StanChart eyes yuan opportunities in FTZ

Group to take advantage of broad international network, experience

The China (Shanghai) Pilot Free Trade Zone is likely to become an international treasury center and attract an increasing number of multinationals, Standard Chartered Group Chief Executive Officer Peter Sands said in Beijing on Tuesday.

People queue up at the China (Shanghai) Pilot Free Trade Zone's service center. Banks within the zone can now conduct renminbi cross-border settlements for transactions involving the current account and direct investment business. Xu Congjun / for China Daily

In addition to Hong Kong, Taiwan, Singapore and London, the new FTZ represents the next opportunity to expand renminbi services, Sands said.

"We are very excited that the renminbi is becoming more integrated into the global economy, and the process is extraordinarily rapid, although there are many steps to go through," he said.

Standard Chartered, based in the United Kingdom, is preparing for reforms and changes in China, especially those in relation to the FTZ.

It aims to "play a positive role", taking advantage of the bank's broad international business network and experience, according to Sands.

The People's Bank of China released a document, Guidelines for Financial Support for the China (Shanghai) Pilot Free Trade Zone, on Monday.

The central bank's document gives permission to expand cross-border use of the yuan, lists measures to facilitate currency conversion, cross-border investment and financing activities, and deepens the reform of foreign exchange management.

Chang Jian, a senior Chinese economist at Barclays Capital Plc, said the document means institutions in the FTZ will be able to invest in products on financial exchanges in Shanghai and issue yuan-denominated bonds onshore.

"Foreign parent companies of enterprises in the zone can also issue renminbi bonds in onshore capital markets," which will provide business opportunities to domestic and foreign financial institutions, said Chang.

Under the new policies, institutions in the Shanghai free trade zone can borrow overseas. Banks in the zone may conduct renminbi cross-border settlements for transactions involving the current account and direct investment business.

Standard Chartered is also launching offshore yuan services in London.

On Monday, the UK bank and Agricultural Bank of China Ltd agreed to provide renminbi clearing services in the UK. These services will help Chinese companies expand overseas and accelerate the currency's internationalization, he said.

Under the agreement, financial institutions and companies can carry out yuan-denominated transactions through the UK branches of both banks.

"It will pave the way for greater awareness and the development of more renminbi-related products and services in areas such as trade finance, global cash management, asset management and bond settlement, based on the renminbi offshore market in London," said Sands.

"The opportunity to boost renminbi liquidity in London could be used to fund large investment projects and support the development of other financial activities."

The renminbi clearing services will offer more opportunities for Chinese enterprises to expand investment, he said. "More broadly, it will help Chinese companies access all Western markets."

Both institutions will continue to expand together in various areas, including small and medium-sized enterprise financing and collaboration to support Chinese companies venturing overseas, he added.

"We are proud to contribute to the strengthening of economic ties between the two nations, as the renminbi continues to internationalize," he said. 

According to the Society for Worldwide Interbank Financial Telecommunications, London accounts for 28 percent of offshore yuan settlement transactions, and it's the main center for the currency in the European Union.