The Monetary Authority of Singapore (MAS) and the People’s Bank of China (PBOC) have agreed to renew and enhance the bilateral currency swap arrangement (BCSA) established between the two central banks. This is one of the main outcomes of the recent visit to Singapore by the President of the People’s Republic of China, Mr Xi Jinping.
The existing PBC-MAS BCSA was sealed in March 2013 and is set to expire in March 2016.
In its announcement, MAS notes that by providing timely liquidity support to market participants, a stronger BCSA will help increase market confidence as Singapore’s RMB market continues to grow.
In addition, China and Singapore agreed to extend to Chongqing Municipality the same cross-border RMB initiatives that currently exist with respect to Suzhou and Tianjin. As a result, Singapore-based banks will be allowed to lend RMB to companies in Chongqing. Also, Chongqing-based companies may issue RMB bonds in Singapore and fully repatriate the proceeds.
Another key point is that Singapore’s quota under the RMB Qualified Foreign Institutional Investor (RQFII) scheme will be doubled from RMB 50 billion to RMB 100 billion. This is in response to the growing interest by Singapore-based asset managers and investors to invest in China. The larger quota will also allow more fund managers in Singapore to offer investors a wider range of RMB fund products.
Regarding capital markets, an agreement was reached to institute a regular high-level dialogue between MAS and the China Securities Regulatory Commission (CSRC). This will help the two regulators exchange views and achieve a common understanding on regulatory issues that impinge on their respective capital markets.
MAS and CSRC have also agreed to explore product collaboration to broaden capital market offerings.
MAS Managing Director, Ravi Menon, said:
“Singapore and China have achieved remarkable success in RMB co-operation thus far. It has benefitted our financial centre while supporting the gradual and orderly internationalisation of the RMB. In the next phase of our financial co-operation with China, we hope to replicate in the area of capital market development the success we have had in building the RMB ecosystem. There is great scope for China to tap on Singapore’s strong institutional investor base and established derivatives markets to facilitate the development of their own capital markets. There are also significant opportunities for exchanges from both sides to collaborate in a mutually beneficial way.”
You can view the full announcement from MAS by clicking here.