Date
25 March 2017
Mainland companies are increasing their offshore renminbi holding through their outbound subsidiaries and remitting the proceeds back to the mainland to pay for imports. Photo: Xinhua
Mainland companies are increasing their offshore renminbi holding through their outbound subsidiaries and remitting the proceeds back to the mainland to pay for imports. Photo: Xinhua

Renminbi arbitrage distorting outbound exports to China

A wider spread in the exchange rates of offshore and onshore renminbi and a surge in related arbitrage activities have distorted statistics on Hong Kong’s outbound exports to mainland China.

Such exports skyrocketed 64.5 percent in December, according to official Chinese statistics, the Hong Kong Economic Journal reports.

These compare with just 0.9 percent growth for the same exports recorded in Hong Kong.

The disparity works out to US$22.3 billion, the highest since March 2013 in absolute terms, the report said, citing research by BOC Hong Kong (Holdings) Ltd. (02388.HK).

Alicia Garcia Herrero, chief Asia Pacific economist of Natixis Corporate and Investment Bank, said the arbitrage spectrum has swung in the opposite direction from where it was in 2009 and 2014 when the renminbi offshore exchange rate was higher than the onshore rate.

This time, with the higher onshore exchange rate, mainland corporates are increasing their offshore renminbi holding through their outbound subsidiaries and remitting the proceeds back to the mainland to pay for imports.

The wider interest rate differential between the two sides is driving arbitrage activities, Herrero said.

[Chinese version中文版]

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