SINGAPORE: Following Chinese President Xi Jinping's 2-day state visit to Singapore last week, both countries will strengthen cross-border Renminbi (RMB) flows and collaborate on capital market connectivity.

The Monetary Authority of Singapore (MAS) said in a press release issued on Monday (Nov 9), that there will be three key initiatives to expand channels for cross-border RMB flows and enrich the ecosystem to support greater use of the RMB outside China.

Chongqing Municipality, the site of the third government-to-government project will be extended the same cross-border RMB initiatives that are in place for Suzhou and Tianjin, where Singapore and China's first two joint projects are.

This means that Singapore-based banks will be allowed to lend RMB to companies in Chongqing and Chongqing-based companies may issue RMB bonds in Singapore and fully repatriate the proceeds.

This will provide a larger variety of financing solutions for Chinese corporates and help strengthen financial connectivity between Singapore and China’s western region, MAS said.

Secondly, Singapore's quota under (RQFII) will double from RMB 50 bilion to RMB 100 billion in response to the strong interest from Singapore-based asset managers and investors to invest in China, MAS added.

This larger quota will allow more fund managers in Singapore to offer investors a wider range of RMB fund products. It will also help bring greater liquidity to China’s capital markets and help to broaden their investor base.

MAS and the People's Bank of China agreed to renew and enhance their bilateral currency swap arrangement. The existing agreement was due to expire in March 2016.

CAPITAL MARKET COOPERATION

There will also be two initiatives to help Singapore and China to enhance capital market co-operation. MAS and the China Securities Regulatory Commission will institute regular high-level dialogue to come to a common understanding on regulatory issues that impinge on their respective capital markets. Both parties will also explore collaboration to broaden capital market offerings. With greater capital market connectivity, Singapore will be well-placed to support the needs of Chinese policy banks, corporates and investors under China’s One-Belt-One-Road initiative, MAS said.

MAS managing director, Ravi Menon, added: "In the next phase of our financial co-operation with China, we hope to replicate in the area of capital market development the success we have had in building the RMB ecosystem. There is great scope for China to tap on Singapore’s strong institutional investor base and established derivatives markets to facilitate the development of their own capital markets. There are also significant opportunities for exchanges from both sides to collaborate in a mutually beneficial way.” 

BANKS WELCOME MOVE

Standard Chartered said the new initiatives "will no doubt further strengthen Singapore’s position as an offshore RMB centre". "The extension of RMB cross-border scheme to Chongqing is a major step forward. Given the Municipality’s importance to the ‘One Belt, One Road’ strategy, we expect to see strong demand in financing including offshore loans," said the head of Transaction Banking for Singapore at Standard Chartered Bank Goh Beng Kim.

It also described the renewal and enhancement of the bilateral currency swap arrangement as positive. OCBC said the move to include Chongqing in cross-border RMB initiatives spells "immense opportunities" for businesses interested in investing there. The bank said it will be able to extend its RMB financing solutions to more companies, especially in Chongqing, in addition to Suzhou and Tianjin. "This is expected to boost cross-border RMB activities and further promote the internationalisation of the RMB,” said Mr Benjamin Quek, head of the China Business Office at OCBC Bank.

http://www.channelnewsasia.com/news/singapore/singapore-china-to/2248218.html