The Standard Chartered Renminbi Globalization Index (RGI)* reached 1,882 in May, up 3.7% from the previous month and 84.4% year-on- year. The index remains on an uptrend, but at a slower pace as deposits and dim sum issuance face summer lull. The RGI’s growth rate was slowest in seven months, but SCB expect the slowdown to be transient.

Off-shore demand

Europe posted strong corporate demand for renminbi liquidity management solutions, which are now all in place – inbound or outbound, renminbi or foreign currency. Latest SWIFT numbers confirm strong cross-border renminbi payments with European centres. Also, renminbi payments through the US more than doubled in the last four months, outperforming the rest of the offshore centres. 

Offshore renminbi bonds have been expanding their footprints, the bank adds. Taiwan authorities have been loosening a number of regulatory restrictions on foreign participation of Formosa bonds – non-Taiwanese dollar denominated bonds issued in Taiwan’s onshore market. It further expects Formosa bond issuance to reach 15 billion yuan-20 billion yuan this year and Taiwan renminbi deposits to reach 350 billion yuan.

SCB expectations

In their note on the Renminbi Global Index (RGI) results, SCB commented:

• in terms of CNY valuations, SCB expect the currency to resume its appreciation trend later into 2014 and in 2015 as China’s embedded trade surplus is reflected in a seasonal upturn in net USD selling in the onshore FX market. 
• we expect the tentative signs of further liberalizations of the FX rate, such as daily CNY fixing, which may be forthcoming with the strategic economic dialogue between the US and China in early July
• after a strong first half, dim sum issuance experienced quiet sessions amid the World Cup and the summer lull. Primary issuance declined to 28 billion yuan in June from 65 billion yuan the previous month. The bank expects issuance to stay slow in the foreseeable future, and maintain our full-year forecast at 550 billion yuan-580 billion yuan.

(*: Standard Chartered launched the RGI in November 2012. Prior to adding New York, the Index covered four markets in offshore renminbi business: Hong Kong, London, Singapore and Taiwan. It measures business growth in four key areas: deposits (denoting store of wealth), dim sum bonds and certificate of deposits (as vehicles for capital raising), trade settlement and other international payments (unit of international commerce) and foreign exchange (unit of exchange).)