Standard Chartered adds Taiwan to RMB globalisation index

RGI increased 65% and hit 1,112 in July.

Standard Chartered announced that the Standard Chartered Renminbi Globalisation Index, or the RGI, added Taiwan to the index. Bolstered by Taiwan’s inclusion coupled with strong market momentum in other offshore centres, the RGI hit 1,112 in July, up 65% year-on-year and 5.1% month-on-month.

Taiwan’s inclusion came in the wake of its growing offshore Renminbi businesses, driven by a year-to-date 420% surge in Renminbi-denominated cross-border payments and a consistently fast-paced accumulation of offshore Renminbi deposits. Policy support from Beijing was another key consideration for the inclusion of Taiwan, translating into ample room for further growth in its offshore Renminbi businesses, such as Formosa bonds and FX.

We expect China’s capital account to be “basically open” by 2020. That said, there will still be some prudential controls, large flows are likely to still be closely monitored, and at times of stress, the authorities will intervene as they think necessary. On the back of China’s evolving financial policies, offshore Renminbi markets are set to maintain strong growth momentum.

By 2020, we expect the share of Renminbi invoicing to double to 28%, from the current estimate of 14%, of China’s total trade; within that, about 6% of China’s commodity imports are likely to be invoiced in Renminbi.

By the end of 2020, offshore Renminbi bond market is expected to reach CNY3 trillion while offshore Renminbi loans extended by Hong Kong banks could rise to HK$2.3 trillion, or 20% of total Hong Kong bank loans.

The offshore Renminbi market is poised to converge further with the onshore market, and we expect the Renminbi exchange rate to be basically free-floating by 2020.