Repo market opens to short-term foreign loans
Updated: 2015-06-05 09:32
(Agencies)
|
||||||||
China has opened a market for short-term loans to foreign banks, giving them access to cheaper yuan funding as policymakers encourage greater global use of the currency.
All overseas yuan clearing and settlement banks that participate in the interbank bond market can conduct repurchase agreements and move the funds abroad, the People's Bank of China said in a statement on Wednesday. There are 107 offshore lenders that can exchange debt with their local counterparts and the change will make repos possible for most of them, including HSBC Holdings Plc and Standard Chartered Plc.
The change comes as China seeks to bolster the case for the International Monetary Fund to grant the yuan reserve status later this year. The currency failed to qualify in a 2010 review because it wasn't deemed to be freely usable. Onshore interbank short-term money rates have fallen below that of Hong Kong after the PBOC reduced interest rates three times since November and cut major banks' reserve ratios twice this year.
"This latest move is to address the last few remaining major restrictions of China's capital account," said Suan Teck Kin, Singapore-based economist at United Overseas Bank Ltd. "The further opening of China's capital account will help lower offshore funding costs and improve offshore liquidity conditions, as China keeps its eye on the IMF's Special Drawing Rights."
"We are moving quickly toward a one currency, one curve system, as we have been expecting for a long time," said analysts led by Hong Kong-based Qu Hongbin at HSBC Holdings Plc on Thursday.
"The move will result in greater transmission of onshore monetary policy to the offshore market." The monetary authority has in the past year appointed yuan-clearing banks in 11 foreign cities, including Seoul, Sydney and Kuala Lumpur, choosing local branches of the Industrial & Commercial Bank of China Ltd, China Construction Bank Corp, Bank of China Ltd and Bank of Communications Co Ltd.
The PBOC started to allow central banks and overseas yuan clearing and settlement banks to invest in the domestic interbank bond market in 2010. Lenders including HSBC and Standard Chartered obtained licenses to conduct yuan settlement overseas in 2009.
The National Interbank Funding Center had 107 overseas lenders as members as of Wednesday, as well as 24 Qualified Foreign Institutional Investors and 91 Renminbi QFIIs, according to data posted on its website. The programs allow foreign currency and yuan raised offshore to be invested in the local market.
Overseas institutions held 712.8 billion yuan ($115 billion) of onshore bonds at the end of March, PBOC data show. That was only 1.9 percent of the 36.7 trillion yuan outstanding, according to Bloomberg.
- Chicago gets a present from Shanghai
- Rescuers cut into capsized ship in search for survivors
- Search-and-rescue operation enters third day
- Djokovic ends Nadal's remarkable reign in brutal fashion
- Highlights of 10 years at Apple's WWDC
- Rescuers fought bad weather at night
- Kobe Bryant causes a stir on Weibo
- Ten photos you don't wanna miss - June 3
Most Viewed
Editor's Picks
Premier Li embarks on Latin America visit |
What do we know about AIIB |
Full coverage of Boao Forum for Asia |
Annual legislative and political advisory sessions |
Spring Festival trends reflect a changing China |
Patent applications lead the world |
Today's Top News
65 bodies found, more than 370 still missing
Ex-FIFA executive detailed bribes in 2013 secret guilty plea
HK economy will suffer if reform fails, tycoon says
Beijing 'shocked' at Nazi comparison by Philippines
Ship disaster in Yangtze River: Roundup of updates
Obama signs bill remaking NSA phone records program
Unconfirmed multiple bomb threats made against flights in US
Where Caitlyn Jenner found her Vanity Fair style inspiration
US Weekly
Geared to go |
The place to be |