25 January 2020


Just a week after China inked a similar deal with London, Asia’s biggest economy has accelerated its efforts to enhance the role of the Chinese currency in global trade and investment by introducing direct currency trading with Singapore. The pacts with London and Singapore will undoubtedly help London and Singapore in boosting their role as offshore yuan hubs in different time zones, threatening the dominant role of Hong Kong, which holds the world’s largest offshore yuan savings pool and handles a bulk of the Chinese trade that is denominated in yuan. We believe further appreciation of the yuan is along the road as Beijing seeks to lure more people and companies to use and hold the so-called redback. The stepped-up efforts in yuan internationalization was also evident as authorities granted Singapore a 50 billion yuan (US$8.2 billion) quota for financial institutions in the city to invest in China’s domestic securities under the Renminbi Qualified Foreign Institutional Investor program. With the currency appreciation prospects and recovering Chinese economic growth, the renminbi as well as yuan-denominated assets will probably see renewed investor bets.

Gas deal: After years of back-and-forth talks, China and Russia at last reached an agreement on a price for gas supplies via the eastern route pipes. Russia, the world’s biggest producer of natural gas, will start supplying gas to China in 2018 with the maximum volume at 38 billion cubic meters per year should a contract be signed by the end of this year. The gas deal has two implications for China. Firstly, it helps enhance the energy security for the country which imports more than half of the oil it consumes. More importantly, it can help authorities tackle the worsening pollution in Beijing and other cities, helping China become a greener economy. The Asian giant expects to consume up to 230 billion cubic meters of gas by 2015.

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