RMB round-up: PBoC governor urges looser capital control, HK leader backs cross-border RMB business, UK RMB deposits up in Q2

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Regulators:

  • China should continue to open up its economy to foreign investment, reform the renminbi’s exchange rate mechanism and cut back on capital controls, Zhou Xiaochuan, the PBoC’s governor, told Chinese media on October 9.
    In particular, Zhou named strict capital controls as a major obstacle to the opening up of China’s economy.
    “There is not a single country in the world which could achieve an open economy with severe capital controls,” he said. “And not one country has achieved positive interaction between its domestic and foreign markets while the exchange rate is seriously unbalanced.”
    Zhou, who is expected to retire in 2018, made the remarks shortly before the National Congress of the Communist Party, which will start on October 18.

Hubs:

  • Hong Kong will cement its status as an offshore renminbi business hub by participating in the Belt and Road Initiative, said Carrie Lam, chief executive of Hong Kong, on October 11.
    Lam, who took office in July, also promised to increase the level of cross-border fund flows between Hong Kong and Mainland China.
    “We will explore the possibility of including in the two‑way mutual access mechanism a wider range of investment products, such as exchange traded funds, and extending the Mainland‑Hong Kong Bond Connect to cover southbound trading,” said Lam.
  • Renminbi deposits in the UK reached £9.67bn in the second quarter, up 7% quarter-on-quarter, according to figures published by Bank of England. Turnover for RMB FX spot fell by 21% to £16.7bn, whereas RMB FX forwards, swaps and options turnover rose by 5%, 8% and 18%, to £11.4bn, £12.5bn and £11.1bn, respectively.

FX:

  • The volume of China’s FX reserves stood at $3.1085tr at the end of September, up 0.5% month-on-month, according to the State Administration of Foreign Exchange. This marked the eighth consecutive month of grow for China’s FX reserves, the regulator noted in an October 9 statement.
  • The PBoC’s renminbi fix against the dollar was set at 6.5866 this morning, 58bp weaker from Thursday. The NEX CNH benchmark came in at 6.5859 at 4.31pm on Thursday, weaker than 6.5781 on Wednesday.
    The dollar index closed at 93.057 on Thursday, up 0.05% from Wednesday, according to Bloomberg. The Thomson Reuters CNY reference index closed at 96.01 on Thursday, down 0.3% from its previous close.

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