RMB Builds Presence in ASEAN as Singapore Becomes Second Largest Clearing Center

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SINGAPORE – Singapore has reclaimed the ranking of second largest clearing center for Renminbi (RMB) in the world. Only Hong Kong has a greater share of the market.

In March, 6.8 percent of international RMB payments were carried out via Singapore. Hong Kong accounted for 72.8 percent and London, 5.9 percent.

A clearing center is essential for international trade and is used to fulfil promises of bank payments between international accounts.

Singapore was the first clearing center for RMB outside of China. It was established in June 2011 and, alongside Hong Kong, was one of two global clearing centers for the Chinese currency. This turned Singapore into a hub for Chinese companies to open trade links in Southeast Asia, especially with the ASEAN region.

Since March 2013, RMB cleared in Singapore has grown by 375 percent, surpassing London, which grew at 203%. This has seen Singapore overtake London in February and March 2014, having previously been surpassed by London in June 2012.

RELATED: Frankfurt Beats London to Become First RMB Clearing Hub Outside Asia

Singapore had been expected to overtake London following the appointment of the Industrial and Commercial Bank of China (ICBC) last February by Chinese authorities as a clearing bank for offshore RMB payments in Singapore.

There is also scope for financial innovation in Singapore. Claus Kwon, SWIFT’s Asia Pacific Head of Securities Markets anticipates “securities traffic to ramp up”, and expects “Singapore RMB payment flows to accelerate”.

Over 10 trillion RMB (US$1.6 trillion) has been cleared through ICBC in Singapore since February 2014 to April 8th this year. The highest amount cleared in a single day almost hit 300 billion RMB (US$48billion), according to the bank’s data.

In March, RMB accounted for 1.62 percent of global payments. This is still a long way behind the U.S. dollar and Euro, which accounted for 40.19 percent and 31.78 percent of global payments respectively.

China and Thailand are also in negotiations about the possibility of RMB clearing centers in Bangkok. This would raise the amount of Chinese currency in the ASEAN region. In 2012, trade between China and Thailand totalled over US$75 billion; Li Keqiang said the aim is US$100 billion by 2015.

Similarly, Malaysia is in negotiations with China about setting up an RMB clearing center. Trade between China and Malaysia totalled over US$69 billion in 2012.

As clearing becomes more accessible throughout the ASEAN region, China, as a trading partner, will become more accessible, allowing both sides to obtain the benefits of reduced costs of trade.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email asean@dezshira.com or visit www.dezshira.com.

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