Global Securities Financing Conference – Asia
Hong Kong
RMB
– More Than Just Another Currency !
Mr. Esmond Lee
Executive Director – Financial Infrastructure Department
Hong Kong Monetary Authority
1
Agenda
• Role of RMB in International Trade,
Foreign Exchange & Payment Market
• Role of Hong Kong in Providing
Clearing and Settlement Facilities for
Offshore Renminbi
2
Role of RMB in International Trade,
Foreign Exchange & Payment Market
3
Global Economic Growth Forecasts
(% year-on-year)
Real GDP Growth
2014
2015
Forecasts
2016
Forecasts
Mainland
China
7.36
6.76
6.30
Asia
(ex-Japan)
6.0
6.0
6.0
US
2.39
3.14
3.06
Hong Kong
2.32
2.81
3.12
Euro area
0.88
1.45
1.65
Japan
-0.06
1.04
1.17
• China is now the 2nd
largest economy & the
largest trading nation in
the world.
• China’s economic growth
is still far ahead of the
others.
Source: IMF, World Economic Outlook Database, except Asia (ex-Japan) from January Consensus Forecasts
4
Polling Question :
Given the following key facts of 2014:
World GDP
USD 75 trillion
Mainland China GDP
USD 11 trillion equiv.
Question: How many years will Mainland China’s economy continue to
grow at around 7% in real terms or around 10% in money terms?
1) 10 more years
and the size of Mainland China’s economy becomes the
largest in the world (at around USD 30 trillions equivalent); or
2) 20 more years
and per capita GDP in Mainland China reaches the level
of the contemporary developed economy level (USD 40,000 per capita GDP)
or the size of economy at around USD 75 trillions equivalent, about the
same size of the world economy at present.
5
RMB as World Payments Currency
RMB breaking into the
top five world
payments currencies
overtook the Canadian
and Australian dollar
as global payments
currency in December
2014
Source: SWIFT Watch
6
Use of RMB in International Trade
Jan-Dec 2014
•
About 25% of
Mainland’s exports and
imports are settled in
RMB, of which 96 %
are intermediated
through Hong Kong
•
When compared with US
and Japan in terms of the
percentage of trade
settled in domestic
currency, there is a huge
potential for China trade
to be settled in RMB
(in RMB Bn)
China trade volume
26,454
Mainland’s exports and imports
settled in RMB
6,550
Mainland’s exports and imports
intermediated through Hong
Kong (in RMB)
6,258
7
Hong Kong’s Continuing Pivotal Role in RMB
Trade Settlement
Source: HKMA
•
In 2014, RMB trade
settlement handled by
Hong Kong banks
amounted to RMB
6,258.3 bn, up 63%
compared with 2013.
•
Turnover in Hong
Kong’s RMB RTGS
system increased
further, with daily
turnover reaching
RMB 888 bn in
December 2014.
8
Overview of Offshore RMB Markets
– Ascending Importance of RMB in Global FX Market
Turnover
Selected currencies, daily average in
April 2013（%）
Selected currency pairs, daily average in
April 2013 （%）
1. RMB was the
9th most
frequently
traded currency
globally in
April 2013.
1
Turnover of CNY was 2.2%
of the overall turnover, an
increase from 0.9% in 2010,
driven mainly by the
offshore CNY business
Source: BIS Triennial Bank Survey September 2013
2
2. Turnover of
USD/RMB
were more than
that of USD /
HKD.
9
Continuous Growth of Offshore RMB FX Market
•
While the figures of BIS Triennial Central Bank Survey were a bit outdated,
the recent figures derived from the RMB RTGS system indicated that the
RMB FX market continued its growth momentum in 2014.
•
According to the BIS Triennial Central Bank Survey (April 2013):
•
•
RMB FX turnover in offshore market was US$86 billion per day
•
Of which US$49 billion was conducted in Hong Kong
According to a back of envelop calculation deriving from the average daily
turnover of RMB RTGS in Hong Kong (US$ Bn):
(A) Normal business days
(B) US Holidays
Turnover relating to USD (A - B)
April 2013
Feb 2015
60
112
9
23
51
89
10
Growth of Offshore RMB FX Market in
April 2013 and Feb 2015
BIS Triennial
Back-of-envelope
Central Bank Survey
Calculation
(US$ Bn equivalent)
(US$ Bn equivalent)
April 2013
49
51
Feb 2015
Not available
89
Growth rate
Not available
+75%
11
RMB – Major Global Currency of Tomorrow
(Top 3 in each column are shaded in gradients according to their rank)
Economy
Currency
(a)
Share of
global payment
currency
(b)
Share of
global trade
(c)
Share of
global GDP
United States
USD
44.64%
10.43%
22.25%
Mainland China
CNY
2.17%
11.11%
13.23%
Japan
JPY
2.69%
4.03%
6.09%
Hong Kong
HKD
1.27%
2.88%
0.37%
United Kingdom
GBP
7.92%
3.15%
3.64%
Germany
EUR
4.88%
7.58%
Euro area
EUR
22.89%
17.11%
n/a
28.30%
Source: (a) SWIFT RMB Tracker, Dec 2014
(b) and (c) Imports, exports and GDP estimates for 2014, The World Factbook, The Central Intelligence Agency, USA
12
Role of Hong Kong in Providing Clearing
and Settlement Facilities for Offshore
Renminbi
13
Key Attributes of the Development of an Offshore
Centre
High
Low
Product Origination
Trading
Importance to
the development
of an offshore
centre
Low
Liquidity
Government’s
involvement
Settlement
High
14
Development of Offshore RMB Market:
Lessons Learnt from the Euro Dollar Market
Similarities
Differences
Euro dollar
Offshore RMB
Background
Strong global demand for
Euro dollar started in 1950s
Strong global demand for
CNH started in 2009
Product
Origination
Market driven
Market driven (facilitated by
the PBoC’s policy relaxation)
Trading
Market driven
Market driven (facilitated by
the PBoC’s policy relaxation)
Major
Liquidity
Providers
Major US banks
RMB CB
Settlement
CHIPS in New York
RMB RTGS System
in Hong Kong
15
PBoC’s Move to Expand the Offshore RMB Markets
Date
Economies
RMB Clearing Bank
Dec 2003
Hong Kong
BoC(HK)
Apr 2004
Macau
BoC(HK)
Dec 2012
Taiwan
BoC(Taipei)
Feb 2013
Singapore
ICBC(Singapore)
Jun 2014
UK
CCB(London)
Jun 2014
Germany
BoC(Frankfurt)
Jul 2014
Korea
BoCom(Seoul)
Sep 2014
France
BoC(Paris)
Sep 2014
Luxemburg
ICBC(Luxemburg)
Nov 2014
Canada
ICBC(Toronto)
Nov 2014
Australia
BoC(Sydney)
Nov 2014
Qatar
ICBC(Doha)
Nov 2014
Malaysia
BoC(KL)
Dec 2014
Thailand
ICBC(Bangkok)
•
PBoC has accelerated
its pace of expanding
the network of RMB
Clearing Banks
•
10 RMB Clearing
Banks were
appointed in 2014
•
What competitive
advantages do Hong
Kong have to
maintain its status as
a leading offshore
RMB centre?
16
Continuous Growth of RMB Businesses in HK
•
Benefited from the well-established RMB financial infrastructure (e.g. RMB RTGS
system, CMU, tendering platform and system linkage with China’s CNAPS, etc)
•
Hong Kong continues to provide a favourable environment for the development of
a wide range of RMB businesses
2013
RMB Deposits
(incl. Certificate of Deposit)
at year end
RMB Trade Settlement handled
by banks in Hong Kong
during the year
RMB Debt Securities
lodged with CMU
1,053
2014
↑10%
1,158
3,841
6,258
387
407
502
888
↑ 63%
↑ 5%
outstanding at year end
RMB RTGS
Average daily turnover
in December
Source: HKMA
↑ 77 %
17
RMB RTGS System in Hong Kong
Daily Turnover in December 2014
RMB 888 bn
Record Turnover on a Single Day (on 28 Nov 2014)
RMB 1,774 bn
l
Dec
Nov
Sep
Oct 2014
Aug
Jun
Jul 2014
May
Mar
Apr 2014
Feb
Dec
Jan 2014
Nov
Sep
Oct 2013
Aug
Jun
Jul 2013
May
Mar
Apr 2013
Feb
Dec
Jan 2013
Nov
Sep
Oct 2012
Aug
Jun
Jul 2012
May
Mar
Apr 2012
Feb
December 2014
RMB 888 bn
Jan 2012
2011
2010
2009
RMB bn
2008
950
900
850
800
750
700
650
600
550
500
450
400
350
300
250
200
150
100
50
0
As of December 2014, the average daily turnover has increased from 45.7% comparing to last year.
(Source: HKMA excluding holidays in HK, US and Mainland China)
18
Dim-sum Bond Market in Hong Kong:
The Largest Offshore RMB Bond Market
Outstanding RMB Debt Securities
Lodged with CMU
•
Over RMB 944.4 billion worth of RMB
debt have been issued in HK and lodged
with CMU since 2007
•
As of Dec 2014, outstanding RMB debt
securities lodged with CMU amounted
to RMB 407 billion
•
Issuers include CMoF, policy banks,
commercial banks (from Mainland and
HK), corporates (of local, mainland and
multinationals) as well as super-national
•
The RMB bond market in Hong Kong
is the largest outside Mainland China
End Dec 2014
RMB 407 bn
450
400
350
300
250
200
150
100
50
0
JanAprJul Oct JanApr Jul Oct JanApr Jul OctJanAprJul OctJanAprJul Oct
2010
2011
2012
2013
2014
(Source: HKMA)
19
Closing Remarks
We have to consider ourselves very fortunate that
Hong Kong is a financial centre
in China, of China and for China.
20
Polling Question :
Given the following key facts of 2014:
World GDP
USD 75 trillion
Mainland China GDP
USD 11 trillion equiv.
Question: How many years will Mainland China’s economy continue to
grow at around 7% in real terms or around 10% in money terms?
1) 10 more years
and the size of Mainland China’s economy becomes the
largest in the world (at around USD 30 trillions equivalent); or
2) 20 more years
and per capita GDP in Mainland China reaches the level
of the contemporary developed economy level (USD 40,000 per capita GDP)
or the size of economy at around USD 75 trillions equivalent, about the
same size of the world economy at present.
21
Thank You !
22