FX

China agreed to $12.8bn of deals with the UK during the British prime minister’s state visit, RMB returns as the fifth most used global payments currency, and Aberdeen Asset Management grabs Rmb5.3bn ($842.8m) new renminbi qualified foreign institutional investor (RQFII) quotas.

Data releases by a number of monetary authorities show uneven turnover in RMB-denominated FX transactions around the globe.

China’s banking regulator prioritises deleveraging of financial institutions and individuals, the Chinese government tightens grip on overseas investment with new guidelines, and regulators encourage financing for the maritime industry in an effort to promote the Belt and Road Initiative.

China Foreign Exchange Trade System (CFETS) insists that the counter-cyclical factor remains in place, the Chinese central bank introduces a new limit on cross-border financing for commercial banks, and China Securities Regulatory Commission (CSRC) reportedly cracks down on risky private bond issuance.

Promoting RMB internationalisation is necessary for China to safeguard its national security, Anthony Leung, chairman and CEO of Nan Fung Group and former financial secretary of Hong Kong, told the Asian Financial Forum on January 16.

More central banks may add the Chinese currency to their FX reserves following Bundesbank’s indication to do so, Yifan Hu, regional chief investment officer and chief China economist at UBS, said at the Asian Financial Forum (AFF) on January 16.

The State Administration of Foreign Exchange (Safe) has poured cold water over claims that China may stop buying US Treasury bonds. But there is a need for the country to diversify its debt portfolio in the long run if it is serious about promoting RMB internationalisation, economists told GlobalRMB.

The People’s Bank of China has reportedly tweaked the way it sets the daily renminbi fix against the dollar, abandoning a key control mechanism it introduced last May. While some analysts hail the move as a sign of confidence from China, others say it exposes the failure of the PBoC’s previous FX policy.

China has relaxed access to the onshore renminbi (CNY) foreign exchange market for overseas banks based in Cambodia, Kazakhstan, Mongolia and Thailand, all countries that fall under the Belt and Road initiative, GlobalRMB has learned.

Offshore renminbi liquidity could get a shot in the arm as Shanghai Clearing House (SHCH) joins hands with R5, a London-based FX platform, to create a link between the FX markets in the UK and China. The move is also set to widen Chinese banks’ access to global currencies.

China will not amend the RMB trading band in the near term, Zhou Xiaochuan, governor of the People’s Bank of China, said on October 19. Zhou made the remarks shortly after the central bank defended its recent changes to the FX rate mechanism in a report.

The arrival of Typhoon Hato in Hong Kong on Wednesday suspended equity trading in the city, but the impact on the offshore RMB market was limited.