12 Jun 2015
China: Key takeaways from PBoC’s RMB internationalisation report – Nomura
FXStreet (Barcelona) - Research Analysts at Nomura review the PBoC’s first annual report on RMB internationalisation and further share the key takeaways.
Key Quotes
“The PBoC will continue to liberalise China’s capital account, and key measures include (1) opening channels for individuals to invest overseas – the PBoC is considering launching a trial programme for qualified domestic individual investors (i.e. so-called QDII2); (2) improving the “Shanghai-Hong Kong Stock Connect” and pushing out the “Shenzhen-Hong Kong Stock Connect”, while allowing non-residents to issue non-derivatives-related financial products in China; (3) amending foreign exchange management ordinance, lifting most ex ante approval requirements, and establishing an effective ex post monitor and macro-prudential management system; (4) making it easier for foreign institutional investors to invest onshore capital market; and (5) removing unnecessary policy barriers and providing good infrastructure to facilitate RMB internationalisation."
“The PBoC will also continue to push forward the marketisation reform of the RMB exchange rate mechanism and enhance the two-way flexibility of the RMB exchange rate.”
“The PBoC will promote RMB to be accepted in the currency basket of the IMF’s Special Drawing Rights (SDR) and support other central banks and monetary authorities to include RMB as part of their foreign exchange reserve assets. The PBoC will also examine the possibility of removing the quota limit for other central banks and monetary authorities to invest in the onshore interbank bond market.”
“The PBoC also supports foreign institutions that issue RMB bonds in the onshore market and will carefully expand trials for domestic companies to borrow overseas funds in RMB. Moreover, the PBoC will gradually widen the scope of foreign institutions that invest in onshore interbank bond market and steadily increase the size of investment. Also, it will gradually ease restrictions for domestic institutions to issue RMB bonds overseas.”
“These statements are generally in line with our view of a continuous capital account liberalisation in China. On the inclusion of RMB in the SDR currency basket, it is not clear this will happen this year because of the still large gap between the IMF’s requirement and the current situation of the RMB’s convertibility under the capital account. However, we believe there is a high probability of this happening within a year or two, as the PBoC brings forward capital account liberalisation.”
Key Quotes
“The PBoC will continue to liberalise China’s capital account, and key measures include (1) opening channels for individuals to invest overseas – the PBoC is considering launching a trial programme for qualified domestic individual investors (i.e. so-called QDII2); (2) improving the “Shanghai-Hong Kong Stock Connect” and pushing out the “Shenzhen-Hong Kong Stock Connect”, while allowing non-residents to issue non-derivatives-related financial products in China; (3) amending foreign exchange management ordinance, lifting most ex ante approval requirements, and establishing an effective ex post monitor and macro-prudential management system; (4) making it easier for foreign institutional investors to invest onshore capital market; and (5) removing unnecessary policy barriers and providing good infrastructure to facilitate RMB internationalisation."
“The PBoC will also continue to push forward the marketisation reform of the RMB exchange rate mechanism and enhance the two-way flexibility of the RMB exchange rate.”
“The PBoC will promote RMB to be accepted in the currency basket of the IMF’s Special Drawing Rights (SDR) and support other central banks and monetary authorities to include RMB as part of their foreign exchange reserve assets. The PBoC will also examine the possibility of removing the quota limit for other central banks and monetary authorities to invest in the onshore interbank bond market.”
“The PBoC also supports foreign institutions that issue RMB bonds in the onshore market and will carefully expand trials for domestic companies to borrow overseas funds in RMB. Moreover, the PBoC will gradually widen the scope of foreign institutions that invest in onshore interbank bond market and steadily increase the size of investment. Also, it will gradually ease restrictions for domestic institutions to issue RMB bonds overseas.”
“These statements are generally in line with our view of a continuous capital account liberalisation in China. On the inclusion of RMB in the SDR currency basket, it is not clear this will happen this year because of the still large gap between the IMF’s requirement and the current situation of the RMB’s convertibility under the capital account. However, we believe there is a high probability of this happening within a year or two, as the PBoC brings forward capital account liberalisation.”