Internationalisation of the Renminbi - SWIFT
Transcript of Internationalisation of the Renminbi - SWIFT
Internationalisation of the Renminbi: Measuring Progress
Towards a Global Currency
RMB TrackerJuly 2016 Edition
The authors would like to thank the following for their support in producing this paper:
Julien Martin Head of Fixed Income and Currency Product Development, Hong Kong Exchange
Qingsong Zhang General Manager, Payment and Clearing Department, Bank of China
Sandip Patil Regional Head, Global Liquidity and Investment, Asia Pacific, Treasury and Trade Solutions, Citi Bank
Upadhyay Biswajyoti Managing Director, Regional Head Transaction Banking - Product Management & Client Access, Greater China and North Asia, Standard Chartered Bank
Xin Zhang General Manager, China International Payment Service Corp
SWIFT
Astrid Thorsen
Eric Yang
Laetitia Moncarz
Michael Moon
Nicola Kaur
Pedro Mullor
Sarah L’Ortye
Wim Raymaekers
1 Foreword
2 Executive summary
4 Chinese Yuan back to #6 as world payments currency
7 Three new offshore clearing centres appointed since September 2015
9 RMB Adoption across financial institutions continues to grow
10 US Dollar continues to be the leading currency for cross border payments done with China and Hong Kong
11 Support your RMB strategy with fact-based insights
12 About SWIFT
CONTENTS
Since 2010, SWIFT has actively supported its customers and the financial industry regarding
RMB internationalisation through various publications and reports. The SWIFT RMB Tracker
issued on a monthly basis provides the community with insights into the focal conversation about
China’s Renminbi (RMB) and its growing influence on the world.
With the occasion of the SWIFT Greater China Regional Conference, taking place in Shanghai on
the 21 July 2016, I am delighted to present this special edition of the RMB Tracker that provides
an updated and consolidated overview of the RMB’s rise as an international currency.
This report focuses on 2016 half-year statistics and analysis from SWIFT. It also includes insights
from financial industry experts on the recent evolutions of the RMB and what the future has in
store for the Chinese currency.
Despite a recent slowdown, reflected in the key indicators presented in this report, RMB internationalisation is continuing by
most measures, such as payments, bank adoption and offshore clearing centre growth. The journey towards full
internationalisation of the RMB is a long one, but the creation of new offshore centres around the world combined with the
progress of China’s new Cross Border inter-Bank Payments System (CIPS) will help move the RMB along its path towards
internationalisation. SWIFT is optimistic about the RMB’s journey towards a more international currency. However, the success
of the RMB remains dependent on several key factors, which requires the full attention of the global community.
The following key factors are critical for RMB internationalisation:
Expand the connectedness of RMB
On 30 November 2015, the International Monetary Fund (IMF) included the RMB in the Special Drawing Rights (SDR) basket
along with four other major currencies. Concretely, the central banks will be able to use RMB to diversify their reserves.
However, this inclusion needs to be supported by broader connectivity and progress of RMB internationalisation correlates
with more banks serving their customers in RMB, and through improvements in RMB clearing and settlement financial
infrastructures such as offshore clearing centres and CIPS.
Enhance RMB products and services suite
To support the growth of RMB in a manner that is safe, scalable, reliable, secure and resilient — financial institutions will need
to invest in optimising products and services for their customers. SWIFT’s suite of products and services, such as business
intelligence, messaging conversion and networks, contribute to an essential foundation for growing the global footprint of the RMB.
Ongoing focus on standards and compliance
The march towards a global currency requires ongoing industry focus on efficiency, automation and global message
standardisation. As part of the journey, compliance to local and global regulations is ever more important.
I hope you find this Greater China Regional Conference special edition of the SWIFT RMB Tracker insightful. In terms of
emerging economic opportunities, and despite the recent slowdown, I truly believe the RMB remains the game changer for
many not just for countries with designated offshore RMB centres, but for businesses and consumers around the world.
FOREWORDBy Alain Raes
Chief Executive,
APAC & EMEA, SWIFT
1
SWIFT’s July 2016 RMB Tracker provides a detailed status update on the evolution of RMB in Payments
In SWIFT’s capacity to support its community, many initiatives are taking place to facilitate Renminbi (RMB) transactions
worldwide. SWIFT has been tracking the internationalisation of the RMB since 2010 and produces a public, freely available
monthly tracker on swift.com.
Since 2011, the RMB has steadily progressed along its path to become a global currency in international trade. SWIFT’s
data indicates that many RMB data points continue to progress in areas such as payments, bank adoption and offshore
clearing centre growth.
On 25th March 2016, SWIFT and CIPS signed a memorandum of understanding (MoU) to commence strategic cooperation.
The MoU sets out plans to develop CIPS using SWIFT as a secure and reliable channel to connect CIPS with SWIFT’s global
user community. CIPS went live with pilot banks since October 2015 and it is now starting its phase 2 Development. SWIFT
will continue working with China and the international financial community by providing connectivity, standardisation and other
value added services. This will undoubtedly underpin the ongoing success of RMB internationalisation.
• Representing 40% of all financial institutions exchanging payments with China and Hong Kong
• Up 22% since June 2014
• A further 600 banks use the Chinese currency for payments without a leg with China or Hong Kong
banks use RMB for payments with China and Hong Kong in June 2016
1,247for Asia Pacific intra-regional payments with China & Hong Kong
#2• But the gap between JPY and CNY is minimal
as a World Payments Currency in value
#6• 1.72% of global payments in value — up from #10 and 0.87% in June 2013
• New centres have emerged including Seoul and Canada
• United Kingdom becomes the #1 clearing centre again for RMB after Hong Kong processing 24.4% of RMB payments by value, excluding China and Hong Kong
• The UK is closely followed by Singapore, processing 18.5% excluding China and Hong Kong
• Decrease in most countries except United Kingdom (+7%), South Korea (+16%) and Canada (+124%)
EXECUTIVE SUMMARY
3
This special edition covers in more details the below key highlights based on June 2016 data:
As an important financial infrastructure to support the RMB internationalisation, Cross-border Interbank Payment System (CIPS) offers clearing and settlement services for cross-border trade, investment and financing, and other cross-border RMB business in major time zones. CIPS, like a broad straight highway, provides an efficient, convenient and secure payment channel to further improve the efficiency of the RMB cross-border clearing and settlement process, and therefore promote the RMB internationalisation.
— Xin Zhang General Manager, China International Payment Service Corp
T he collaboration between SWIFT and CIPS enables consistency and standardization towards global standards. The establishment of CIPS will help improve the efficiency of RMB clearing as the currency moves forward on its internationalisation journey. For corporate treasurers, we anticipate that CIPS would enable efficiency in settling their global trade and treasury transactions using RMB. Specifically, with the collaboration with SWIFT and RMB banks, corporate treasurers can look to gain benefits from the use of SWIFT standards for communication and global standardisation.
— Sandip Patil RegionalHead,GlobalLiquidityandInvestment,AsiaPacific,TreasuryandTradeSolutions,Citi
2
• US Dollar is still the primary currency with a weight of 63.6%
currency for cross-border payments done with China and Hong Kong with a share of 12.7%
#2
What is CIPS?China International Payment Service Corp. (CIPS) is a clearing institution established within the
territory of the People’s Republic of China, which is approved by People’s Bank of China (PBOC)
and subjected to PBOC’s supervision. CIPS Corp. is responsible for the operations and maintenance
of Cross-border Interbank Payment System (CIPS), including the management of its participants
and business promotions etc.
Construction of the CIPS is carried out in two phases:
• In the first phase, real-time full-amount settlement is adopted to provide clearing and
settlement services for cross-border trade, cross-border investment and financing, and other
cross-border RMB businesses
• In the second phase, a more liquidity-saving hybrid settlement mode will be employed to
increase the efficiency of cross-border and offshore RMB clearing and settlement
In phase two, CIPS is also looking at extending the operating time to cover more time zones, and consistently improving its standards and services portfolio to enable broader participation.
Chinese Yuan back to #6 as world payments currency
54
According to SWIFT June data, Canadian dollar has overtaken the RMB and entered the top five of world payment currencies by value, with a share of 1.96%.
Just three years ago, in June 2013, the RMB was ranked at position #10 with a share of 0.87%, while in June 2016, the RMB had a share of 1.72% in global payments by value. In the last three years, the RMB overtook several currencies, including the SEK, HKD, CHF and CAD, but fell back to position number six in April 2016.
D uring the first half of this year, the
growing pace of RMB cross border
payments has to some extent slowed
down after several years' spectacular
growth, against the backdrop of
eventful international markets and
more responsive RMB exchange rates.
This is arguably a necessary stage of
RMB internationalisation, which helps
setting solid foundation in the long run.
In regards of financial market
infrastructure, Bank of China Hong
Kong was admitted to join the CIPS,
being the first direct participant out
of mainland China, which will further
facilitate the connectivity between
onshore and offshore systems. We are
confident that Hong Kong's place as
a global RMB trading and clearing
hub will be enhanced and all market
participants are certain to benefit.
— Qingsong Zhang
General Manager,
Clearing Dept, Bank of China
2013 2014 2015 2016 06 07 08 09 10 11 12 01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05 06
CNYSEKHKD
CHFCADAUD
JPY
#7 #5 #6
Source: SWIFT Watch
RMB overtook 6 currencies during the last 3 yearsPayments sent and received by value, excluding central banks.
In April and May 2016 the RMB was
trailing the CAD with a minor difference
of 0.01% but the gap increased in June
2016 likely due to the seasonal effect
of the Dragon Boat holiday in China
and Hong Kong. The RMB reached its
record high share of 2.79% in August
Recent SWIFT data also shows that the
Japanese yen overtook the Chinese
currency as the most active currency
used by Asia Pacific for payments with
China and Hong Kong. Compared to
last year, the RMB moved from position
one to number two, but the gap with
2015 but since then its share has
been decreasing. The offshore RMB
usage has most likely been negatively
impacted by the volatility in the
Chinese market and the slow-down
of Chinese economy.
the Japanese yen is minimal.
Overall, global RMB payments slightly
increased by value by 0.19% in
June 2016 compared to May 2016,
while payments across all currencies
increased by value by 10.33%.
#10
Three new Offshore Clearing Centres Appointed since September 2015
76
When it comes to handling global
payments in RMB, Hong Kong stays
the world’s largest offshore RMB
centre, processing 71% of RMB
payments. Although more than
110 countries made RMB payments
in June 2016, more than 90% is
concentrated in 10 countries; United
Kingdom does 24.4% of all offshore
RMB payments and has taken over
Singapore as number one offshore
RMB clearing centre compared to
last year, excluding Hong Kong.
London and Singapore still play a
key role in driving RMB adoption
outside of Hong Kong but in the last
years, the emergence of other RMB
clearing centres worldwide, also
facilitates its usage.
Since September 2015, three new
clearing centres have been selected
by the People’s Bank of China (PBOC),
including Zambia, Argentina and
Switzerland, leading to a total of 19
RMB clearing centres, spread across
each continent. However, over the last
six months, SWIFT data shows RMB
adoption in most countries where
an RMB clearing centre has been
appointed is flat or declining, as is
the case with Singapore (-37%) and
Malaysia (-63%) showing the largest
decrease. On the flip side, the United
Kingdom (+7%), South Korea (+16%)
and Canada (+124%) are showing a
significant increase compared to the
same period last year.
Today, the PBOC has not appointed an
RMB clearing centre in the United States
and interestingly, SWIFT data shows
that RMB adoption in the United States
is marginal. However, SWIFT expects
payments in RMB between China/Hong
Kong and the United States to evolve
following the creation of the U.S. RMB
Trading and Clearing Working Group,
which has a directive to promote and
develop trading, clearing and settlement
of the RMB in the United States.
RMB as World Payments CurrencyCustomer initiated and institutional payments. Messages exchanged on SWIFT. Based on Value.
Jan - June 2016 Jan - June 2015
#1#2JPY
#2#1CNY
#3#3HKD
#4#4USD
#5#5AUD
Source: SWIFT Watch
Source: SWIFT Watch
Currency weight evolution within Asia Pacific for payments within China and Hong Kong
Payments sent and received by value, excluding China and Hong Kong
USD #1 38.75%EUR #2 33.52%GBP #3 9.37%JPY #4 2.50%CAD #5 1.80%AUD #6 1.75%CNY #7 1.39%CHF #8 1.38%HKD #9 1.09%THB #10 0.98%SEK #11 0.97%SGD #12 0.88%NOK #13 0.80%DKK #14 0.60%PLN #15 0.58%ZAR #16 0.40%RUB #17 0.40%MXN #18 0.39%NZD #19 0.35%TRY #20 0.34%
January 2014 June 2016
USD #1 40.97%EUR #2 30.82%GBP #3 8.73%JPY #4 3.46%CAD #5 1.96%CNY #6 1.72%AUD #7 1.55CHF #8 1.52%HKD #9 1.09%THB #10 1.02%SEK #11 0.96%SGD #12 0.90%NOK #13 0.74%PLN #14 0.53%ZAR #15 0.45%DKK #16 0.40%NZD #17 0.38%MXN #18 0.37%TRY #19 0.33%CLP #20 0.29%
Source: SWIFT Watch
United Kingdom
-37%
+7%
Canada
AustraliaFrance
South Korea
SingaporeTaiwan
-18%
+16%-7% -30%
Luxembourg
-28%
Germany
-5% +124%
Switzerland
-26% -32%
Malaysia
-63%
* Including South Africa, Thailand, Qatar, Zambia, Chile and Argentina
Others*
Jan - Jun 2015 Jan - Jun 2016
Evolution of RMB payments in economies with RMB clearing centresPayments sent and received by value, excluding China and Hong Kong.
Please note, for the purpose of the following chart, Hong Kong has been removed from the list to show at a comparable scale the evolution of the other RMB clearing centres.
Recent SWIFT data shows that 1,247 banks used the RMB for payments with China and Hong Kong, representing 40% of all institutions exchanging payments with China and Hong Kong across all currencies.
RMB Adoption across financial institutions continues to growOfficial RMB Clearing Banks appointed by People’s Bank of ChinaGeographical Location and Timeline
8 9
C hina’s Cross-border Interbank Payments System (CIPS) as a scalable and efficient clearing infrastructure aligning to international payment standards, has truly accelerated the RMB internationalisation journey. SCB is in the first batch of banks as direct participant to CIPS, and we are looking forward to phase 2 implementation through enhanced liquidity efficiency and allowing overseas participating banks to link directly.
— Biswajyoti Upadhyay Managing Director, Regional Head Transaction Banking - Product Management & Client Access, Greater China and North Asia, Standard Chartered Bank
SEOUL,JUL 2014
SANTIAGO,MAY 2015
TORONTO,NOV 2014
LONDON,JUN 2014
PARIS,SEP 2014
DOHA,NOV 2014
KUALA LUMPUR,JAN 2015
BANGKOK,JAN 2015
SYDNEY,FEB 2015
TAIPEI,DEC 2012
MACAU,SEP 2004
HONG KONG,2003
BUENOS AIRES,SEP 2015
JOHANNESBURG,JUL 2015
SINGAPORE,FEB 2013
LUSAKA,SEP 2015
FRANKFURT,JUN 2014
LUXEMBOURG,SEP 2014
ZURICH,OCT 2015
TORONTO
DOHASEOUL
LUSAKALUXEMBOURG
PARIS SANTIAGO
ZURICHJOHANNESBURGSYDNEY
BANGKOK
KUALA LUMPUR
HONG KONG
FRANKFURT
LONDON
BUENOS AIRES
20132012 2015201420042003
SINGAPORE
MACAU TAIPEI
SEP DEC FEB JUN SEPJUL NOV JAN MAYFEB SEPJUL OCT
Asia Pacific leads the way with 43%
adoption, followed by the Americas at
42% adoption rate. Europe falls behind
the Americas at 37% and the Middle
East and Africa is at 34%. The majority
of these institutions are located in Asia-
Pacific (624), followed by Europe (399).
Compared to two years ago, all regions
continue to show a double digit growth.
Number of financial institutions using RMB for paymentsInternational payments sent and received directly with China and Hong Kong.
In June 2016, more than 1,800 financial
institutions made worldwide payments
in RMB, representing a 12% increase
compared to last year. 600 banks use
the Chinese currency for payments
without a leg with China or Hong Kong.
Source: SWIFT Watch
+22%
+23%
+23%
+22%
+16%
Share of RMB users AFRICA–MIDDLE EAST
JUN 2014 JUN 2014 JUN 2014 JUN 2014 JUN 2014
28%
JUN 2016 JUN 2016 JUN 2016 JUN 2016 JUN 2016
34%
81 94
ASIA PACIFIC
37% 43%
513
624
AMERICAS
35% 42%
106130
EUROPE
29% 37%
325399
WORLD
33% 40%
1,025
1,247
RMB is a strategic opportunity for most of our corporate clients. It adds several strategic benefits in managing liquidity and funding efficiently across all global business and hence, reduces risks and costs. We are seeing increasing adoption of RMB in Client’s Pooling and Netting structures globally. However, client needs to be watchful regarding volatility and liquidity for onshore & offshore. For a currency to be used actively by corporations offshore, one clearly needs deep and fungible financial markets behind it. If liquidity is not available on demand, there will only be conservative offerings from the banking partners. The good news is that there is constant experimentation in this space and we continue to see progress with regards to RMB liquidity.
In particular, we still need more depth in the offshore RMB market for it to be meaningful. Lack of reliable intraday liquidity sources brings tremendous volatility as we have seen recently in Hong Kong. This causes negative impact on corporate clients’ aspirations to use Global RMB as a trade or treasury currency. At times, there is a limited supply of intraday RMB liquidity in key offshore centres like Singapore or London. Hong Kong has a good source of RMB liquidity, but from time to time, even the Hong Kong market becomes illiquid or expensive. However, there are good positive efforts including extension of RMB clearing time in Hong Kong or CIPS in China. Corporate clients are slowly building comfort and confidence in these efforts and we see continuously increasing adoption by corporate clients for managing genuine liquidity and funding positions.
— Sandip Patil RegionalHead,GlobalLiquidityandInvestment,AsiaPacific,TreasuryandTradeSolutions,Citi
At a global level, the Chinese currency
continues to be the second most used
currency for cross border payments
done with China and Hong with a weight
of 12.7% when looking at 2016 year-to-
date data. With a share of 63.6%,
the US dollar remains the primary
currency. Compared to last year, we
see that the Chinese currency even lost
some weight (share of 13.6%) so several
years will be required to become a real
alternative to the US dollar.
The top RMB corridors for cross border
payments in June 2016 were
Hong Kong – United Kingdom,
Hong Kong – United States and
Hong Kong – Singapore.
This shows that Hong Kong still remains
the main entry point for most of the RMB
payments. 25.8% of the international
RMB payments are sent between Hong
Kong and the United Kingdom followed
by nearly 10% between Hong Kong and
the United States.
US Dollar continues to be the leading currency for cross border payments done with China and Hong Kong
Top RMB Corridors for Cross Border PaymentsInternational payments by value, June 2016.
Currency usage for cross border payments done with China and Hong Kong
International payments sent and received by value with China and Hong Kong. YTD June 2016.
Source: SWIFT Watch
1110
W e have seen an accelerated
internationalisation of the RMB through
acquisitions, investments and a stronger
pricing power. Among the different
offshore centres, Hong Kong is in a
premier position to offer cross-border
connectivity and product solutions.
— Julien Martin Head of Fixed Income and Currency Product Development, HKEX
Source: SWIFT Watch
USD63.6%CNY
12.7%
HKD7.9%
JPY7.0%
EUR4.2%
OTHERS4.6%
Hong Kong – United Kingdom
25.8%
Hong Kong – United States
9.9%
Hong Kong – Singapore
6.4%
The growing importance of the RMB currency and its role in financial markets is evident.Because of this, financial institutions have already started to build their RMB strategy or are planning to do so in the near future, but need more fact-based information to identify where their organisation stands.
To address these issues, SWIFT Business Intelligence provides a free Monthly RMB Tracker. Furthermore, in order to obtain more granular market information and a competitive framework, SWIFT has developed a comprehensive offering:
Support your RMB strategy with fact-based insights
• At the core of SWIFT Business
Intelligence sits the Watch platform,
a portfolio of online reporting
and analytical tools that give
customers direct and easy access
to business intelligence about their
financial institution and the global
financial industry. For example,
Watch Analytics provides customers
with direct access to business
data of RMB transactions allowing
customers to perform a more
dynamic search and analysis.
• In order to obtain more granular
market information and a competitive
framework, this can be acquired
through its extended RMB Market
Insights analysis report. SWIFT’s
RMB Market Insights report responds
to the needs of SWIFT customers
(both Watch product users and non-
users). With this, financial institutions
can benefit from fact-based
quarterly market analysis using
unique data only available through
SWIFT Business Intelligence.
• Similarly, the customised RMB
analysis leverages SWIFT’s unique
data and provides crucial competitive
and strategic insights to optimise
business operations and support
decision-making.
1112
More than 1,800 Financial Institutions in over 110 countriesare already doing business in the Chinese currency: theRenminbi (RMB). Is yours one of them? Are you looking tounderstand more about RMB internationalisation, or furtherexpand your RMB business?
SWIFT’s RMB Tracker provides a monthly report with aunique set of statistics to help you track and understandhow the RMB is being used across geographies andfinancial sectors. To register for the free RMB Tracker orlearn more about our RMB offering, visit www.swift.com ore-mail [email protected].
For further information about SWIFT’s Business Intelligence RMB Consulting Services and the full Business Intelligence portfolio, please visit swift.com or e-mail [email protected]
Please visit www.swift.com for
more information about RMB
Internationalisation or join our new
‘Business Intelligence Transaction
Banking’ LinkedIn group.
About SWIFT
SWIFT is a member-owned cooperative
that provides the communications
platform, products and services to
connect more than 10,800 banking
organisations, securities institutions
and corporate customers in over
200 countries and territories. SWIFT
enables its users to exchange
automated, standardised financial
information securely and reliably,
thereby lowering costs, reducing
operational risk and eliminating
operational inefficiencies. SWIFT also
brings the financial community together
to work collaboratively to shape market
practice, define standards and debate
issues of mutual interest.
Disclaimer
This report is provided for information
only. If the customer or any third
party decides to take any course of
action or omission based on this report
and/or any conclusion contained
therein, they shall do so at their own
risk and SWIFT shall not be liable for
any loss or damage, arising from
their acts or omissions based on this
report and/or any recommendations
contained therein.
About SWIFT and
RMB Internationalisation
Since 2010, SWIFT has actively
supported its customers and the
financial industry regarding RMB
internationalisation through various
publications and reports.
Through its Business Intelligence
Solutions team, SWIFT publishes key
adoption statistics in the RMB Tracker,
insights on the implications of RMB
internationalisation, perspectives on
RMB clearing and offshore clearing
guidelines, supports bank’s
commercial RMB product launches
and provides in-depth analysis and
business intelligence, as well as
engaging with offshore clearing
centres and the Chinese financial
community to support the further
internationalisation of the RMB.
The SWIFT network fully supports
global RMB transactions, and its
messaging services enable Chinese
character transportation via Chinese
Commercial Code (CCC) in FIN
or via Chinese characters in
MX (ISO 20022 messages). It offers
a suite of dedicated RMB business
intelligence products and services
to support financial institutions
and corporates. In addition, SWIFT
collaborates with the community to
publish the Offshore and Cross-Border
RMB Best Practice Guidelines,
which facilitate standardised RMB
back office operations.
Ready for RMB?
For more information, visit www.swift.com
Media contacts:
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+44 (0)20 7426 9400
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