Chinese banks yearn to trade offshore renminbi
Analysts’ confidence that there is untapped demand from Chinese banks to trade offshore RMB is good news for R5, which last week announced a joint venture with Shanghai Clearing House designed to connect these institutions to the London FX market.
China’s ongoing acquisition of offshore assets and increasing influence in many parts of the world have created a need for its domestic banks as the primary financiers of a growth in demand by Chinese banks to more actively trade renminbi in all centres.
According to Wendy Tao, director of prime services at brokerage Invast Global, easier access to offshore RMB trading would reduce the discrepancy between the use of its currency and China’s status as the world’s second-largest economy.
“To an extent this would increase the involvement of marginal participants, but more significantly it would substantially improve liquidity as both existing and new participants would increase their trading in renminbi,” she says.
Arin Ray, an analyst in the securities and investments group at Celent, also accepts that easier access to offshore renminbi trading should lead to an increase in the number of market participants and improve liquidity.
To date, demand from Chinese-based financial institutions to promote and participate in offshore RMB trading has been focused on the main Asian trading centres of Hong Kong and Singapore.