Standard Chartered Bank yesterday added Taiwan to its Renminbi (Chinese yuan) Globalization Index, or the RGI, in recognition of its rapid emergence as a key offshore yuan market, along with Hong Kong, Singapore and London.
The RGI is the first industry benchmark to track yuan business activity after factoring in deposits, Dim Sum bonds, certificate of deposits, trade settlement and foreign exchange denominated in the Chinese currency.
“This is well-deserved recognition for Taiwan’s success in growing its offshore yuan business and for its contribution to the expansion of the overall yuan market pie,” the bank’s Taipei-based economist Tony Phoo (符銘財) said.
As of July, yuan-linked cross-border payments through Taiwan have grown 420 percent to almost half the number of payments in Singapore and up from 17 percent in December last year, the report said.
While other financial centers, such as Paris and Luxembourg, have comparable payment volumes, Taiwan stands out as one of the few nations that has managed to accumulate offshore yuan deposits at a consistently fast pace, the report said.
Taiwan’s strong yuan deposits help offset its low turnover in terms of yuan foreign exchange, unlike Singapore and London where the opposite trends characterize the market development, the report said.
Policy support from Beijing also played a key consideration for the British banking group to include Taiwan, Phoo said, after two-way cross-border yuan lending pilot deals took place between Taiwan companies and their operations in the Chinese city of Kunshan, home to many Taiwanese investments and expatriates.
Taiwan’s inclusion made an impact on the RGI, which rose to 1,112 in July from a revised 1,058 in June, the report said, adding that Taiwan’s share of the RGI pie is 3.5 percent, compared with 10.3 percent for Singapore and 11.5 percent for London.
Hong Kong, the earliest and largest offshore yuan market, has a share of 74.7 percent, down from 77 percent, before Taiwan’s inclusion, the report indicated.
Yuan deposits in domestic banking unit accounts amounted to 46.5 billion yuan, 1.5 times more than 30.3 billion yuan in offshore banking units, the report said.
Overall yuan deposits, valued at 76.9 billion yuan as of the end of July, may reach 100 billion to 150 billion toward the end of the year, as local residents continue to embrace yuan after local banks campaigned aggressively to offer relatively higher yields on yuan deposits, the report said.
Yuan deposits now account for 11.8 percent of foreign-currency deposits, up from 6.2 percent in February, the report said.
However, the size of the nation’s yuan-denominated bond issuance remains disappointing with only five Formosa bonds so far worth a mere 4.8 billion yuan, Phoo said.
The planned deregulations to ease investor access — such as shorter issuance time, easier approval process and a greater variety of issuers — are likely to boost interest in the market, the economist said.
There is much room for growth given that outstanding Formosa bonds make up a mere 6 percent of yuan deposits, whereas Dim Sum bonds constitute 74 percent of deposits in Hong Kong, he said.