Competition for offshore renminbi (RMB) business is getting fiercer as financial centres seek to grab a share of the pie and capitalise on Beijing’s ambition to make the RMB a global currency, reports Bank of New York Mellon (BNY Mellon).
With billions of dollars in transaction and servicing fees up for the grabs the race is on it says, in a commentary by Fred DiCocco, the bank’s Asia-Pacific head of sales and relationship management for treasury services business.
DiCocco predicts that London and Singapore will emerge as the two dominant offshore RMB hubs alongside Hong Kong by 2020.
“The impact the continued internationalisation of the RMB will have on the global monetary landscape cannot be overstated,” he says. “To give this some context, around 20% of China’s US$4 trillion in annual foreign trade is conducted in RMB today, a figure which could surge to over 30% as early as next year and see the RMB become one of the top three global trade currencies. It would not be naïve to suggest that it could rise to as much 50% by 2017.
“Hong Kong is still the undisputed number one offshore RMB payments centre with a 71% market share, but its leadership position is slowly eroding having dropped by around 10% over the last three years with London and Singapore both establishing themselves as strong alternatives. Whilst their market shares are minor when compared with Hong Kong today, languishing in single digits, I expect we will see both centres surge forward and break away from the rest of the pack over the next few years. By 2020, it is possible we will see London and Singapore join Hong Kong to form the top three RMB offshore centres by market share.
“With China-EU trade representing the second largest global economic co-operation pact, and with more than 40% of all global foreign exchange (FX) trading taking place in London, it was no surprise two years ago to see London take the initiative to position itself as the main offshore trading centre for RMB. It quickly rose to a commanding position and assumed the second largest centre in respect of market share.”
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