note: A detailed list of RMB internationalisation milestones is available in the appendix
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