now loading...
Wealth Asia Connect Middle East Treasury & Capital Markets Europe ESG Forum TechTalk
Treasury & Capital Markets
Renminbi’s tale of two halves and the banks that made a difference
The Asset reveals those banks providing the best renminbi solutions as its internationalization gathers momentum
The Asset 29 Mar 2019

Having chalked up a number of milestones in recent years such as SDR (special drawing rights) inclusion in 2016, the renminbi appeared on course by early 2018 for a relatively stable year. With the aftereffects of the sudden devaluation of the renminbi in 2015 subsiding, the currency slowly strengthened against the dollar, at one point reaching 6.2 to one US dollar, which occurred in February 2018.

The gradual appreciation in the renminbi prompted Chinese policymakers to loosen capital controls with most of the window guidance (which plagued cash pooling and sweeps) removed. Even China’s central bank, the PBoC (People’s Bank of China), took steps to reignite the drive to internationalize the renminbi. Confidence in the renminbi was high, with sovereigns such as the Republic of the Philippines and the Emirate of Sharjah issuing their respective renminbi-denominated bonds in Q1 2018.

That period of stability, however, was suddenly interrupted in July 2018 when US President Trump slapped his first round of tariffs on Chinese exports, prompting companies around the world to rethink their decision to settle in renminbi. Weakening confidence in the Chinese currency led to a devaluation, leading to 6.9 against the US dollar, and raised fears that the renminbi could even decline to seven against the US dollar.

This sudden shift in sentiment caused Chinese policymakers to rethink their strategy around protecting the renminbi and instead focus on increasing inflows and FX stability. There were already a number of channels in place for foreign investors to access China’s onshore capital markets, from the Shanghai-Hong Kong Stock Connect to the Bond Connect. However, international investors remained concerned on a number of fronts such as an unclear tax policy, the inability to do block trades, and issues around DvP (delivery versus payment).

Amid the uncertainty, these key issues were eventually resolved, resulting in China’s confirmation into the Bloomberg Barclays Global Aggregate Indices early this year, with some pundits estimating that that move would result in a passive inflow of US$130 billion over the next 20 months.  

Nevertheless, any growth of renminbi usage has to be met with cautious optimism. During the ongoing Sino-US trade war there has been a push by the Chinese government to encourage renminbi usage in schemes backed by the government, such as transnational ones like the Belt and Road initiative, and China-focused ones like the Greater Bay Area.

Another area of commercial activity where the renminbi can leapfrog to the next stage is commodities. Some banks have approached onshore commodity-consuming (including iron ore, petrol and crude oil) companies to consider settling their commodity transactions in renminbi.

Both HSBC and Standard Chartered remain two of the most active banks in educating and encouraging the use of the Chinese currency across multiple locations. Both banks notched up multiple Renminbi Bank wins in various countries at this year’s The Asset Triple A Treasury, Trade, Supply Chain and Risk Management Awards.

To view the Best Renminbi Bank by country list please click here.

Conversation
Benze Lam
Benze Lam
head of Asia, ex-Japan
Northern Trust Asset Management
- JOINED THE EVENT -
7th Taiwan Investment Summit - Webinar Series 2021
Transitioning to a green future
View Highlights
Conversation
Anupam Misra
Anupam Misra
head of corporate finance
Adani Group
- JOINED THE EVENT -
18th Asia Bond Markets Summit - Asean Edition
Investing in the new normal
View Highlights