The booming offshore market for China’s currency, the yuan renminbi, is driving demands for renminbi-denominated investment products.
China’s approach to liberalising its monetary rules has been to create an offshore, or shadow, currency in Hong Kong, known as the offshore yuan renminbi, or CNH, which is partially convertible with the mainland CNY currency. The idea is to start allowing its domestic currency to develop internationalisation characteristics while keeping it protected from global markets.
HSBC is in a front-foot position in the race to service this growing market and wants to be the number one offshore renminbi product provider.
Latest figures show the renminbi deposit base in Hong Kong was RMB451.4bn at the end of March, up almost 10% on the previous month.
Renminbi market is growing “staggeringly quickly”: Meares
The offshore renminbi market is growing “staggeringly quickly” says Meares. HSBC’s recent investor strategy presentation said it had sold $2bn in offshore renminbi products across all asset classes over the past year.
“What people expect to happen in 10 years is going to happen in three. So you are seeing renminbi bonds and initial public offerings in the future, but you have to build up offshore renminbi to invest in these,” he says.
HSBC is now offering renminbi services to clients out of about 30 countries, mostly to traders but also through its private bank, he says.
“Clients are very keen on the bond issues, where you have seen companies like McDonald’s and Unilever issue offshore renminbi bonds. HSBC also worked on the first renminbi initial public offering in Hong Kong,” says Meares.