Clearstream, the financial market infrastructure already active in Asia since 1990, this week sets out its market approach to developing and delivering solutions to help support the internationalisation of the Renminbi (RMB).
The market approach involves bringing together market providers and participants from across the finance community to collectively enable foreign investors to further invest in the Chinese currency, help develop solutions to increase offshore RMB liquidity, enhance the depth and breadth of RMB products and services and facilitate both growth and maturity in the offshore RMB bond markets.
To deliver this market approach, Clearstream is actively seeking partners to join in building and implementing the components that will help establish and facilitate an international offshore RMB market. As part of its market approach, Clearstream also itself intends to leverage its international infrastructure to act as a reciprocal gateway between Chinese and non-Chinese investors and issuers and other market participants.
Since the launch of the offshore RMB programme in 2009 and China's recent new measures aimed at internationalising its currency, there has been impressive appetite for this growing world currency. China is the second largest economy in the world with its currency currently standing in 8th place as a world payment currency by value, having risen from 20th place since 2012, according to SWIFT's statistics. Yet the RMB accounts for less than 9% of global trade finance volume. This compares to the USD, which accounts for more than 81%, so it is clear that there is a large gap between the currencies of the world's two largest economies, indicating clear growth potential for the RMB at the international level and with observers citing it as the next major international currency.
As part of delivering on its market approach, Clearstream's well-established partnerships with the global banks, domestic infrastructures and local agents can help boost Offshore RMB cash management capabilities by ensuring there are sufficient cash reserves available to participants both during the Asian business day, and extending into European trading hours. To help develop and eexecute its RMB market approach, Clearstream is also working with the trade finance industry, investment funds industry and the global securities financing industry such as collateral management providers. Simultaneously, Clearstream can significantly facilitate the efficiency and liquidity of the Offshore RMB cash market by funding the demand for Offshore RMB in one region with supply of Offshore RMB from another region and secured by collateral held on the Clearstream collateral management platform.
Services and products to be explored include triparty repo solutions for increasing interbank market liquidity in the RMB, cash management, bonds issuance and the development of new offshore products and services including in the funds area.
Philip Brown, Head of Global Client Relations and Executive Board Member, Clearstream, comments: "A cornerstone of Clearstream's business strategy is to facilitate and support our customers' increasing demand to invest in the Asian markets. The internationalisation of the Renminbi that the Chinese authorities pursue is currently one of the most exciting developments in this space that we, as a core market infrastructure provider, have been supporting since the early days. We have a clear vision and market approach to help take this agenda forward - together with partners from across the market we intend to contribute to the development of a truly international offshore market for the Chinese currency."
Clearstream has a long-standing presence in Asia: the company opened its first office in the region in Hong Kong in 1990. Clearstream also has representative offices in Dubai (since 1995) and Tokyo (since 2007) and a branch in Singapore (since 2009) - the company's operational hub for the region. Clearstream offers access to the following markets in Asia: China (B Shares), Hong Kong, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea and Thailand. 20 percent of Clearstream's ICSD revenues are currently coming from Asia.