International Asia Singapore grows rapidly as one of the top offshore RMB hubs

Singapore grows rapidly as one of the top offshore RMB hubs

The growth of Singapore as an offshore RMB centre comes at a time of ongoing exchanges between senior Singapore and Chinese officials

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Singapore is rising as one of the world’s top offshore renminbi (RMB) hubs, with its RMB-related transactions growing much faster than those of its competitors, according to a recent report by the People’s Bank of China (PBC).

“The PBC will promote the development for RMB offshore markets, including enhancing RMB convertibility and promoting interactions and deep integration of both offshore and onshore markets,” said the 2020 RMB Internalization Report published on the PBC website on Aug 14.

Singapore is the second-largest offshore RMB hub behind Hong Kong, with the Lion City accounting for 10.3 per cent of cross-border RMB settlement, while Hong Kong commanded 44.9 per cent, according to the report. Germany was third at 3.4 per cent, while Taiwan was fourth at 3.3 per cent.

At present, the RMB trading amount in the United Kingdom, Hong Kong, the United States and Singapore comprise the four highest in the offshore markets, accounting for over 80 per cent of the offshore RMB trading volume in total, according to the PBC report.

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However, the growth of RMB-related transactions in Singapore far outpaced those of other offshore RMB centres.

In 2019, the trading volume of US dollar/offshore RMB foreign exchange (FX) futures in Singapore soared 76 per cent to exceed US$907 billion (S$1.2 trillion), according to the PBC report. Also in 2019, the trading volume of US dollar/offshore RMB FX futures in the Singapore Exchange grew by over 70 per cent to 9.07 million contracts with a daily average of 36,710 contracts. At the end of 2019, the turnover of open interest for such futures soared by 76 per cent to 53,288 contracts, accounting for around 68 per cent of the total turnover of open interest for similar products in exchanges globally, said the PBC report.

In comparison, the trading volume of US dollar/offshore RMB FX futures in the Hong Kong Stock Exchange (HKSE) grew at a slower rate of 10 per cent to 1.939 million contracts in 2019. The average daily trading volume of US dollar/ offshore RMB options on the HKSE actually fell by 48 per cent to 63 contracts last year.

The trading volume of US dollar/offshore RMB FX futures in the Taiwan Futures Exchange grew by 13 per cent to 75 thousand contracts. The trading volume of US dollar/offshore RMB FX options decreased by 17 per cent to 13,000 contracts in 2019.

The UK is the largest offshore RMB clearing centre outside Asia. In 2019, the average daily trading volume in London of offshore RMB increased by 7 per cent to 82 billion pounds (S$147 billion).

In the United Arab Emirates (UAE), the clearing amount of RMB clearing banks grew by 8.1 per cent to RMB53.02 billion in 2019.

The RMB is one of the most active currencies in foreign exchange markets globally, according to the Society for Worldwide Interbank Telecommunication (SWIFT). The total trading amount of the RMB against the US dollar ranked sixth among cross-currency trading in the world in 2019, the same as 2016, but the average daily trading amount increased to US$269 billion in 2019 from US$192 billion in 2016, according to the PBC report.

The RMB bond market in Singapore is also burgeoning. On Aug 5, a Malaysian bank, Malayan Banking (Maybank), listed its RMB205 million 3% fixed rate notes due 2027 on the Singapore Exchange’s Bond Market, reported the Edge.

Hong Kong’s initial public offering (IPO) market is far bigger than Singapore’s, by virtue of the huge IPOs of large Chinese firms on the HKSE. Hong Kong, NASDAQ and the New York Stock Exchange are the three biggest IPO markets in the world. However, Singapore’s foreign exchange market is bigger than Hong Kong. Singapore, London and New York are the three biggest foreign exchange hubs in the world.

The growth of Singapore as an offshore RMB centre comes at a time of ongoing exchanges between senior Singapore and Chinese officials.

On Aug 20, Mr Yang Jiechi, China’s Director of the Office of the Central Commission for Foreign Affairs, called on Singapore Deputy Prime Minister Heng Swee Keat in Singapore. On that day, Mr Heng, the presumptive next Prime Minister of Singapore, said on his Facebook: “Director Yang and I discussed how we can further strengthen cooperation between our countries. These ideas can be taken up at the Joint Council for Bilateral Cooperation, which I co-chair with PRC Vice-Premier Han Zheng.”

Also on Aug 20, Mr Yang met Singapore Foreign Minister Vivian Balakrishnan, who said on his Facebook: “We exchanged views on enhancing ties for the benefit of our peoples. We also discussed regional and global developments in a post-Covid-19 world.”

Toh Han Shih is a Singaporean writer in Hong Kong.

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