Bank of China (Hong Kong) has
urged overseas issuers to get better acquainted with the
offshore renminbi products on offer.
The banks deputy general
manager of global markets, Tony Wang, told IFLR that economic
uncertainty in the Eurozone had provided a good reason for
European and US corporations to tap the offshore renminbi
market, particularly for those who have large operations in
However, he advised new entrants
to the market to familiarise themselves with the currency and
the policies that had been in put in place to-date to govern
New issuers must stop
thinking of renminbi as this mysterious product, he said.
It is no different to any other currency.
But the policies under which
offshore renminbi funds can be utilised, traded and remitted
onshore comprise a huge system. It is critical for
would-be issuers to be aware of the regulations in place before
deals go ahead, he said.
It is particularly important for
those new entrants to first obtain approval from Chinese
authorities, if they want to repatriate renminbi funds back to
Mainland China. Otherwise, the process for approval could
take time, and extra costs may be incurred as a result of the
delay, he said.
The market is growing
increasingly mature and its investor base more discerning, he
said. But it had been affected by volatility in the
international credit markets. The investor base is today
much more cautious, and more willing to park cash, he
Even so he remained bullish on
the future of the market. Everything happening in other
currencies can happen here, he said.
Certainly, there has been
positive momentum in terms of renminbi market developments in
In August, Chinas
vice-premier Li Keqiang announced that Chinas central
government would support Hong Kong enterprises making direct
investment on the mainland in renminbi and that pilot projects
would be launched to enable foreign banks in the city to
replenish capital with the currency.
In doing so, he provided
much-needed clarity on Chinas policy direction, and
helped to clear a number of barriers hindering market
development, in particular those governing repatriation of
renminbi to the mainland.
Li revealed more than
expected, said Wang. He also indicated a lot of
areas that could be explored to help the real economy in Hong
Clearly Chinas central
government is trying to encourage mainland enterprises to tap
international markets for their overseas direct investments.
There is expected to be more room for people to use overseas
accounts in a number of projects, as well as more scope to use
renminbi capital accounts.
The Peoples Bank of China
aims to facilitate renminbi use in international markets.
As China is a big player in terms of international trade,
it is right to say that its currency shall enjoy a status as
favourable as other currencies do, said Wang.
Wang anticipated steady market
growth from here. There is scope for a whole suite of new
products to come out in the offshore renminbi market, he
said. But it will be a gradual process.
Simpler products in the debt
finance space as well options, interest rate swaps and other
interest-bearing products would develop first, he said.
While, more exotic instruments
such as derivatives and bundled packages would follow when the
market was ready. We are at the beginning of this,
he said. China is having constant contact with
international markets. However, its financial systems are
different from other countries, and it may take time to
be fully connected globally.
Wangs comments come as
Hong Kongs Securities and Futures Commission (SFC)
announced Hong Kongs regulatory platform was ready to
authorise retail fund products managed by holders of renminbi
Qualified Foreign Institutional Investors (RQFII) quotas.
SFCs acting chief
executive officer said that adding the Rmb20 billion RQFII
quota was an encouraging start to accelerating the pace of
transforming renminbi into an internationally accepted and
widely used currency.