Cross-border yuan settlement growing rapidly


Currency now second most used for China’s intlpayments after dollar, central bank official says

The use of the yuan in cross-border trade and investment has grown rapidly in the past five years, according to Hu Xiaolian, deputy governor of the People’s Bank of China.

Addressing a recent forum on cross-border yuan business in Beijing, Hu revealed international renminbi settlement had exceeded 4.8 trillion yuan ($784 billion) by the end of September this year, up from 3.58 billion yuan in 2009.

Hu said yuan payments between China and 174 countries now account for nearly one quarter of China’s total international payments, which has helped the Chinese currency become the second most used for such payments after the US dollar. More than 15 percent of imports and exports were also settled in yuan.

According to statistics released on Tuesday by the Industrial and Commercial Bank of China Ltd, the nation’s biggest lender by assets, its own cross-border yuan business has grown by an average of more than 200 percent annually since China launched its pilot program to settle more cross-border trade in yuan in 2009.

As of Sept 30, total cross-border yuan business handled by the bank amounted to nearly 7.7 trillion yuan, 2.8 trillion yuan of which was handled in the first three quarters of 2014, an increase of more than 80 percent from a year earlier.

Hu said China has been deepening international cooperation on the use of yuan in recent years, and that the PBOC had now signed bilateral currency swap agreements worth almost 2.9 trillion yuan with 26 central banks and monetary authorities.

Those agreements include the PBOC setting up clearing houses for yuan-denominated transactions in leading financial centers around the world, such as Hong Kong, Singapore, London and Frankfurt.

After designating the Singapore branch of ICBC as the renminbi-clearing bank there in February, 2013, the branch had set up 82 yuan clearing accounts covering 34 countries and regions by the end of September this year.

Its clearing business amounted to 23.8 trillion yuan.

The renminbi is now directly tradeable with the US dollar, the euro, yen, pound, Russian rouble, Malaysian ringgit, Australian dollar and New Zealand dollar.

Some central banks have added it as a reserve currency or have signaled they are prepared to do so.

Hu said China is forging ahead with a reform of the yuan exchange rate mechanism, which will allow market players to better allocate their financial resources based on price signals.

The PBOC widened the daily trading band for the yuan against the US dollar to 2 percent from 1 percent in March. As two-way fluctuations in the yuan exchange rate expand steadily, traders have begun to have divided expectations on the rate. Such reform has helped to lay a market foundation for the cross-border use of the yuan, Hu said.

In her view, China should continue to improve the financial regulatory coordination mechanism and further promote cross-sector, cross-border regulatory cooperation.




Source : China Daily | October 23, 2014

Thomas D’Innocenzi

October 24, 2014 at 9:46 am Leave a comment

China’s GDP in Q3 grows 7.3%


China’s GDP in the third quarter grew 7.3 percent over a year earlier, according to National Bureau of Statistics data released on Tuesday, hitting the slowest level in the past five and a half year.

The expansion rate is the slowest since the first quarter of 2009, when the global financial crisis roiled China. China in the first half of this year grew 7.4 percent over a year ago.

Fixed-asset investment, a key driver of economic growth, grew 16.1 percent in the first nine months, while retail sales grew 12 percent in the same period, the NBS said.

Industrial output in September grew 8 percent, up from 6.9 percent increase in August, a six-year low, the NBS said.

Sheng Laiyun, spokesman of the NBS, said despite the slowdown, the world should recognize that China’s economy has entered a “new norm”, in which emphasis has shifted to the quality of the growth.

There are some upsides of the statistics, including the rapid growth of some new businesses and emerging industries, which underscored the changing makeover of China’s economy, Sheng noted.

Wen Bugao, deputy director of policy research department under the National Development and Reform Commission, China’s top economic planner, said it is “over-simplistic” to say that China’s economy is facing great downward pressure.

“The sheer size of the economy has developed into an extent that it is difficult to maintain a fast expansion rate. At the same time, the traditional drivers of the economy, such as export and investment, are loosing steam. What’s more, the economy is ‘greening’ itself so there is less demand for energy and raw materials. All these factors contributed to the moderated growth,” he said.

He said only innovation, either in technological or institutional sense, can help to lift the competitiveness of the economy.

Market also expects that as the top leadership emphasize the “new norm” of the economy, there will be greater tolerance of the slowdown and fewer possibility that strong stimulus policy will be used.

Zhu Haibin, chief China economist at JPMorgan Chase & Co, said:”We expect policy rates will stay unchanged and credit growth will remain stable in the coming months. The central bank is reluctant to implement traditional monetary easing, because it is concerned about distortions in the monetary policy transmission mechanism. Instead, a new operational framework may focus on lowering market interest rates; targeted quantitative measures and a shift in credit components to improve direct support from credit to the real sector.”




Source : China Daily | October 21, 2014

Thomas D’Innocenzi

October 22, 2014 at 10:35 am Leave a comment

Penang invites Singapore firms to grow together


Penang is vying to become the next hub for Singapore companies’ regional expansion, with the state government open to more opportunities for bilateral partnerships, its Chief Minister Lim Guan Eng said on Tuesday (Oct 14).

“We are putting ourselves on the map – that Penang is open for business, and you can set up your plants here at very attractive rates,” said Mr Lim, who was in Singapore to unveil BPO Prime, a S$500 million mixed-use development project led by Singapore investment giant Temasek Holdings and Penang Development Corp (PDC) – the state’s development agency.

“We can complement the role played by Singapore. We have a technology and electronics cluster, and I believe you should use our core competencies in manufacturing to grow your services sector. The key is convergence,” he said.

“Singapore’s investment into Penang jumped from RM61 million (S$23.8 million) to RM622 million between 2012 and 2013. We feel there is room to grow – and what better way to grow than working together? That’s why we have asked Temasek to come in, not just as an investor but also as a player,” he added.


BPO Prime and Penang International Technology Park (PITP), the two Penang projects outlined in a memorandum of understanding that Temasek and PDC signed in May, will have a total development value of about S$4.4 billion.

The developments will be funded via a joint venture that is 49 per cent owned by Temasek.

BPO Prime will break ground in the first half of next year and construction will take two to three years. When completed, it will offer 1.6 million sq ft of residential and commercial space. The commercial element will focus on business process outsourcing.

“Penang’s outsourcing sector saw more than a 20 per cent increase in revenue last year. BPO Prime is a priority project that is part of the state government’s plans to transform Penang into an international outsourcing hub,” Mr Lim said.

Penang can be a sound alternative for Singapore companies to expand in Malaysia at a time when all eyes are on the nearby Iskandar region, said Mr Philip Yeo, chairman of Economic Development Innovations Singapore (EDIS), the project’s master development manager.

“I’m looking for skilled workers, in which case Penang has a better advantage … Iskandar is near enough – but I’ll go where the skill is,” Mr Yeo said, citing his own experience as a chairman of aerospace component manufacturer Accuron, which is planning to grow its workforce of 800 to 1,000 in Penang.

“I believe talent will be a strong selling point for Penang, where spaces such as BPO and PITP will be ideal for high-end activities from Singapore and elsewhere,” he said.



Source : Channel News Asia | October 15, 2014

Thomas D’Innocenzi

October 16, 2014 at 9:35 am Leave a comment

3 Malaysia banks announce merger


Three Malaysian banks have announced plans for a merger to create Southeast Asia’s fourth-biggest commercial lender and an Islamic bank.

CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd said Thursday they have submitted the proposed merger to the country’s central bank.

If approved, the combined entity would pass Malayan Banking Bhd as the country’s biggest commercial bank.

The banks said in a joint statement that they hope to sign an agreement by early 2015 and complete the deal by mid-year.

The three-way merger valued at 72.5 billion ringgit (725 billion baht) that creates the nation’s largest bank by assets.

RHB Capital will issue new shares to acquire its larger competitor CIMB for 60.6 billion ringgit, offering 1 RHB share for every 1.38 CIMB shares, according to a joint statement. As part of the transaction, which is expected to be completed by mid-2015, the two companies’ Islamic-banking units will combine with Malaysia Building Society to form a “mega-Islamic bank,” the lenders said.

The agreement highlights a trend towards fewer, bigger lenders in Malaysia as overseas companies expand their presence in the country and leaders of the Association of Southeast Asian Nations press on with integrating the region’s markets. A combination of the three would create a group with total assets of 629 billion ringgit as of June 30, surpassing Malayan Banking’s 583.4 billion ringgit, according to data compiled by Bloomberg.

The deal values CIMB at 1.7 times its book value as of June 30, while RHB would be valued at 1.44 times, according to the statement. As part of the transaction, CIMB’s Islamic unit will acquire Malaysia Building Society and RHB’s Shariah-compliant banking arm for a combined 11.9 billion ringgit, according to the statement.

The resulting Islamic bank will remain a subsidiary of the merged CIMB-RHB entity. CIMB and Malaysia Building Society will be delisted after the merger.

CIMB, RHB and Malaysia Building Society shares were suspended on Thursday before the statement. The companies announced plans for the deal in July and entered a 90-day exclusive agreement to negotiate and finalise the price and structure of the transaction.

The companies said they have applied to the central bank for the merger’s approval. They will begin due diligence with the aim of signing a “definitive” sale and purchase agreement early next year, according to the statement. They will seek other regulatory and shareholder approvals after that.

CIMB shareholders will own 70% of the combined company, with RHB investors holding the rest.

The two companies are structuring a deal between them as a so-called reverse takeover, with RHB issuing new shares to acquire its larger competitor. The transaction values each CIMB share at 7.267 ringgit, a 0.4% premium to CIMB’s market price on July 9, the day before the merger was proposed, according to the statement.

The structure of the deal between RHB and CIMB may allow the firms to overcome resistance from Abu Dhabi-based Aabar Investments PJSC, RHB’s second-largest shareholder, as an outright acquisition by CIMB would require approval from 75% of RHB shareholders.

Aabar will not agree to any deal below 12 ringgit a share for RHB, which is the total cost that it incurred when it bought its stake from Abu Dhabi Commercial Bank PJSC in 2011, the Malaysian Insider reported on July 16, citing people it didn’t identify. The sheikhdom also sent a special envoy to the Malaysian government to convey unhappiness over the merger, according to the Insider.

Aabar paid 10.80 ringgit per share, when RHB was the target of a takeover battle between Malayan Banking and CIMB. CIMB last traded at 6.98 ringgit and RHB at 8.70 ringgit.

“Both sides have to convince Aabar this merger is good for everybody,” said Ang Kok Heng, chief investment officer of Phillip Capital Management Sdn in Kuala Lumpur, which manages $428 million. “They will have to convince Aabar that the bigger group is better, rather than being an investor in RHB alone.”




Source : Bangkok Post | October 9, 2014

Thomas D’Innocenzi

October 15, 2014 at 9:45 am Leave a comment

China, Russia seek ‘international justice’, agree currency swap line


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Russia and China on Monday (Oct 13) pledged to ramp up efforts to promote a just world order as they signed dozens of deals ranging from energy to finance.

Visiting Chinese Prime Minister Li Keqiang and his Russian counterpart Dmitry Medvedev oversaw the signing of 38 agreements, including a deal to open a yuan-ruble swap line worth 150 billion yuan (US$24.5 billion) in an apparent bid to reduce dependence on the US dollar.

Li’s first visit to Russia as prime minister comes at a sensitive time, with the Kremlin locked in a battle of wills with Washington and Brussels over Ukraine.

Accused by Kiev and the West of stoking a bloody insurgency in eastern Ukraine, Russia is facing its most serious isolation since the end of the Cold War, with its economy shaken by several rounds of Western sanctions.

Russia hopes intensified cooperation with Asia will help it ride out EU and US sanctions. After talks with Li in Moscow, Medvedev said the two countries should think many moves ahead.

“My colleague Mr Prime Minister just recently noticed that our peoples like to play checkers and chess. And those who think strategically play checkers and chess well,” Medvedev told reporters after the talks.

“And also those who think about the future play well, that is why we should think about the future, developing our relations for years to come.”

Li, who is set to meet President Vladimir Putin on Tuesday, also resorted to allegory, saying Russia’s famous nesting doll symbolised huge joint opportunities.

“I believe that the matryoshka symbolises the vast potential for cooperation between China and Russia,” he said in comments translated into Russian.

“Both countries are full of determination to develop eternal friendship and together defend peace and stability in the region and the world on the whole.”

The two countries agreed to jointly celebrate the 70th anniversary of the defeat of Nazi Germany in World War II next year, a hugely symbolic date in Russia.

Li said the goal of the festivities would be, among other things, to “protect international justice and international order after the war.” China has spoken out against Western sanctions against Russia and has called on all sides to reach a political settlement over Ukraine.



Among the top business deals was an agreement to open a currency swap line worth 150 billion yuan ($24.5 billion) to promote bilateral trade and investment.

“The agreement has been concluded for a period of three years and can be prolonged following agreement of the two sides,” Russia’s central bank said. It allows the countries to use each other’s currencies without buying them on the currency markets, said the bank.

Li’s three-day Russia trip is part of a week-long visit to Europe. Once bitter foes during the Cold War, Moscow and Beijing have over the past years ramped up cooperation as both are driven by a desire to counterbalance US global dominance.

China and Russia often work in lockstep at the UN Security Council, using their veto power as permanent council members to counter the West on issues such as the Syria crisis. Russia’s showdown with the West over Ukraine has given Moscow a new impetus to court Beijing.

Resource-hungry China is seeking to diversify its sources of energy amid booming domestic consumption, while Russia is seeking to tap fast-developing Asian markets.

After a decade of tough negotiations China and Russia inked a 30-year, US$400-billion agreement in May that will eventually involve 38 billion cubic metres of gas annually.

Critics however disparaged the terms of the deal, saying Putin, in his bid to spite the West, signed an agreement that was more beneficial to China than to Russia.

Ahead of his Moscow visit, Li travelled to Germany for talks with Chancellor Angela Merkel. He will also participate in a summit in Milan later this week.





Source : Channel News Asia | October 14, 2014

Thomas D’Innocenzi

October 14, 2014 at 9:58 am Leave a comment

Deputy Prime Minister sees stronger trading nation status for Thailand

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Deputy Prime Minister Pridiyathorn Devakula on Wednesday set his sights on boosting Thailand as a trading centre in Southeast Asia, spelling out his plans to achieve the goal.

When the region becomes one community under the Asean Economic Community (AEC) in December next year, MR Pridiyathorn said he was confident Thailand could fully tap the benefits of economic integration at the end of next year,” he told the Bangkok Post Forum 2014 on Wednesday night.

MR Pridiyathorn raised the question of why the trading headquarters of companies for products which Thailand champions in the global market are situated outside the country. He said this was because the rules and regulations governing trading companies in Thailand are not as expedient as in Singapore, Hong Kong or Malaysia, both in terms of tax and non-taxes.

“We could easily become the trading nation of the region,’’ added the deputy prime minister, who is in charge of economic affairs.

But MR Pridiyathorn said the private sector could not do it alone as it needed help from the government to set the country up as a firm regional trading base.

Part of the reform process of the government will be geared towards this goal, he added.

The deputy prime minister urged the Board of Investment (BoI) to play a stronger role in promoting overseas investment in Thailand, and said the government will need to change rules and regulations “in the near future”.

The rules included the need to make the tax system more competitive with Thailand’s rivals, reduce the cost of living, better methods to tackle corruption and improve logistics systems, including the construction of additional deep sea ports on the Andaman Sea, revenue structure and developing the digital economy.

“We need to change all related regulations to accommodate the establishment of trading headquarters in Thailand. I am working on it and should be able to announce the desirable changes in the near future,” he said.

“The current government is drafting a law to set up a new policy body governing the digital economy and amending many laws to expand the scope of the ICT (Information and Communication Technology) Ministry and to streamline the functions of all related government agencies in this area,” he added.

MR Pridiyathorn said the trading hub plan could not be turned into reality overnight and needed a strong will by the government.

“The whole thing may not be able to be completed within a year, but a serious start with a strong political will could lay a good foundation for this reform and would naturally attract the attention of subsequent governments to continue this development as it is obviously needed to cope with the changing world,” he said.



Source : Bangkok Post | October 8, 2014

Thomas D’Innocenzi

October 10, 2014 at 9:33 am Leave a comment

Manufacturing crucial for productivity growth, innovation

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Manufacturing remains a key pillar of the Singapore economy and the sector is an important driver for productivity growth, innovation and trade, Second Minister for Trade and Industry S Iswaran said on Wednesday (Oct 8).

Speaking at the launch of the Singapore Innovation and Productivity Conference, Mr Iswaran – who is also minister in the Prime Minister’s Office and second minister for Home Affairs – said the manufacturing sector has played a crucial role in Singapore’s modernisation plans since the 1960s.

“Our manufacturing productivity has grown strongly since the start in 2009 of our renewed productivity drive, registering 9 per cent strong growth annually,” he said, highlighting precision engineering and transport engineering as bright spots within the sector.

He also said the global manufacturing landscape is changing, and there are several key trends and developments that Singapore firms need to keep abreast of. For example, consumers are increasingly looking to manufacturers not just for products, but also for services, particular in business-to-business markets.

Disruptive innovations such as advanced robotics and 3-D printing have not only resulted in new production possibilities, but also challenged how manufacturing here is run, he added.



Mr Iswaran stressed that productivity gains involved more than just investing in technological improvement and equipment, and companies can also redesign their business processes to improve the performance of their employees.

He cited Workforce Development Agency (WDA) training courses such as the WSQ Certified Productivity & Innovation (CPI) Manager programme and the SME Quality Initiatives to Assist, Nurture and Grow (SME QIANG) training programme that have helped companies achieve significant productivity improvements.

Since 2010, 134 companies have come on board these initiatives and more than 500 individuals have been trained, he said.

He reiterated a point made by Prime Minister Lee Hsien Loong a day earlier – that everyone has a role to play in the effort towards productivity-driven growth.

The Government will continue to create an enabling environment and give support, but businesses must chart and stick to their journey towards greater productivity and competitiveness, the minister said.

Workers, too, must have the mindset to pursue continual education and skills upgrading, Mr Iswaran added, saying that it is a collective effort that will sustain Singapore’s competitiveness and economic growth well into the future.




Source : Channel News Asia | October 8, 2014

Thomas D’Innocenzi

October 9, 2014 at 9:36 am Leave a comment

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