Date
23 October 2017
China May Resume Yuan Float, Avoid Sharp Revaluation

The Big Picture: INTEREST RATE SWAP

Shanghai’s Interbank Market Clearing House Co. Ltd. (Shanghai Clearing House) launched on Jan. 2 an interest rate swap clearing service for the Chinese currency, the People’s Bank of China (PBoC) said in a statement late Friday.

The new service aims to help improve the country’s financial market system, diversify the investment products offered by commercial banks and speed up the development of a derivatives market, the PBoC said.

Shanghai Vice Mayor Tu Guangshao {屠光紹} said the interest rate swap clearing service will help China’s largest commercial city to become an international financial center.

Under the new arrangement, Shanghai Clearing House will serve as a middle man for interest rate swap deal makers and will set up a risk management system to ensure all deals are completed. More than 90 percent of interest rate swap transactions, which have a contract term between five days to five years with reference of the Shanghai Interbank Offered Rate (Shibor) or the repo rate, will be covered by the new services.

The latest move is an important milestone for Shibor to become a benchmark for the price-setting of onshore renminbi bonds and other fixed-income products, observers said. It will help establish an interest rate swap yield curve and push forward the nation’s interest rate liberalization.

However, it is expected that Shibor will remain a benchmark rate only for the onshore reminbi bond market in the coming few years as it takes time for the country to open its capital account.

Meanwhile, the offshore renminbi Hong Kong Interbank Offered Rate (CNY-Hibor), offered by the Treasury Market Association, will have room to form a yield curve and become a benchmark rate for offshore renminbi bonds.

Big four new loans hit 180 bln yuan in December

China’s big four state-owned banks — Industrial & Commercial Bank of China Ltd. (ICBC) (01398.HK, 601398.CN), Agricultural Bank of China Ltd. (01288.HK, 601288.CN), Bank of China Ltd. (03988.HK, 601988.CN) and China Construction Bank Corp. (00939.HK, 601939.CN) — extended 180 billion yuan (US$29.76 billion) in combined new loans in December, Shanghai Securities News reported Monday, citing an unnamed source. Deposits rose 1.2 trillion yuan. No comparative figures were given. New loans by commercial banks were estimated at 580 billion yuan, down 45 billion yuan from a month earlier, the report said, citing Bank of Communications Co. Ltd. (03328.HK, 601328.CN). It expects new loans this year to increase between 13.6 and 13.9 percent year on year to 10 trillion yuan, the report said.

Govt backs anti-pollution technology projects

The government will support air pollution-related technology projects, the China Securities Journal reported Monday, citing the Ministry of Environmental Protection. The plan covers de-nitrification projects, motor exhaust processing, pollution analysis and warning systems. They will receive special funding and other incentives from the government.

–Contact HKEJ at [email protected]

JP/CG

 

 

 

 

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