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FX comment: Everything you always wanted to know about RMB but were afraid to ask

October’s Euromoney magazine carries an article by Chris Wright surveying the liberalization of the renminbi market. It should be read in its entirety. Subscribers will get their hard copy soon, or they can read it online here. Here’s a précis for those of you who are truly time-pressed.

The pace of RMB liberalization is increasing: in January 2009 there was the CNY200 billion currency swap between the PBOC (People’s Bank of China) and the HKMA (Hong Kong Monetary Authority); and in June 2009 the pilot scheme was launched for the settlement of cross-border trade in renminbi.

In February this year new rules from the HKMA allowed further development of offshore renminbi business by participating banks – one effect was to open the renminbi bond market to eligible issuers in Hong Kong.

Then, on July 19, the HKMA and PBOC signed the Supplementary Memorandum of Cooperation. This increased the pool of renminbi holders to include non-bank financial institutions, allowing them to “open renminbi accounts and receive non-trade-related renminbi conversion. Also, restrictions were removed on transfers between Hong Kong-based renminbi deposits”, meaning that Hong Kong banks could net out positions with each other. This in turn means the beginning of true offshore trading within Hong Kong.

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