Growth in global use of renminbi expected to continue as economy recovers in 4th quarter

An index measuring the yuan's global use rebounded in November on broad-based pickup in activities and hit a new high of 737 from October's 731, Standard Chartered Bank announced on Monday.

The increase was supported by the progress of offshore yuan deposits, dim sum bond issuance, and trade settlement volumes in the currency, it said.

Growth is expected to continue on the heels of recovering confidence in China's economy and yuan appreciation; the continued global expansion of yuan invoicing; and further policy support, the bank said in a news release.

The ratio of the relative sizes of yuan in Hong Kong, Singapore and London now stands at 78:11:11, it said.

"Hong Kong's yuan liquidity conditions have improved, and we look for deposits to exceed 700 billion yuan ($112.5 billion) by year-end," said Stephen Green, chief China economist of the lender, adding increased backflow of offshore yuan has caused the interest-rate gap between the mainland and Hong Kong to narrow.

Strong cross-border renminbi payments allowed London to close the overall gap with Singapore, shown by the Standard Chartered Renminbi Globalisation Index, or RGI.

Apart from the three key centers, the offshore yuan market is expanding its footprint around the world.

"Taiwan has substantial pent-up demand for retail renminbi services. Based on its pace and scale of development, it is a top candidate for RGI inclusion sometime this year. Dubai is another potential RGI candidate as it refocuses on its roles as a regional hub for trading, logistics and tourism," the bank said.

Standard Chartered launched the Standard Chartered Renminbi Globalisation Index in November. The Index covers Hong Kong, London and Singapore, the top three markets in offshore yuan business.

It measures business growth in four key areas: deposits; dim sum bonds and certificates of deposit; trade settlement and other international payments; and foreign exchange.

"We hope for moves by China to further open up its capital accounts to allow more yuan outflows, although the pace of such change is still unclear," Green said.

Last week a central bank official said China will promote the opening-up of its financial market to both domestic and foreign players this year to enhance the cross-border circulation of the yuan in domestic and global markets.

The bank is preparing for a trial program to allow qualified domestic individual investors to trade directly in overseas capital markets, and plans to approve residents to use the yuan to settle cross-border business, said Xing Yujing, secretary-general of the central bank's Monetary Policy Committee.

In 2012, cross-border trade settlement in yuan went up by 41 percent year-on-year, while investment settled in the currency surged by 153 percent year-on-year, data from the People's Bank of China showed.

International payments in yuan increased by 24 percent in November from the previous month, and reached a record 0.56 percent of the global total, according to the global transaction services organization SWIFT.

[email protected]

(China Daily 01/22/2013 page14)