Post on 16-Jul-2020
Offshore RMB
Express Issue 62 ‧
April 2019
Contents
Part 3
Part 4
Part 1
Special Topic
Chart Book
Market Review
Part 2 Policy and Peers Updates 4
5
1
Editors:
Annie Cheung
Tel :+852 2826 6192
Email : anniecheung@bochk.com
Matthew Leung
Tel:+852 3982 7177
Email: matthewleung@bochk.com
Sharon Tsang
Tel :+852 2826 6763
Email: sharontsang@bochk.com
10
Market Review
Offshore RMB Express 1
I. RMB exchange rate depreciated
slightly against USD
RMB briefly reached an eight-month
high in March, followed by depreciation
against USD due to increasing market
demand for USD. On March 29, the RMB’s
central parity rate against the USD closed at
6.7335, down by 0.6% from last month. CNH
closed at 6.7231, down by 0.3% MoM.
Meanwhile CNY closed at 6.7121, down by
0.3% MoM.
The Federal Reserve decided on March
21 to hold interest rates steady and expected
no more hikes in 2019. The Fed pointed to a
more dovish stance than market expected in
the statement accompanying its decision.
Fears over an inverted yield curve also
raised uncertainty of US Dollar Index. RMB
exchange rate against the USD is expected
to experience two-way fluctuation in the near
term as Sino-US trade negotiations continue
in April.
In terms of CNH HIBOR, the liquidity of
CNH remained stable in March. On March 29,
the O/N, 1-week and 3-month CNH HIBOR
rates were 1.90%, 2.57% and 3.12%,
respectively.
II. Major RMB indicators remained
stable
By the end of February 2019, RMB
deposits in Hong Kong amounted to RMB
608.3 billion, up by 1.5% MoM and 10.5%
YoY. Meanwhile, RMB loans outstanding in
Major RMB business indicators in the offshore market remained stable in March. RMB
exchange rate depreciated against the USD slightly. Since the beginning of 2019, total trading
volume of Bond Connect has more than doubled compared to the same period last year. RMB
assets holdings by overseas central banks continued to rise. RMB-denominated bonds were
officially included into the Bloomberg Barclays Global Aggregated Index effective April 1. This
encourages investors to increase their allocation in RMB assets and is another important
achievement of China’s financial opening up.
Offshore RMB Market Grows
Steadily
Market Review
Offshore RMB Express 2
Hong Kong were RMB 107.0 billion, up by
2.5% MoM and down by 25.6% YoY. The
total remittance of RMB for cross-border
trade settlement was RMB 338.6 billion in
February, down by 17.0% MoM, and up by
12.3% YoY. RTGS turnover was RMB 20.9
trillion in March 2019, up by 16.5% MoM. As
of March, 2019, the issuance amounted to
RMB 25.6 billion.
III. Total trading volume of Bond
Connect more than doubled
Staring from April 2019, 356 RMB-
denominated government and policy bank
bonds would be officially included into the
Bloomberg Barclays Global Aggregated
Index over a 20-month period. Upon
completion, the market value of RMB-
denominated bonds will become the fourth
largest currency component in the index,
following USD, EUR and JPY, and is
estimated to represent 6.06% of the
Bloomberg Barclays Global Aggregated
Index. Pan Gongsheng, Deputy Governor of
the People’s Bank of China, believes that the
decision made by Bloomberg demonstrates
global investors’ increasing demand for
China’s bonds and their confidence in
China’s economy. This encourages investors
to increase their allocation in RMB assets
and is another important achievement of
China’s financial opening up.
In February 2019, foreign investors’
RMB bond holdings amounted to RMB 1.75
trillion, down by RMB 2.5 billion compared to
last month and up by 37.3% YoY. Total
trading volume of Bond Connect in the first
quarter of 2019 reached RMB 341.8 billion,
more than doubled from last year (RMB
162.6 billion). Monthly total trading volume of
Bond Connect reached RMB 112.4 billion in
21 trading days in March 2019. Average daily
turnover surged to RMB 5.35 billion. Global
investors’ monthly net purchase of Chinese
bonds through Bond Connect amounted to
RMB 22.0 billion. At present, the investor
community of Bond Connect has grown to
711, spanning 25 jurisdictions.
IV. RMB holdings by overseas central
banks continued to rise
According to IMF statistics on March 31,
as of the fourth quarter of 2018, RMB assets’
share of the official foreign reserves of
central banks rose to 1.89% (USD 202.79
billion), higher than the share of 1.80% in the
third quarter and a record high since IMF
started reporting RMB reserve assets in
October 2016. The increasing RMB
allocation in central banks’ official reserves
shows that interests in RMB assets continue
to rise.
Market Review
Offshore RMB Express 3
In February 2019, SWIFT showed that
the RMB retained its position as the fifth
most active currency for domestic and
international payments by value, with a share
of 1.85% (2.15% in January 2019). Affected
by the seasonal effect of the Chinese New
Year, RMB payments value decreased by
26.5% compared to January 2019, while in
general all payments currencies decreased
by 14.3%.
V. Steady progress of opening up in
domestic capital markets
According to statistics from the State
Administration of Foreign Exchange (SAFE),
by the end of March 2019, the approved
quota for RMB Qualified Foreign Institutional
Investor (RQFII) was RMB 661.0 billion, up
by RMB 0.5 billion from previous month;
while the approved quota for Qualified
Foreign Institutional Investors (QFII)
increased by USD 0.2 billion to USD 101.6
billion. The approved quota for Qualified
Domestic Institutional Investors (QDII)
totaled USD 103.2 billion, with a total of 152
qualified domestic institutional investors,
same as previous month.
Policy and Peers Updates
Offshore RMB Express 4
BOCHK launched attestation service for
Mainland personal account opening With the development of the Greater Bay Area and fulfilling the demand for financial
services among Hong Kong residents in the Mainland, Bank of China (Hong Kong)
(“BOCHK”) announced on March 20 that it has been authorized to launch attestation
service for Mainland personal account opening in Hong Kong.
In order to open an account, Hong Kong residents only need to visit any BOCHK
branch with their permanent HKID card and Mainland Travel Permit for Hong Kong and
Macao Residents, and fill in account opening documents. Neither Mainland addresses
nor visits to the Mainland are required for the application. While the account can be linked
to Mainland mobile payment applications, there is transaction limit to ensure greater
security amid fulfilling customer’s spending needs in the Mainland.
PBOC is set to roll out 5 financial opening up measures by year-end
On March 24, Governor of the People’s Bank of China (“PBOC”) Yi Gang said that
the PBOC will introduce five measures to further open up financial markets by the end of
this year: 1) Encourage foreign investors into trust, financial leasing, auto finance,
currency brokerage and consumer finance sectors; 2) There will be no foreign ownership
limits for investment in financial asset investment companies and wealth management
companies set up by commercial banks; 3) Substantially expand the business scopes of
foreign banks; 4) Lift restrictions on business scopes of securities joint venture, and treat
them equally as domestic companies; 5) Remove requirement for foreign insurance
companies to have representative offices in China for 2 years before setting up
institutions.
Special Topics
Offshore RMB Express 5
Chapter ten of the “Outline Development Plan for the Guangdong-Hong Kong-Macao
Greater Bay Area” is “Jointly Developing Guangdong-Hong Kong-Macao Cooperation
Platforms”. It proposes to expedite the development of major platforms such as Qianhai of
Shenzhen, Nansha of Guangzhou and Hengqin of Zhuhai, expand the development potential of
Hong Kong and Macao, promote collaboration in public services, and spearhead
comprehensive cooperation among Guangdong, Hong Kong and Macao. The Outline
Development Plan highlights the function of Qianhai, Nansha and Hengqin as important
platforms in the development of the Greater Bay Area, encouraging Hong Kong and Macao to
proactively participate and capture business opportunities.
Jian YING, Senior Economist
I. The Outline Development Plan
raises the bar
The Outline Development Plan was
officially announced in February this year.
One of the strategic positioning of the
Greater Bay Area is to become a showcase
for in-depth cooperation between the
Mainland, Hong Kong and Macao -- relying
on the good foundation for cooperation
among Guangdong, Hong Kong and Macao,
fully leveraging the functions of the key
cooperation platforms in Qianhai of
Shenzhen, Nansha of Guangzhou and
Hengqin of Zhuhai, exploring new modes of
coordinated and synergistic development,
and deepening pragmatic cooperation
between the nine Pearl River Delta
municipalities, Hong Kong and Macao. The
Outline Development Plan specifies
development path for the three platforms:
Enhancing the functions of the
Shenzhen-Hong Kong modern service
industry cooperation zone in Qianhai
of Shenzhen
There are several key tasks in financial
sector. The first task would expand the
functions of offshore accounts (OSA) and
proactively explore effective paths to
Expanding Hong Kong’s
Development Potential via Proactive
Collaboration with Qianhai, Nansha
and Hengqin
Special Topic
Offshore RMB Express 6
capital account convertibility with reference
to the system of free trade accounts (FTA) in
the Shanghai Free Trade Zone. The second
task would support the Qianhai Mercantile
Exchange of the Hong Kong Exchanges and
Clearing Limited in establishing a spot
commodities trading platform for serving
domestic and foreign clients. The third task
would enhance cooperation in green finance
and FinTech between Shenzhen and Hong
Kong. Key tasks in other areas include
building a network service platform for cross-
border economic and trade cooperation,
developing a new type of international trade
center to facilitate offshore trading, as well as
high-end international maritime service
center, etc.
Developing Nansha of Guangzhou into
a showcase for comprehensive
cooperation between Guangdong,
Hong Kong and Macao
The Outline Development Plan supports
Nansha of Guangzhou to collaborate with
Hong Kong and Macao in developing an
integrated service base and an international
exchange platform for Chinese enterprises
going global, and develop as an important
window for opening up in southern China. In
terms of innovative development, Nansha
would plan to develop an industry
cooperation zone for in-depth collaboration
between Guangdong and Hong Kong and
explore the establishment of an industrial
park for Lusophone countries under
cooperation between Guangdong and Macao.
Meanwhile, Nansha would spend great
efforts in developing specialized financial
services such as shipping finance, FinTech,
aircraft and ship leasing. Moreover, Nansha
would explore the establishment of Greater
Bay Area International Commercial Bank in
the Guangdong Pilot Free Trade Zone, as
well as an account management system that
is conducive to the development of the
Greater Bay Area in order to facilitate cross-
border trade, investment and financing
settlement.
Showcasing Hengqin of Zhuhai for in-
depth cooperation between
Guangdong, Hong Kong and Macao
The Outline Development Plan proposes
to develop Guangdong-Hong Kong-Macao
Logistics Park, expedite the development of
major cooperation projects including the
Macao-Hengqin Youth Entrepreneurship
Valley and the Guangdong-Macao
Cooperation Industrial Park, and study the
development of a Guangdong-Macao
information hub. The Outline Development
Plan also supports joint development of
Chinese Medicine Science and Technology
Industrial Park by Guangdong and Macao.
Special Topic
Offshore RMB Express 7
II. Expanding business
development potential for Hong Kong
With the publication of the Outline
Development Plan, Guangdong, Hong Kong
and Macao will accelerate the establishment
of a world-class Bay Area, science and
technology innovation center, as well as
industrial cluster. Supportive policies and
business opportunities are likely to first
emerge in Qianhai, Nansha and Hengqin.
Major business opportunities in the financial
sector include:
1. Opportunities for cross-border
RMB business: The Outline Development
Plan proposes to progressively expand the
scale and scope of cross-border RMB usage
in the Greater Bay Area, allowing RMB
interbank lending, RMB foreign exchange
spot and forward businesses, derivative
trading and cross distribution of wealth
management products in accordance with
relevant regulations. The Outline
Development Plan also proposes to steadily
expand the channels for Mainland and Hong
Kong residents to invest in financial products
in each other’s markets, promote cross-
border sales of funds in the Greater Bay
Area in an orderly manner, and establish a
mechanism for mutual access of funds,
products, etc. In view of macro-prudential
and risk management, it will be ideal to
authorize financial institutions to carry out a
portion of pilot businesses in Qianhai,
Nansha and Hengqin in the near term. These
businesses will be easier to promote and
replicate across the entire Greater Bay Area
with solid fundamentals.
2. Opportunities for livelihood finance:
One of the basic principles of the Outline
Development Plan is to share the benefits of
development and improve people’s livelihood,
enabling all residents in the region to benefit
from the Greater Bay Area development. For
example, the Outline Development Plan
proposes to introduce high-end education
and medical resources, complement public
services and social management with Hong
Kong and Macao, and develop integrated
livelihood project covering senior care,
housing, education, medical care, etc. As a
result, innovative opportunities for livelihood
finance, such as pension funds, pension
loans, cross-border payment, silver bonds,
health insurance, etc. will emerge in Qianhai,
Nansha and Hengqin.
Special Topic
Offshore RMB Express 8
3. Opportunities for FinTech: Hong
Kong is actively promoting FinTech and the
development of blockchain, artificial
intelligence, store value facilities and virtual
banking. However, given limited market size
and technology talents, it is necessary to
consider alternatives. The development of
FinTech in the Pearl River Delta started
earlier with better foundation. In particular,
Qianhai has formulated industrial
accumulation, containing leading enterprises
such as WeBank, Zhaolian Consumer
Finance and more than 1,000 FinTech
enterprises. The Outline Development Plan
proposes to strengthen FinTech collaboration
between Shenzhen and Hong Kong.
Financial institutions of Hong Kong could
capitalize on the strength of talent and
technology in Qianhai and other two
platforms by assigning some of the research
and development functions there, so as to
break through the development bottleneck
and create synergy.
4. Opportunities for business relating
to the Belt and Road Initiative: The
Greater Bay Area will serve as a supporting
pillar for the Belt and Road Initiative. Hong
Kong will develop as an investment and
financing platform for supporting the Belt and
Road Initiative, as well as project investment
and business dispute resolution service
center. Qianhai will establish a cross-border
economic and trade cooperation platform,
support “going global” enterprises and
collaborate with Hong Kong to develop an
international legal services center and
commercial dispute resolution center.
Hengqin will collaborate with Macao to
establish international trade channels in Belt
and Road-related countries and regions.
There are many intersections in providing
financial services for the Belt and Road
Initiative.
5. Opportunities for securities and
insurance: The Outline Development Plan
supports the Hong Kong Exchanges and
Clearing Limited to develop a spot
commodities trading platform in Qianhai and
Nansha to establish a trading platform for
innovative insurance. Meanwhile, the Outline
Develop Plan proposes to promote cross-
border insurance progressively in the Greater
Bay Area, establish mutual access
mechanism for funds and products, support
Shenzhen to establish a pilot zone for
innovative insurance development and
bolster eligible Hong Kong and Macao
insurance institutions to set up operations in
Qianhai, Nansha and Hengqin.
Special Topic
Offshore RMB Express 9
6. Opportunities for specialized
financial services: The Outline
Development Plan proposes the Greater Bay
Area to actively develop specialized financial
services, such as green finance, financial
leasing, shipping finance and maritime
finance. Nansha will focus on developing
shipping finance and aircraft and ship leasing.
Hengqin will study the establishment of
health care fund for Macao residents.
Qianhai will strengthen green finance
cooperation with Hong Kong, and develop
modern service industry such as ship finance.
Financial industry of Guangdong, Hong Kong
and Macao will further develop on the three
platforms.
Qianhai, Nansha and Hengqin are of
great significance to Hong Kong’s financial
sector. The Outline Development Plan
introduces the concept of “joint development”,
encouraging Hong Kong and Macao to
regard the three platforms as new room for
development and an extension of the
offshore market. This will motivate Hong
Kong’s financial sector to participate more
actively, making full use of three platforms to
attract customers and seize business
opportunities.
Chart Book
Offshore RMB Express 10
Market Indicators
Hong Kong RMB Deposits (in RMB bn) RMB Cross-border Trade Settlement (RMB bn)
USD-CNH and USD-CNY Exchange Rates
Source: HKMA Source: HKMA
Source: Bloomberg
Chart Book
Offshore RMB Express 11
CNH HIBOR Fixing (%) Hong Kong Offshore RMB Bond Issuance (RMB bn)
CNH & CNY China Sovereign Curve (%, 29 Mar 2019)
FTSE-BOCHK Offshore RMB Bond Composite Index
Source: Bloomberg
Source: Bloomberg Source: Bloomberg
Source: BOCHK Global Market estimate
End of Mar:
End of Mar:
Chart Book
Offshore RMB Express 12
RMB Clearing Transaction Value (RMB tn)
SWIFT World payments currency ranking & market share
Source: HKICL
Source: SWIFT
October 2016 February 2019
40.55% USD #1
EUR 32.26% #2
GBP 7.61% #3
JPY 3.38% #4
1.85% CNY
EUR 34.99% #2
GBP 7.34% #3
JPY 3.51% #4
#5 1.82% #5 CAD
CNY #6 1.67%
USD #1 39.07%
1.75% #6
AUD
CAD
#7 1.49%
HKD #8 1.37%
15
Disclaimer: This report is for reference and information purposes only. It does not
reflect the views of Bank of China (Hong Kong) or constitute any investment advice.
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