beyondbrics

By Jamil Anderlini in Beijing and Robert Cookson in Hong Kong

Some of the small steps China is making towards internationalising its currency are so so small that they don’t get noticed until well after the event.

And so it is with a move by the Bank of China, the country’s fourth-largest lender by assets, to offer limited renminbi deposit services to personal banking customers at its London, New York, Canadian and Southeast Asian branches.

The “news” of the first such facility outside mainland China and Hong Kong made headlines on Wednesday. But in fact, as the bank told beyondbrics, the service was introduced nearly a year ago, in February 2010. A quiet move, it may have been, but it is playing its part in what could amount to a revolution in international finance if the Rmb eventually adopts what the Chinese authorities see as its rightful place on the global stage.

The BOC spokesperson said Wednesday the bank now offers Rmb exchange and deposit services for personal banking customers at “basically all” of its international branches in the 29 countries where it operates and has been doing so since early 2010.

BOC is the first Chinese bank to widely offer non-corporate Rmb deposit services outside Hong Kong and mainland China but because of Beijing’s strict controls on convertibility and capital account transactions the service remains extremely limited.

Many international banks – including HSBC, Standard Chartered, JP Morgan Chase, Citigroup, Deutsche Bank, Spain’s BBVA and South Africa’s Standard Bank – already offer Rmb trade settlement and Rmb corporate account services in various countries.

HSBC has been aggressively expanding its offshore Rmb services and now provides Rmb trade settlement in 35 countries and also offers Rmb-denominated accounts for personal banking customers in Malaysia, Japan and Singapore, as well as in China.

International trade settled in renminbi has gone from zero to Rmb340bn in under two years, according to the Bank of China.

But while the renminbi is spreading globally, it is not likely to replace US dollars anytime soon. Analysts said the BOC services are more symbolic than significant because of the numerous restrictions that remain.

For example, US customers have been able to open Rmb-denominated accounts since February last year but cannot deposit or withdraw Rmb cash from those accounts.

The only way customers can put any money in their US BOC Rmb account is if they or one of their relatives remit the Rmb from China or if the customer buys Rmb from the bank using US dollars.

The daily limit for buying or selling Rmb is $4,000 worth of Rmb and the annual limit is $20,000 worth of Rmb, less than half the $50,000 annual limit imposed on Chinese residents’ foreign currency transactions within China.

In addition, foreign exchange transactions for non-corporate customers can only be done at BOC’s Chinatown branch in New York City but not at the bank’s Madison Avenue branch or its limited branch in Los Angeles.

BOC’s business customers are only permitted to exchange Rmb in the process of settling trading contracts with companies in China.

No need to rush out and open a renminbi account just yet. But with more small steps towards internationalisation planned by Beijing the day will surely come when they are available on the High Street.

Related reading:
China wants the world to spend more renminbi, beyondbrics
Did the RMB just go global?, beyondbrics