Alicia Garcia-Herrero 艾西亞’s Post

FSDC releases report “Accelerating Offshore RMB Market Development: Enriching Hong Kong's Offerings as an International Financial Centre” Hong Kong, March 28 2024 – The Financial Services Development Council (FSDC) today released a research report titled “Accelerating Offshore RMB Market Development: Enriching Hong Kong's Offerings as an International Financial Centre”. To maintain its prominent status as an international financial centre (IFC), Hong Kong must proactively enhance its competitiveness. Despite China’s significant contribution of 17.78% to the world’s GDP in 20221, the Renminbi (RMB) remains a relatively modest presence in global trade and the foreign exchange markets, with its foreign exchange turnover accounting for only 3.51% of the global total in April 20222. Similarly, RMB’s share as a global payment currency was 2.15% in the same year and had only increased to 4.51% in January 20243. However, the RMB is poised to assume an increasingly important role as an international medium of exchange, financing tool, and investment currency. Recognising this potential, Hong Kong should proactively pursue the expansion of its offshore RMB business to drive further growth. #HongKong #Internationalfinancialcentre

Ah, the internationalization of the Renminbi (RMB)! This is a fascinating topic with significant implications for the global economy and China's financial future. Let me dive into it with you: **What is RMB internationalization?** It's the process of increasing the global use of the Chinese yuan (RMB) for international transactions, investments, and reserve holdings. This includes its use in: * **Trade settlements:** Companies conducting business with China can settle their invoices in RMB instead of other currencies like USD or EUR. * **Financial investments:** Foreign investors can buy and hold RMB-denominated assets like bonds and securities. * **Foreign exchange reserves:** Central banks around the world can hold RMB as part of their foreign exchange reserves, diversifying their portfolios and potentially increasing demand for the currency. **Why is China pushing for RMB internationalization?** There are several reasons: * **Reduced dependence on USD:** By lessening reliance on the US dollar, China aims to gain greater control over its own financial system and reduce vulnerability to external shocks. * **Increased global influence:** A widely used RMB would enhance China's economic and political clout on the world stage. * **Boosting domestic financial markets:** A more internationalized RMB can attract foreign investment and deepen China's capital markets. **Progress and challenges:** The RMB has made significant strides in recent years: * Its share of global foreign exchange reserves has risen steadily, reaching around 2.8% in 2023. * Offshore RMB markets have flourished, particularly in Hong Kong and Singapore, facilitating cross-border transactions. * China has signed bilateral currency swap agreements with numerous countries, promoting RMB circulation. However, challenges remain: * **Capital account liberalization:** China still maintains certain controls on capital flows, which limits the RMB's full convertibility and attractiveness for long-term investments. * **Financial market development:** Compared to established financial centers, China's domestic markets lack depth and sophistication, making it less appealing for some investors. * **Political uncertainties:** Geopolitical tensions can negatively impact foreign confidence in the RMB and hinder its internationalization. **The future of RMB internationalization:** While complete dominance over the USD is unlikely in the near future, the RMB's continued growth is expected. Factors like China's economic weight, ongoing financial reforms, and technological advancements in cross-border transactions will likely contribute to its increasing global presence.

The Monetary Authority of Singapore (MAS) has achieved a remarkable turnaround, posting a net profit of $3.8 billion for FY2023-2024. This recovery is largely attributed to the rebound in global markets and a weaker Singapore dollar, which boosted investment gains and eased currency pressures. This strong performance underscores the resilience of Singapore's financial system, with substantial foreign reserves and healthy liquidity positions in the banking sector. Despite potential geopolitical risks and inflationary pressures, MAS remains optimistic about steady global growth. This optimism is mirrored in Singapore's economic outlook, with growth expected to return to pre-pandemic levels, bolstered by robust financial health and sound economic policies. #Finance #SingaporeEconomy #Investment #GlobalMarkets #EconomicGrowth #Linkedcorp

The recent discussions on the internationalisation of the Indian rupee have ignited a vital conversation about India's role in the global economy. This journey presents incredible opportunities and notable challenges. This journey is not just about currency; it's about potential, challenges, and strategic moves. Let's delve into it. The internationalisation of the Indian rupee refers to the process of expanding the global presence and usability of India's national currency. Over the years, India has taken strategic steps to promote the international use of the rupee, aiming to enhance its role in international trade, finance, and investment. In March 2023, RBI enabled Rupee trade settlement with 18 countries. Banks in these countries can now open Special Vostro Rupee Accounts (SVRAs). External commercial borrowings in Rupees (Masala Bonds) have been promoted. To expedite the internationalisation of the Indian Rupee, India should aim for full currency convertibility, encourage invoicing in the rupee for trade, develop a liquid Rupee bond market, expand the Real-Time Gross Settlement (RTGS) system, establish currency swap agreements, and seek inclusion in the Special Drawing Rights (SDR) basket. Advantages of Internationalisation: By reducing reliance on foreign currencies, the internationalised rupee enhances India's economic sovereignty, making it less vulnerable to currency fluctuations. When we can transact directly in rupees, international trade becomes more efficient. No more conversion hassles, reduced costs, and streamlined cross-border transactions. A globally recognized rupee attracts foreign investors, leading to increased capital inflows, investment opportunities, and liquidity in Indian financial markets. A widely accepted rupee can strengthen India's diplomatic ties. It fosters economic collaborations and facilitates bilateral trade agreements. The rupee's global acceptance spawns financial services tied to rupee transactions, like trade financing and currency hedging, promoting a competitive financial sector in India. Rupee-denominated assets attract foreign investors, boosting India's capital market which offers a way to invest in India's economy, diversify the investor base, increase market liquidity, and bolster foreign exchange reserves. Challenges in Internationalisation: The rupee accounts for only 1.6% in the forex market, despite India's substantial trade. The rupee isn't fully convertible due to restrictions on certain capital transactions, limiting its global use. Recent policy changes like demonetization in 2016 and the withdrawal of the ₹2,000 note have impacted the confidence in the rupee. The internationalisation of the rupee is not just a monetary milestone; it's a reflection of India's growing global significance. As we embark on this journey toward an internationally recognized rupee, the collaboration between policymakers, financial institutions, and market participants will be the key to our success.

Impact of De-dollarizing Africa. It's important to note that de-dollarization is a complex process that involves multiple stakeholders and may occur gradually over time. Here are some key impacts: 1. Enhanced Economic Sovereignty: One of the primary goals of de-dollarization is to increase African countries' economic sovereignty. By reducing dependence on the U.S. dollar, African nations can have more control over their monetary policies and reduce vulnerability to external economic shocks. 2. Stability in Exchange Rates: A reduction in dollar dependence can help stabilize exchange rates. This stability is beneficial for businesses engaged in international trade, as it reduces uncertainty and currency risk. 3. Promotion of Regional Integration: De-dollarization can encourage African countries to use their own regional currencies more extensively in trade and financial transactions. This can support regional economic integration efforts, such as the African Continental Free Trade Area (AfCFTA), by promoting the use of regional currencies within the trading bloc. 4. Diversified Investment: African countries may attract a more diverse range of foreign investments when they offer opportunities for investment in local currencies. This can spur economic growth and development. 5. Reduced Transaction Costs: The use of a single foreign currency for international transactions can be expensive due to exchange rate fluctuations and transaction fees. De-dollarization can reduce these transaction costs for African businesses. Challenges and Considerations: 1. Global Trade and Finance Links: The U.S. dollar plays a dominant role in global trade and finance. As such, fully de-dollarizing can be challenging, especially for countries heavily reliant on international trade. 2. Currency Stability: Many African currencies face challenges related to inflation and exchange rate stability. Before de-dollarization, efforts must be made to strengthen local currencies to ensure they can serve as reliable alternatives. 3. External Debt: African countries often hold external debt denominated in U.S. dollars. Transitioning away from the dollar may require careful management of these debts to avoid financial instability. 4. Central Bank Capacity: Central banks in African countries may need to enhance their capabilities in managing monetary policy, currency stability, and foreign exchange reserves to effectively de-dollarize their economies. In conclusion, de-dollarization in Africa can lead to greater economic autonomy, stability, and regional integration. However, it is a complex process that requires careful planning, coordination, and management to mitigate potential challenges. African countries, in collaboration with international partners, should work toward a gradual and strategic de-dollarization to reap the benefits while managing the risks effectively.

An interesting read about the growing #trade and #investment ties between #HongKong and the #GCC. Experts say China was set to receive $1 trillion to $2 trillion in investments from sovereign funds in the Middle East by 2030, while Hong Kong expands its role as the global gateway to #China. https://lnkd.in/gE6DKfyK

Digital currency boosts Renminbi’s global role in transactions Read full article on: https://bit.ly/4cAT99C The global use of Renminbi is influenced by geopolitics, macroeconomic conditions, infrastructure, and technology ● Geopolitical tensions emerged as biggest challenge in 2023 ● Surveyed companies showed increased interest in digital currencies ● Financial institutions remain more conservative in digital adoption Over the past decade, China has expanded its financial market exposure, gradually fostering the internationalisation of the Renminbi (RMB). Despite geopolitical shifts and widening interest rate differentials, China’s positive macroeconomic outlook and technological innovation present favourable conditions for the RMB in global trade and investment. In 2023, China Construction Bank (Asia) and The Asian Banker conducted a comprehensive survey on the international use of the RMB for cross-border trade settlement, cash management, investment, and financing. The study encompassed 2,542 executives from Chinese companies, overseas companies, and global financial institutions (FI). Subscribe to TABInsights for more research notes and relevant articles: https://bit.ly/3MYtxsp Chris Kapfer, TAB Global #renminbi #digitalcurrency #globaltrade #geopolitics #survey #financialinstitutions #ecommerce #macroeconomics #infrastructure #technology #internationalization #crossbordertransactions #financialtransactions #financialmarket #digitaladoption #tabinsight #tabglobal

Sharing the recent research report by the Financial Services Development Council delves into RMB internationalization and how it can enrich Hong Kong's offerings as an international financial center. It includes insightful facts on C-REITs/H-REITs and policy suggestions for the potential implementation of REIT Connect.

The yuan is facing its highest level of capital outflow in eight years, according to new research, and data suggest a wave of offshore yuan remittances from Hong Kong to mainland China have helped offset some of the currency’s looming depreciation pressures. China’s trailing 12-month net capital outflows stood at US$139 billion as of May 2024, the worst year for the figure since the period from 2016 to 2017, said the French investment bank Natixis Corporate & Investment Banking in a presentation on Tuesday. Firms are reluctant to convert their US dollar holdings into yuan, pushing the currency’s foreign settlement ratio down to 60 per cent last month – the metric’s lowest level since 2017, per Natixis. While China’s outward foreign direct investment grew over the past year, foreign direct investment to the mainland stagnated. Large differentials between the interest rates of the US and China, weak confidence in China’s economic outlook and perceptions of geopolitical risk over using the yuan have contributed to the trend, the French investment bank said – and led to a slowdown in yuan internationalisation for the first half of 2024. The key takeaway is that Hong Kong’s role as an offshore yuan centre has been used to support the yuan. A sizeable level of foreign currency conversion into the yuan has been observed there, as well as increasing remittances of yuan into mainland China despite growing depreciation pressures elsewhere. Monthly yuan remittances from Hong Kong to mainland China amounted to US$1.28 trillion in April 2024, surging 117 per cent from US$588 billion in September 2023. Huang Yiping, dean of Peking University’s National School of Development, said at a forum in Shanghai last week that Hong Kong’s role as an international financial centre makes it an apt platform to help the yuan go global. This is all the more vital as Shanghai, he added, has yet to become a fully fledged hub amid elevated risk controls from Beijing. Source: South China Morning Post SCMP #china #beijing #chineseeconomy #globalfinance #banking #capitalmarkets #financialservices #currency #renminbi