Our Renminbi Globalisation Index shows a dip in April

Standard Chartered today announced that the Standard Chartered Renminbi Globalisation Index (Bloomberg: SCGRRGI <index>), or the RGI, fell 0.8% m/m, to 2,154 from a revised 2,171 in March. This is the first monthly drop since October 2012.

Read the report from our Global Research team > (PDF)

FX turnover remained the biggest index contributor in April, adding +0.8ppt to the m/m change, but down from March’s +2.5ppt. A more stable CNY exchange rate since the start of April has caused FX turnover to ease back to lower levels; however, the benefits of a steadier CNY did not yet feed through to the RGI sub-components for deposits and Dim Sum bonds in April. Trade settlement and Dim Sum bonds outstanding contributed -0.34ppt and -1.24ppt, respectively, to the m/m change, resulting in an overall drop of 0.8% m/m. April was the ninth consecutive month that Dim Sum bonds subtracted from the headline RGI reading.

Looking ahead, however, we expect offshore deposits to receive a boost from increased southbound flows via the Shanghai-Hong Kong Stock Connect programme in the coming months. We think Renminbi deposits in Taiwan are on track to reach CNY 400bn by end 2015, up from CNY 302.3bn in 2014. Across the board weakening in cross-border payments was possibly a delayed result of CNY volatility in Q1. We expect the RGI to start rising soon given much improved sentiment towards the CNY and a wave of recent policy liberalisation steps.

The impending launch of the Mutual Recognition of Funds (MRF) scheme in July, and the Qualified Domestic Individual Investors (QDII2) programme possibly in H2 2015, should further boost Renminbi usage. The People’s Bank of China (PBoC) also recently granted offshore Renminbi clearing banks and other participating banks access to the onshore repo market. We expect these supportive policy measures to boost two-way cross-border flows and offshore liquidity. They also underscore Beijing’s commitment to faster capital account opening. This would strengthen the case for including the Renminbi in the IMF’s Special Drawing Rights (SDR) currency basket, which would foster further internationalisation. We see a 60% chance of SDR inclusion this year. Amid the SDR review, China’s capital account liberalisation is likely to accelerate sharply. SDR inclusion in 2015 would likely have a significant market impact, driving an immediate sharp increase in global diversification into Renminbi assets. It would likely alleviate pressure on the FX market and provide a strong boost to the Dim Sum bond market.

Standard Chartered launched the RGI in November 2012. The Index covers seven markets in offshore RMB business: Hong Kong, London, Singapore, Taiwan, New York, Seoul and Paris. It measures business growth in four key areas: deposits (denoting store of wealth), Dim Sum bonds and Certificate of Deposits (as vehicles for capital raising), trade settlement and other international payments (unit of international commerce) and foreign exchange (unit of exchange). As the Renminbi further internationalises, there is capacity to include additional parameters and markets.

Standard Chartered Renminbi Globalisation Index

For further information, please contact:

Yolanda Chan
Corporate Affairs, Taiwan
Standard Chartered Bank
+886 2 6603 7110
yolanda.chan@sc.com