The Chinese renminbi marched to a record high against the US dollar on Thursday, adding to a recent burst of appreciation and spurring talk that Beijing is poised to soon let the currency trade more freely, reports Simon Rabinovitch.
Over the past three weeks the renminbi has gained 0.6 per cent against the dollar, an unusually fast rise for the tightly controlled Chinese currency and one that has come even as the dollar has been relatively strong. Continue reading »
Dim sum benchmark launch could bring ETFs into a growing market
Dim sum bonds showed signs of fatigue last year, despite their young age. Issuance of offshore renminbi bonds grew compared to 2011 – but only by a whisker, while a summer sell-off in the Chinese currency prompted a spike in borrowing costs. On both counts, it was a far cry from the market’s early days of breakneck growth and barely visible coupons.
But 2013 has begun on a more steady footing, with growth returning and yields falling once again. And soon the market will get a further boost – with the launch of benchmark index products. Continue reading »
Guest post: soaring reserves put renminbi back in the spotlight
By Eswar Prasad and Karim Foda
Last year was a calm one for the renminbi. China’s trade and current account surpluses fell below 3 per cent of GDP in 2012, suggesting that the economy was on its way to resolving its protracted external imbalances. Capital inflows eased off and capital outflows rose as the government liberalised controls on outflows. Net accumulation of foreign exchange reserves was just over $130bn, compared to $330bn in 2011 and an average of nearly $450bn per year in the four years preceding that.
But the surge in reserves in the first quarter of 2013 has put the renminbi is back in the spotlight. Rising capital inflows have led to a surge in accumulation of reserves as China’s central bank has attempted to fend off pressures for the renminbi to appreciate. Continue reading »
Brazil-China swap: little practical application
It’s been nine months in the making. But on Tuesday Brazil and China finally sealed a R$60bn ($30bn) currency swap that was first proposed at last year’s Rio+20 earth summit.
While the swap carries enormous geopolitical and diplomatic symbolism – it essentially represents a monetary consummation of the growing trade between the two giants – in practice though, it will change little. Continue reading »
China and Brazil: finally delivering a currency swap?
It’s been a good nine months in gestation, so maybe next week’s Brics summit will be the right moment for China and Brazil to deliver their promised Rmb190bn ($30bn) currency swap.
Hong Lei, China’s foreign ministry spokesman, hinted as much on Friday when he said an agreement would be signed “soon”. Continue reading »
International banks keen on new offshore RMB investment programme
International banks are likely to jump at the opportunities offered by China’s latest move to liberalise the renminbi – this month’s decision to open the Renminbi Qualified Institutional Investor (RQFII) programme to non-Chinese financial companies in Hong Kong.
That in turn will allow them to offer renminbi-denominated funds to their clients around the world. This is a big change – until now only Chinese brokers and asset managers have been able to offer these services. Continue reading »
BoE plans renminbi swap line
The Bank of England on Friday threw its weight behind efforts to develop London as an offshore renminbi centre with a declaration that it’s ready to enter into a foreign exchange swap agreement with China’s central bank.
The UK would join a growing number of countries with swap arrangements, including Russia, India, Brazil and Japan. Britain would be the first developed western nation on the list – but others won’t be far behind. Continue reading »
China: first cross-border rmb loans
China has approved the first batch of cross-border renminbi loans with Hong-Kong-based banks lending a total of Rmb2bn ($320m) to companies in the ultra-modern Qianhai district of Shenzhen.
The scheme is part of Beijing’s programme to gradually liberalise the currency and China’s financial system. As China Daily reported on Tuesday, “Qianhai is a $45 billion ‘mini-Hong Kong’ project approved in June to test, among other things, freer yuan use and capital account convertibility.” Continue reading »
HK and China: a special relationship
From time to time concerns are raised that Hong Kong could one day be eclipsed by financial centres on the Chinese mainland, notably Shanghai. But such fears are overblown according to a new report from HSBC’s Donna Kwok, which says Hong Kong has quite enough advantages to avoid being put in the shade any time soon. Continue reading »
[video] RMB grows in influence
As China grows in economic and political influence, Beijing is determined to turn the renminbi into an international force that might one day rival the US dollar as the world’s most important currency. The FT’s Simon Rabinovitch examines the motives and methods of the internationalisation of the RMB.
ICBC: bridging China and Argentina
Buying banks is “no rose garden. We consider it a battleground”. So says Jiang Jianqing, president of China’s ICBC, the world’s biggest bank (by market capitalisation, deposits and credits).
So far, his takeover of 80 per cent of Standard Bank Argentina appears to have been more genteel – after all, ICBC has a stake in Standard Bank Group in South Africa. Continue reading »
Renminbi faces US election test
How important has the US presidential election been to the recent record-breaking run of the Chinese renminbi?
Beijing officials have repeatedly denied that they have been steering the currency to reduce economic tensions with Washington. But the charts seem to suggest otherwise. With Americans going to the polls on Tuesday, the truth will soon be out. Continue reading »
Guest post: The redback rally looks unsustainable
By Mitul Kotecha of Crédit Agricole.
It was not so long ago when expectations for the Chinese currency, the renminbi, had shifted to a prolonged period of weakness against the US dollar. This corresponded with the view that the Chinese authorities would use their currency as a tool to help cushion the impact of an exports slowdown.
All of this changed in late July from when the RMB began a multi-month period of appreciation at a pace that has astounded many analysts. Continue reading »
Guest post: the new renminbi landscape
By Eswar Prasad and Karim Foda
The renminbi is in the spotlight again. The US Presidential election campaign features both candidates vowing to be tough on China, with Mitt Romney promising to “call China a currency manipulator on day one” if elected.
In fact, based on data for this year, there isn’t a strong basis for a charge of currency manipulation. Meanwhile, with growth slowing and the leadership transition taking many unexpected twists, there are concerns about capital flight from China that could also have implications for the renminbi. Continue reading »
China capital: Fright and flight?
The shadowy world of Chinese capital flows has receded a little further into the dark.
Tracking speculative flows into and out of China has never been an easy task but new developments in the country’s markets have made it even more complicated. In the ensuing confusion, it can look as though Chinese investors are in a state of panic, rushing to the exit with suitcases full of cash. The reality is a little bit duller.
Health warning: We are about to dive into a lot of numbers and wonkery. Continue reading »
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