"CNH" Internationalizing the RMB: Perceptions and Realities ~ China's Currency Going Global with CNH ... _
18 July, 2011
FXall lets clients trade China CNH spot, forwards and swaps FXall, the world's leading electronic foreign exchange platform, announced today that it is extending trading of deliverable offshore Chinese Yuan (CNH) on its FX trading platform through its award-winning QuickTrade Request
In response to client demand, many of FXall's liquidity providers are now pricing yuan over-the-counter (OTC) trades. This offering was a collaborative effort with providers such as BofA Merrill Lynch, HSBC and Royal Bank of Canada, to support recent market developments. With FXall and liquidity providers on the platform supporting the new currency code, CNH, which represents the RMB exchange rate that trades offshore in Hong Kong, FXall clients are now able to trade this important currency offshore.
"The addition of offshore deliverable Chinese yuan (CNH) onto FXall has met client demand, especially from BofA Merrill Lynch's large corporate client base, for hedging exposures in Asia by providing an electronic execution path to access the firm's substantial liquidity pool," said Kan Fung Li, Managing Director, Global Rates and Currencies Trading at BofA Merrill Lynch.
"HSBC continues to see strong and growing demand for CNH trading from our clients who want the ability to trade electronically," said Frederic Boillereau, Global Head of Currencies and Commodities at HSBC in London. "Through our global network and leadership in onshore CNY and offshore CNH trading, we offer our insights and liquidity across markets and look forward to the ongoing partnership with FXall to bring this additional liquidity and access to our clients."
Phil Weisberg, CEO at FXall, said: "We have worked closely with market participants to deliver trading solutions that meet their needs and our ability to provide CNH request for quote trading was driven by mutual interest from both our real money clients and our liquidity providers who want access to the growing offshore RMB market. As a trusted, neutral marketplace, FXall is a strategic execution partner that can efficiently connect counterparties and create the right community and environment to exchange risk."
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07/10/2010
CHINA'S CURRENCY
China is moving fast to create an offshore renminbi currency market. The redback finally seems willing to take on the greenback
China’s renminbi – also known as the yuan or the redback – has long been an inflexible currency, its purpose largely to keep the country’s exports competitive. But moves are afoot to make the renminbi a more flexible way of settling cross-border trade, with the ultimate aim of creating a fully floating, unpegged currency.
After years of prevarication, on August 16, China opened the doors of its domestic interbank bond market to the central banks of a select group of nations including Argentina, Belarus, Indonesia, Iceland and South Korea. Analysts at Standard Chartered called the move a “very important piece of the puzzle for the development of a significant offshore renminbi market in Hong Kong”.
On September 8, Bank of China began issuing up to Rmb5 billion of bonds in Hong Kong with maturities of two and three years to retail and institutional investors. Five days later, Euroclear Bank said it would allow clients to settle transactions and deposit Eurobonds and Hong Kong securities denominated in renminbi from September 27.
Then on September 19, Beijing publicly allowed Malaysia’s central bank to buy yuan-denominated bonds, taking the credibility of the renminbi as an international currency to a new level. Other Asian central banks are also believed, quietly, to have bought yuan-denominated Chinese bonds in recent months.
Even foreign-listed corporates have got in on the act. McDonald’s has recently issued yuan-denominated bonds, as has HSBC’s mainland China operations and Hong Kong-listed Hopewell Highway Infrastructure.
The key questions now are these: how big can the offshore renminbi market become; and who will benefit. The answer to the first question is, simply put, “enormous”.
Philip Lynch, chief executive officer Asia ex-Japan at Nomura, says: “Given the importance of Chinese trade flows and the increasing liberalization of the RMB, the offshore renminbi market will over time be as important as the Eurobond market.”
In July 2009 HSBC chief China economist Qu Hongbin predicted $2 trillion of annual cross-border trade (around half the mainland’s total) could be settled in the yuan by 2012. That would make the renminbi one of the top three currencies in global trade.
Standard Chartered says that comparisons between the offshore-renminbi (CNH) and Eurodollar markets are inevitable: “We expect significant CNH liquidity growth as a result of renminbi trade settlement, tourist receipts and other renminbi flows.” The bank reckons that CNH bond issuance could grow faster, were the rules surrounding the ability to transfer funds into the mainland further relaxed.
Trade in the CNH has so far been relatively thin. At around $4 billion, the offshore-renminbi market is just 0.1% of the onshore total of around $2.9 trillion. Daily offshore spot foreign exchange transactions in the renminbi are meanwhile around $30–50 million, or 0.2%, of the $20 billion onshore spot market. Moreover, CNH deposits, in the Hong Kong banking system, make less than one-tenth of one percentage point of China’s $10 trillion onshore renminbi deposit base.
Yet this isn’t stopping cities and states in and around China from seeking to establish their own credentials as offshore centres. Hong Kong is the logical base for a CNH market, though its mainland twin, Shenzhen, is also trying to muscle in on the act. The Qianhai region of the city plans to develop an onshore-offshore financial centre working hand-in-hand with Hong Kong – though it remains unclear what purpose this would fulfil.
The next step with the renminbi should be the creation of the so-called “mini-QFII”– a variation on the qualified foreign institutional investor scheme. This is likely to be introduced later this year or early next.
The project, originally designed as the ‘through-train’ scheme, announced and then scrapped in spring 2009, should allow Hong Kong residents to convert Hong Kong dollars into renminbi by acquiring Shanghai and Shenzhen-listed ‘A’ shares.
“That would provide Hong Kong residents with an incentive to actually hold renminbi,” says Lucy Feng, regional head of bank research, Asia ex-Japan at Nomura. “We expect more investment opportunities in the renminbi to appear after that, such as investing in the mainland fixed income and interbank markets.”
For now, China seems content to roll out a series of bold pilot projects big enough to boost interest in the CNH market. Beijing’s new currency-related assertiveness also has a knock-on benefit: as other countries buy Chinese bonds as reserve assets, upward pressure on the renminbi is created – helping, if only partially, to mollify US politicians keen to label China a currency manipulator.
http://www.emergingmarkets.org/Article/2682677/CHINA-CURRENCY-Code-red.html
