By 2020, London and Singapore could emerge as the two dominant offshore renminbi (RMB) hubs alongside Hong Kong, according to BNY Mellon’s Fred DiCocco.
DiCocco, BNY Mellon’s Asia Pacific head of sales and relationship management for the treasury services, believes competition for offshore RMB is getting fiercer as financial centres seek to capitalise on Beijing’s ambition to make the RMB a global currency.
“Around 20 percent of China’s $4 trillion in annual foreign trade is conducted in RMB today, a figure which could surge to over 30 percent as early as next year,” says DiCocco. This would make RMB one of the top three global trade currencies.
So far Hong Kong has remained the leader in offshore RMB payment centres, with 71 percent of the market share. But in the last three years, DiCocco says this has dropped by “around 10 percent” as London and Singapore establish themselves as “strong alternatives”.
DiCocco adds: "With China-EU trade representing the second largest global economic co-operation pact, and with more than 40 percent of all global foreign exchange trading taking place in London, it was no surprise two years ago to see London take the initiative to position itself as the main offshore trading centre for RMB.”
“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.”
Despite the advantage, Luxembourg and Germany are also seeking to grow as RMB hubs.
DiCocco says: “Only time will tell who the winners will be, but I believe by 2020 we will see a three-horse race between London, Singapore and Hong Kong for supremacy.”
