Standard Chartered today announced that the Standard Chartered Renminbi Globalisation Index (Bloomberg: SCGRRGI <index>), or the RGI, was at 2230 as of November, up a modest 5% year-to-date, but down 5.3% versus October, the largest m/m drop on record. Looking ahead, December might be equally disappointing, judging by the lingering headwinds the RGI likely faced, including shrinking deposits, weak Dim Sum issuance and disappointing cross-border payments. The RGI is set to register flat yearly growth at best for 2015, after growing 56% in 2014.
Renminbi trade settlement – a key component of cross-border payments – rose m/m in November for those looking for positive signs of seasonality. However, October and November volumes were still, collectively, much lower than volumes during the first three quarters of 2015. Renminbi trade settlement recently dipped into negative y/y growth; as a percentage of total China goods trade, the Renminbi share fell to 21% in November from 29.4% in Q3-2015. More limited offshore bank access to onshore liquidity pools via repo and direct borrowing from affiliated banks could also have weighed on FI-initiated payment flows.
The Chinese authorities began publishing the CNY EER via the China Foreign Exchange Trading System (CFETS) in December 2015, marking the beginning of the next phase of FX policy by the China authorities. We expect the authorities to aim to step away from FX intervention over time and allow volatility in USD-CNY to pick up as they shift from a bilateral USD-CNY focus to a trade-weighted focus. It is increasingly likely that the CNY-CNH basis may persist near-term as authorities seek to manage the weaker CNY sentiment before convergence over the longer term.
The Dim Sum bond market had a volatile year in 2015. Primary issuance weakened for the first time in 2015. Gross issuance of Dim Sum bonds, Formosa bonds, and CDs slid by 26% to CNY 424bn in 2015.We expect primary issuance to remain light in 2016, given the much higher funding costs in the CNH market than onshore, and improved issuance channels in the domestic capital market.
Standard Chartered launched the RGI in November 2012. The Index covers seven markets in offshore RMB business: Hong Kong, London, Singapore, Taiwan, New York, Seoul and Paris. 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). As the Renminbi further internationalises, there is capacity to include additional parameters and markets.
Standard Chartered Renminbi Globalisation Index
The first industry benchmark that effectively tracks the progress of RMB business activity. Offers corporates and investors a quantifiable view of the latest trends, size and levels of offshore activity that are driving RMB adoption
Base value and date
100 at 31 December 2010
14 November 2012
Weight of each of the four parameters are inversely proportional to their 24-month normalized standard deviations
View the latest RGI statistics in one place by visiting our interactive infographic, Global Research’s RGI tracker on BeyondBorders
For further information, please contact:
Business Communications Manager
Standard Chartered China
(8621) 3851 8629