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As trade and investment between China and Southeast Asia continue to rise , United Overseas Bank’s (UOB) Renminbi (RMB) deposits in Singapore have also doubled over the last 12 months.
The growth in deposits is driven by UOB’s corporate clients from China who are expanding into Southeast Asia. These clients are increasing their RMB deposits in Singapore – a key regional offshore RMB hub – as they begin to use more of the Chinese currency for trade, settlement and working capital in a bid to reduce foreign exchange conversion and hedging costs. In 2015, nearly half of the companies UOB helped expand into Southeast Asia were from China.
Similarly, UOB’s financial institution clients are also accumulating RMB deposits in Singapore to diversify their funding base as the Chinese currency becomes more widely-accepted globally as a business and investment currency.
Mr Ben Chan, Head of RMB Solutions at UOB, said China’s increasing business connectivity with Southeast Asia has spurred greater adoption of RMB in the region. It has also strengthened the position of Singapore as a leading offshore RMB trading hub as the country is a strategic gateway for Chinese companies’ regional expansion.
“Despite the recent RMB devaluation, our clients are building up their deposits in the Chinese currency – a signal that trade and investment flows between China and Southeast Asia are expected to remain strong in support of the region’s expanding needs for infrastructure and consumer products.
“We expect to see continued interest from our Chinese corporate clients to invest in the region, particularly in industries such as real estate, trading, natural resources, and the consumer products and services sector, even as China is undergoing an economic slowdown, ” said Mr Chan.
To help UOB’s clients manage better their cross-border businesses and trade in RMB, the Bank has been strengthening its RMB capabilities over the past year.
One of the key initiatives undertaken by UOB was the set-up of a specialised RMB Solutions team in 2015. The team provides clients with advice on how policy and regulatory changes related to the use of RMB will affect their businesses. In addition, the team taps on the resources and expertise across UOB’s network to offer financial solutions in the areas of cash management, foreign exchange, investment and hedging.
UOB partners academic institutions in support of RMB internationalisation To promote the use of RMB as a currency for business, trade and settlement, UOB has partnered Nanyang Business School at the Nanyang Technological University Singapore and the China Centre for Financial Training of the People’s Bank of China to found Asia’s first research centre on RMB internationalisation.
Launched on 29 March 2016, the Centre for RMB Internationalisation Studies (CRIS) is located in Singapore and aims to help global business leaders and policy makers gain insight into the significance of RMB as an international currency.
Mr Chan said, “As bilateral trade and investment between China and Southeast Asia grow, we expect to see greater demand from Chinese and Southeast Asian companies for a diversified suite of offshore RMB products and services, such as deposits, loans, hedging and cash management solutions, for their cross-border businesses. The formation of the CRIS is timely in helping to accelerate the development of RMB financial solutions and the currency’s internationalisation.”