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One third of China trade volume will be settled in RMB

Todays Date: November 12, 2018

On January 13th, Calyon released a report, it expected that within three years, One third of China’s trade volume would be settled in RMB, but with the increase of RMB trading settlement, it would make the premium of the offshore RMB (CNH) to the onshore RMB (CNY) is faced with the pressure of going down.

Bank of China (601988.SH; 03988.HK) today announced the creation of offshore renminbi services in the United States, including cash and non-deliverable forward (NDF) foreign exchange transactions. But the bank currently offers very limited services, limited to account set up, simple investment options and foreign exchange transactions.

Calyon pointed out that although this new business represents an important step in the internationalization of RMB taken, but it does not mean creating an offshore yuan market in the United States, as early as after the Bank of China also has branches in Asia and Europe to provide some RMB exchange rate service. The bank does not think this move will represent China began to trade settlement currency from U.S. dollars into RMB.

However, Calyon is expected in 3 years, China’s foreign trade will have 1 / 3 in RMB, and the end of 2010 the volume of trade in RMB accounted for only 5.5% of the total, not to mention the fact in 2009 only to zero.

Calyon expects to provide offshore renminbi services in the United States will gradually lead to the RMB settlement to the Sino-US trade development, one may start from a Chinese-funded enterprises in the United States began at the same time be attractive terms to stimulate more trade finance business use of the service. The ambition of the Chinese side also is not confined to China and the U.S. provide trade finance trade enterprises, the future United States and other countries will also provide RMB trade finance.

Shift to trade yuan-denominated balance sheet, the expected appreciation in the RMB under the United States very attractive to exporters. They can accept RMB payment, and then stored in the Bank of America branch for future use. Calyon Bank pointed out that, in fact, the first half of 2010, U.S. exports to China are 90% of trade settlement in RMB.

Calyon said in RMB the development of trade in the United States more deeply than other regions. To experience, the Bank of China in Europe and Asia to provide RMB trading settlement (china trade), where third quarter of 2010 of RMB in Hong Kong accounts for trade settlement share of the yuan trade settlement 62%, reflecting mainly the Hong Kong dollar pegged to the dollar, the enterprise more positive with the U.S. dollar will depreciate against the RMB yuan willing to hold, but in Europe only 10% of the RMB settlement of trade, reflecting the market exchange rate of RMB against the European currency uncertainty.

Gradual increase in the yuan while trade settlement, CNH premium of CNY trading narrowing, mainly because the Bank of China through its Hong Kong branch of trade into the monetary settlement, the funds required for U.S. importers through the Shanghai Foreign Exchange Trading Center to the shore RMBCNH liquidation will not affect the exchange rate dollar (international trade), but U.S. exporters may sell directly to the Hong Kong market held by CNH yuan, to earn offshore RMB yuan in bank premiums. It will lead to the increase of market supply of RMB in Hong Kong, in the long run, it will narrow premium of CNH to CNY. From: wholesale electronics

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