KUALA LUMPUR (Jan 5): The People’s Bank of China (PBC), the monetary and financial institution regulatory in mainland China, has approved the Bank of China (Malaysia) Ltd as the clearing bank for renminbi (RMB) transactions in Kuala Lumpur.
“The RMB clearing bank is another important milestone in our financial cooperation and we hope to build on these deep ties, and this signifies our confidence and commitment to the future trend in RMB business in Malaysia,” Bank Negara Malaysia (BNM) said in a media statement this evening.
To recap, BNM had in February 2009 announced that it was the first central bank in ASEAN to establish a RMB swap line with PBC amounting to RMB80 billion. In 2012, the swap size increased to RMB180 billion.
BNM also became the first Asian central bank to be awarded the Qualified Foreign Institutional Investor (QFII) licence in 2009, which enabled it to invest in China’s onshore financial markets and to be among the first few to be granted access to the China Interbank Bond Market.
"The QFII quota currently stands at US$1.5 billion, the highest quota granted to foreign entities outside China," said BNM.
BNM started investing in China’s US dollar sovereign bonds since 2003. Beginning 2010, BNM has included RMB denominated bonds in the international reserves.
BNM added that financial co-operation has been effective in promoting the use of local currencies in bilateral trade, investment and financial flows between China and Malaysia with the use of RMB for trade and investment settlement as well as issuance of RMB sukuk bonds
“Based on SWIFT data statistics, the total RMB clearing amount in Malaysia hit RMB1.15 trillion in the first half of 2014, an increase of 104.5% from 2013. The SWIFT RMB Tracker report July 2014 ranked Malaysia as one of the top ten offshore RMB centres in the world,” it said.
Trade settlement volume, it noted, has also tripled since 2010 to RM3 billion in 2013, while RMB deposits in Malaysia have expanded by more than 10-fold since 2010 to the current RMB10.7 billion.
"By 2013, RMB FX (foreign exchange) volume had reached more than 15 time the amount in 2010. Latest statistics show that average daily RMB FX volume is around US$580 million per day in 2014," it added.