A Singapore CNY hub would benefit China’s FX reserves
The South-east Asia city state could well become the next hub for offshore renminbi trade settlement, a move that would help ease China’s FX reserve burden. However, Beijing still needs to see more onshore exporters trading in renminbi.
Opening up Singapore as another offshore renminbi trade centre should ease China’s foreign exchange (FX) reserves problem, strategist in the region agree. The thoughts comes as news emerges China will soon appoint a Chinese bank to settle renminbi in Singapore.
The Peoples’ Bank of China (PBoC) will soon pick an approved Chinese bank to clear renminbi trades in Singapore, Goh Chok Tong, chairman of the Monetary Authority of Singapore, told the Singapore Business Times today (April 18).
At present, the only offshore hub where this can happen is in Hong Kong. Having a clearing bank domiciled in a country gives the local banks the ability to accrue greater reserves of renminbi and provides a wider avenue for renminbi to be traded.
The timing of the news in Singapore makes a lot of sense. On April 18, Zhou Xiaochuan, central bank governor for the PBoC, said the country was in need of reducing and diversifying its vast FX reserve holdings, which have risen by a further US$200 billion during March to hit US$3 billion.
This vast amount of money—which is still rising—has built as a consequence of the PBoC buying up most of the US dollars flooding into China at a set rate.