Hong Kong offshore RMB settlement swells to 250 billion yuan a day

HONG KONG Wed Dec 5, 2012 5:30am EST

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HONG KONG Dec 5 (Reuters) - Daily turnover in Hong Kong's yuan settlement system, which serves the global renminbi market, has surged as much as two-thirds since June as growing numbers of international banks and companies use the Chinese currency.

Trade in the RMB Real Time Gross Settlement (RTGS) system has reached 250 billion yuan ($40 billion) a day, the British Consulate-General Hong Kong in a statement on Wednesday in conjunction with an industry conference aimed at promoting wider use of the yuan, or renminbi.

In June, daily trading volume on the system was around 150-200 billion yuan.

Hong Kong authorities extended the operating hours of the trading system from 10 hours to 15 in June to help London and other European financial centres with their yuan settlements.

There has also been a substantial increase in yuan corporate accounts and foreign exchange trading in the London and Hong Kong markets over the course of this year, the Consulate-General said.

London now accounts for the largest amount of yuan payments conducted with Hong Kong and mainland China, as shown by the most recent data released by global transaction services organisation SWIFT.

The hefty increase in offshore turnover is likely to be welcome news for Beijing, which has been slowly but steadily moving to internationalise the currency.

Global interest in the yuan soared in the past few years as Beijing encouraged more countries and companies to settle trade deals in yuan. Banks from Hong Kong to Singapore and London scurried to cash in on the trend by offering yuan-related products to investors, betting that the yuan would continue to appreciate in value for some time to come.

But progress has stalled for much of 2012 as the yuan faltered against the U.S. dollar.

In recent weeks, authorities have taken several steps to breathe life back into the market, and the yuan has hit record highs onshore as the cooling Chinese economy shows signs of regaining momentum.

A further deepening and broadening of the offshore yuan market will in turn attract more interest from corporates, according to representatives from 10 banks and more than 60 businesses across Europe who attended the second meeting of the London-Hong Kong Renminbi Forum on Wednesday.

Global banks at the conference agreed to provide more tailored yuan services for European companies to extend their use of yuan in trade settlement and investment.

They also said they hoped to explore market solutions that can enhance yuan liquidity beyond Asian trading hours, including further development of standardised documentation for contracts and use of the cross-border collateral management arrangements.

"We do think the RMB journey to become a global currency is irreversible," said Ben Hung, chief executive officer of Standard Chartered Hong Kong.

Since the group's first meeting in May, there has been remarkable progress in terms of offshore yuan liquidity as well as its usage by European corporates, he added.

The bank recently conducted a survey among top managers of companies across Asia and Europe which found 76 percent of the interviewees were either conducting yuan business already or may consider doing so within half a year, while existing users were more willing to expand their usage than non-users.

China Construction Bank (CCB), the country's No.2 lender, launched a 1 billion yuan ($160.56 million) London-listed bond last week, becoming the first Chinese borrower to tap the London yuan bond market.

Standard Chartered expects offshore yuan bond issuance globally to reach 250 billion yuan in 2013, compared with 185 billion yuan so far this year.

China Construction Bank, Citi, Industrial and Commercial Bank of China, Barclays, Bank of China, Deutsche Bank, HSBC, J.P. Morgan, Royal Bank of Scotland and Standard Chartered Bank are the participating banks of the forum.

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