SINGAPORE, March 13 (Reuters) - Yuan deposits in Singapore jumped 70 percent in the last nine months of 2013, according to figures released on Thursday, as the city-state starts to make headway in its efforts to become a major offshore trading centre for the Chinese currency.
The Monetary Authority of Singapore (MAS) said deposits hit 200 billion yuan ($32.65 billion) at the end of December, catapulted by Industrial and Commercial Bank of China becoming the country's official clearing bank for the currency in May.
"The interest that we are seeing in renminbi stands in stark contrast to the situation two to three years ago, when there was much less interest or familiarity with renminbi opportunities," said Leong Sing Chiong, an assistant managing director at MAS, during a conference on the offshore yuan market.
Hong Kong is still by far the dominant centre for the offshore yuan market, accounting for around 70 percent of transactions and holding around 900 billion yuan in deposits, but other centres are starting to gain ground.
Singapore's growth has been helped by a change in Chinese regulations last year that allowed multinational companies (MNCs) operating in China to store excess yuan holdings offshore in order to centralise their cash management.
"Given Singapore's role as a hub for MNCs, many of whom retain regional treasury centres here, we are seeing strong growth," said Leong.
He added that loans denominated in yuan rose just under 25 percent between March and December 2013 to hit 300 billion yuan, meaning Singapore accounted for around 60 percent of yuan trade finance outside of China and Hong Kong.
Singapore is unlikely to ever surpass Hong Kong as a yuan centre, but is hoping to capitalise on the growing trade between China and Southeast Asia.
Since ICBC became the clearing bank, six yuan-denominated bonds, termed 'Lion City' bonds, have been issued in Singapore, raising 6 billion yuan, according to Thomson Reuters data.
China has been stepping up its efforts to promote its currency to foreign investors, with the aim of it achieving a similar status to the U.S. dollar.
The yuan has now become one of the world's 10 most-used currencies for payments, overtaking the Singapore dollar and Hong Kong dollar, according to global transaction services organisation SWIFT.
In Asia it is making particular headway in trade finance, with SWIFT reporting that 18 percent of intra-Asian trade was in yuan in September 2013, compared to 5 percent in January 2012. The U.S. dollar dropped from 90 percent to 79 percent during the same period.
The offshore yuan market has come in for scrutiny though in recent weeks, with the currency's sudden slide fuelling worries that holders of offshore derivative products could be facing billions of dollars in losses.
China's central bank surprised global markets in February and early March when it engineered a sharp decline in the yuan, a move traders have said was aimed at deterring speculators betting on non-stop yuan appreciation.
Still, foreign exchange strategists polled by Reuters last week expect Beijing to allow the currency to modestly appreciate by around 2.3 percent over the next 12 months.
$1 = 6.1450 Chinese Yuan Reporting by Rachel Armstrong and Saikat Chatterjee; Editing by Kim Coghill