Hong Kong became the first offshore yuan trading hub in 2004, followed by London in 2011
According to the latest SWIFT RMB Tracker (February 2014), the top offshore RMB hub remains London (excluding Hong Kong and Mainland China). Singapore is right behind London in weight and rank and is gaining volume. Singapore yuan clearing volume is set to reach between 25 trillion to 30 trillion yuan by the end of this year; that compares with Hong Kong’s volume of about 80 trillion yuan last year. (See Chart Below).
For payments, the RMB now ranks 7th worldwide, closely followed by the Swiss Franc (January 2014). However, it is moving up the payment ranks quickly. Just as close back as September 2013, the yuan was the 12th most-used payment currency. The rapid internationalization of the Chinese currency is one of the most fascinating developments in the FX world. It has far reaching implications for all involved in foreign exchange trade. (See The Payment Graph Below).
RMB is exciting not only in new products and RMB denominated assets being offered. Further, a more freely floating currency should see Spot FX volumes surge when you throw in the world’s largest creditor nation, massive trading partner to the world, and 2nd largest economy. This is already happening as Singapore naturally looks to gain an advantage as an offshore RMB hub on other Asian nations.
The GM of the sole RMB clearing bank in Singapore Industrial and Commercial Bank of China confirms this, he states: “There will be a great part for Singapore to play for [yuan] settlement. You will see more yuan-denominated products to come – bonds, securities, RQFII products, wealth management products, and structured products,” said Zhang Weiwu, the general manager at ICBC Singapore.
He further goes on to say: “”Hong Kong is undoubtedly the big brother among the offshore centers now. But Singapore’s yuan business is potentially huge given its position as a gateway to Southeast Asia and its huge trade linkage with China,” Zhang said. LeapRate will continue to report on all relevant RMB developments as it relates to all aspects of foreign exchange transactions and the FX trading business.
For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.