BNY Mellon has singled out London and Singapore as markets which will “break away from the pack in the next few years” as top offshore Rmb hubs.
“I expect we will see both centres surge,” says Fred DiCocco, Asia Pacific, head of sales and relationship management for BNY Mellon’s treasury services business centres.
“I believe by 2020 we will see a three-horse race between London, Singapore and Hong Kong for supremacy, with Hong Kong probably continuing to lead the way.”
According to BNY Mellon statistics, Hong Kong currently holds a 71% market share as an offshore Rmb payments centre. However, with Hong Kong losing its leadership position, having dropped by 10% over the last three years, London and Singapore are catching up in the race with the market leader.
“It was no surprise two years ago to see London take the initiative to position itself as the main offshore trading centre for Rmb,” DiCocco says. More than 40% of all global foreign exchange trading takes place in London. “It quickly rose to a commanding position and assumed the second-largest centre in respect of market share.”
Singapore’s rapid ascendancy has been fuelled by the fact that offshore Rmb growth to date has been driven primarily by trade finance settlement. He says: “With Singapore as the main trade finance hub for Asia Pacific, and the predominance of intra-Asia trade, it is not surprising to see Singapore proving an attractive centre for offshore Rmb payments too.”
Singapore and the UK have previously agreed to co-operate on the further development of offshore Rmb through a new ‘UK-Singapore Financial Dialogue’ agreement.
DiCocco is adamant that the impact the continued internationalisation of the Rmb will have on the global monetary landscape cannot be overstated. He says: “To give this some context, around 20% of China’s US$4tn in annual foreign trade is conducted in Rmb today, a figure which could surge by over 30% as early as next year and see the Rmb become one of the top three global trade currencies. It would not be naïve to suggest that it could rise to as much 50% by 2017.”