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S'pore is top offshore centre for yuan-clearing

Publication Date : 30-04-2014


Singapore has overtaken London as the world's top offshore yuan-clearing centre outside of Hong Kong and China.

The value of yuan payments made through Singapore increased 375 per cent in March over the same month last year, making Singapore No. 1 in terms of the value of yuan payments worldwide, said financial payment network Swift yesterday.

London overtook Singapore in June 2012, but has slipped behind since February this year.

It had a 5.9 per cent share of global yuan payments last month compared with Singapore's 6.8 per cent share.

Hong Kong, with its proximity and links to China, is well ahead with a 72.4 per cent slice.

Singapore was designated an offshore clearing hub for the yuan - one of the world's fast-emerging currencies - last year as economic giant China moved to internationalise its currency.

The yuan strengthened its position as the seventh-ranked global payments currency in March, with a record high 1.62 per cent share of worldwide activity.

Swift's report showed that the yuan is gaining on the Canadian dollar, which has a 1.83 per cent share of global payment activity, and the Australian dollar at 1.84 per cent.

Chinese bank ICBC, which began offering yuan-clearing services here last May, has cleared 10 trillion yuan (US$1.6 trillion) since its services were launched and now clears about 300 billion yuan daily, up from just two billion yuan in the early days of the service.

In the first quarter of this year alone, the bank cleared 6.9 trillion yuan, 2.7 times more than it cleared in the whole of last year.

HSBC, the first bank to issue bonds in the Singapore offshore yuan market last May, said its yuan trade volumes have more than doubled in the past 12 months.

Singapore is a platform to facilitate wider use of the yuan in China-Asean trade and, in the longer term, the use of it in third-party trades not involving China, said DBS economist Nathan Chow.

As the yuan becomes more widely used, there will be a shift away from tracking clearing-centre developments to focusing on efficient processing of payments, said  Michael Moon, the director of Asia Pacific payments markets at Swift.

For example, error rates in the automatic processing of yuan payments tend to be higher than those of other currencies such as the United States dollar.

"This is due to difficulties in managing the Chinese language and character set, and clearing codes in domestic Chinese systems...

"(The use of the yuan) will continue to benefit from the adoption of international standards and harmonisation of payment and message processing," he said.

OCBC China economist Tommy Xie said the next stage of the internationalisation process will hinge on whether the yuan can become a successful investment currency.

"China has done quite a good job of promoting the (yuan) as a trade currency... The next focus will be to promote it as an investment currency, as part of China's plan to liberalise its capital account," he said.

A recent milestone was the Shanghai-Hong Kong cross-border investment programme, which allows Hong Kong investors to directly trade in selected Shanghai-listed stocks.

"The recent talk in the market is that China may further open its inter-bank bond market to allow wider participation by foreign investors," added Xie.

*US$1 = 6.26 yuan


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