China-Singapore Sign RMB Cooperation Deals

Posted by Reading Time: 4 minutes

Apr. 10 – The People’s Bank of China (PBC) and the Singapore Branch of the Industrial and Commercial Bank of China (ICBC) signed the RMB Clearing Agreement on April 2, which allows financial institutions in Singapore and China to conduct cross-border RMB settlements through clearing banks, in addition to the agent banks.

In February this year, the PBC appointed the ICBC Singapore branch as the RMB clearing bank in Singapore, which marks a significant step forward in the internalization of the RMB as it is the first time China’s Central Bank has appointed an RMB clearing bank in another country. The ICBC Singapore branch is now allowed to provide RMB clearing services to participating banks and their customers for the next five years. Previously, Hong Kong and Taiwan are the only places outside the mainland China with designated RMB clearing banks.

“We can expect the range of RMB-denominated product offerings to expand, as regional corporations raise RMB financing through bond issuances and equity listings to tap the strong investor base in the region,” said Ravi Menon, Managing Director of the Monetary Authority of Singapore (MAS).

Also on April 2, the PBC and the MAS signed a cooperation memorandum on RMB business cooperation (“Memorandum”).

Under the Memorandum, the MAS and the PBC will cooperate closely in reviewing the conduct of RMB businesses and clearing arrangements in Singapore. The two central banks also agree to establish a regular dialogue to review RMB liquidity conditions and discuss issues concerning the stability of the RMB market.

According to the PBC, Singapore possesses unique advantages in establishing the offshore RMB center. Specifically:

  • Singapore is the world’s fourth-largest international financial center
  • Singapore is Asia’s second-largest foreign exchange center after Tokyo
  • Singapore possesses a sound economic, legal and regulatory environment
  • Singapore has a stable and highly efficient financial system
  • Singapore has accumulated rich experience in financial management and operations

Meanwhile, Singapore is a major trading partner of China. In 2012, bilateral trade between China and Singapore reached US$80 billion, making China the third largest trading partner of Singapore.

In addition, as Singapore is the only international financial hub in the ASEAN region, its RMB service offering can cover the entire ASEAN region; therefore, designating an RMB clearing bank in the country will definitely promote the widespread use of RMB in trade between China and ASEAN.

In recent years, the RMB market in Singapore has witnessed rapid development, and various international and Singapore local banks have launched RMB deposit and loan products. As of the end of June 2012, RMB deposits in Singapore totaled RMB60 billion. Meanwhile, the cross-border RMB volumes handled in Singapore ranked second among overseas regions, behind only Hong Kong. Last month, the MAS and the PBC doubled the size of their bilateral currency swap facility to RMB300 billion from RMB150 billion, allowing MAS to provide RMB liquidity to banks in Singapore.

Over the past few years, the competition to become a major center for offshore RMB transactions has intensified as financial centers are seeking to capitalize on the rapid growth of the offshore RMB bond market. The PBC believes the signing of the two documents will help Chinese and Singaporean enterprises and financial institutions to use RMB for cross-border transactions and further facilitate the liberalization and convenience of trade and investment.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.

For further details or to contact the firm, please email china@dezshira.com, visit www.dezshira.com, or download the company brochure.

You can stay up to date with the latest business and investment trends across Asia by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.

Related Reading

Trading With China
This issue of China Briefing Magazine focuses on the minutiae of trading with China – regardless of whether your business has a presence in the country or not. Of special interest to the global small and medium-sized enterprises, this issue explains in detail the myriad regulations concerning trading with the most populous nation on Earth – plus the inevitable tax, customs and administrative matters that go with this.

Hong Kong and Singapore Holding Companies
In this issue of China Briefing Magazine, we take a closer look at the benefits of both Hong Kong and Singapore holding companies, how to establish and maintain a company in each of these jurisdictions, and the relevant double tax agreements.

China’s Import and Export Licensing Framework

China & Singapore Implement Mutual Recognition Arrangement Program