The initiatives, which were unveiled during the president of the People’s Republic of China Xi Jinping’s visit to Singapore last week, aim to develop channels for renminbi flows with China.
The city state’s quota under the RQFII scheme will be doubled from RMB50bn (£5.2bn, $7.9bn, €7.3bn) to RMB100bn, which is said to be a response to interest from Singapore-based asset managers and investors wishing to invest in China.
This larger quota will give fund managers in Singapore the chance to offer investors a wider range of renminbi fund products, while also helping to broaden the country’s investor base.
Next phase
“Singapore and China have achieved remarkable success in renminbi cooperation thus far,” said the Monetary Authority of Singapore managing director, Ravi Menon.
“It has benefitted our financial centre while supporting the gradual and orderly internationalisation of the renminbi.
“In the next phase of our financial co-operation with China, we hope to replicate in the area of capital market development the success we have had in building the renminbi ecosystem.”
Under another initiative, Singapore banks will now be allowed to lend renminbi to companies in the south west city of China, Chongqing. These companies may also issue renminbi bonds in Singapore, therefore strengthening financial connectivity between Singapore and China’s western region.
Thirdly, the MAS and the People’s Bank of China have agreed to renew and enhance the bilateral currency swap arrangement between the two central banks.
The existing agreement was signed in March 2013 and is due to expire in March next year.
Anchor confidence
“By providing timely liquidity support to market participants, a stronger agreement will help anchor market confidence as Singapore’s renminbi market continues to grow,” the MAS said.
The China Securities Regulatory Commission (CSRC) and the MAS also agreed to converse regularly as they look to reach a common understanding on regulatory issues that impinge on their markets.
Mutually beneficial
“There is great scope for China to tap on Singapore’s strong institutional investor base and established derivatives markets to facilitate the development of their own capital markets,” said Menon.
“There are also significant opportunities for exchanges from both sides to collaborate in a mutually beneficial way.”
