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London, 4 November 2015
China’s journey towards the internationalisation of its currency continues, but challenges remain. Offshore RMB centres will need to continue to evolve to stay relevant, according to a new report released today.
Authored by Dr. Kathleen Walsh and Mr. Geoff Weir, the 150-page report, Renminbi Internationalisation and the Evolution of Offshore RMB Centres: Opportunities for Sydney, includes in-depth analysis of other offshore RMB centres and how they are positioning themselves to attract business. It considers:
- The likely pathway to and timing for RMB internationalisation
- Why the US is not pushing to become an offshore centre
- Whether recent turmoil in China's equity market and the Governments’ response will throw RMB internationalisation off course
- What the imminent IMF decision on whether to include RMB in SDR basket of currencies will mean
- Whether China will become a major component of global investment benchmark indices and the implications
- What all this means for offshore RMB hubs like HK, Singapore, Sydney and London.
Geoff Weir said that there were clear front-runners in the race for offshore RMB business beyond Hong Kong and Singapore. Luxembourg has become a global leader in funds management and RMB capital market activity, while London, being the largest global foreign exchange centre, is focusing on offshore RMB foreign exchange business. Other centres will also need to carve out niches for themselves if they are to succeed in the medium to longer term.
“As with other currencies, offshore RMB activity will gravitate to those centres where the liquidity is
and to centres that have effectively found areas of activity in which to specialize,” said Geoff Weir. “Over the next 5-10 years, financial services companies that gain an early mover advantage through building up a brand name and presence in China and establishing commercial relationships with Chinese companies and consumers of financial products will be the winners once the RMB is fully internationalised and “official” offshore RMB hubs become largely irrelevant”
The second part of the report examines how Australia can best carve out a niche in this increasingly competitive environment and discusses some key changes that will be necessary for Australia to take full advantage of its offshore RMB centre status.
The report was funded by the Australian National University, the NSW Department of Industry and the Sydney Business Chamber. King & Wood Mallesons and the Financial Services Knowledge Hub provided in kind support. It is a follow-up to a 2014 report by the authors on Renminbi Internationalisation: Pathways, Implications and Opportunities, which was funded by the Centre for International Finance and Regulation (CIFR).
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