![]() Morgan’s direct membership in China’s Cross-Border Inter-Bank Payments System (CIPS) gives clients efficient access to CIPS for clearing cross-border RMB payments. Morgan offers RMB-denominated accounts for eligible financial institutions in the U.S., facilitating cross-border RMB payments between the U.S. Morgan is in a position to support other financial institutions with cross-border RMB payment needs. approved by the People’s Bank of China (PBOC), J.P. Leveling the Playing Field for Financial InstitutionsĪs the first non-Chinese offshore RMB clearing bank in the U.S. dollars and RMB, choosing which is most beneficial for their specific needs and requirements. By offering offshore RMB clearing capabilities, financial institutions can enable their clients to transact in both U.S. financial institutions can offer their customers the ability to negotiate their invoicing terms on a currency neutral basis with their Chinese trading partners to allow customers to avoid risk from FX fluctuations. 8īy demonstrating the capability to transact in both U.S dollars and RMB, U.S financial institutions may gain greater access to Chinese markets enabling them to help their clients compete more effectively where access to RMB may facilitate transacting more easily with Chinese trading partners. 7 As one of the five key currencies in the Special Drawing Right (SDR) basket established by the International Monetary Fund (IMF), the RMB continues to grow in importance as a global currency. 6Ĭurrently, RMB ranks no.6 as a payments currency and is among the top 3 currencies in the trade finance market worldwide. ![]() To further promote foreign investment in China’s capital markets, SAFE announced in late 2019 that it would remove quotas associated with the Renminbi Qualified Foreign Institutional Investor (RQFII) and Qualified Foreign Institutional Investor (QFII) programs. 4 Overseas insurance companies with less than 30 years of operations will now be able to establish insurance companies in China. Foreign investors will also be able to own more than 25% of Chinese insurance asset management companies. For the first time, foreign entities will be allowed to wholly-own life insurance companies in the region. 4Īnother area of opportunity in China will be in the insurance industry. 4 Foreign financial institutions will also be able to help establish and invest in Chinese pension fund management companies, as well as establish or completely own currency brokerage companies in China. Regulatory changes in China have enabled foreign financial institutions to invest and participate in the establishment of the wealth management operations of Chinese commercial banks. Investment Opportunities for Foreign Financial Institutions One portion of the announcement revealed that restrictions on foreign exchange settlement and use and the number of foreign exchange accounts opened under a capital account would be removed. In October 2019, China’s State Administration of Foreign Exchange (SAFE) announced a set of policies intended to promote cross-border trade and investment. 4 Foreign rating agencies will now be allowed to rate all bonds in the CIBM and the exchange-traded bond market, which may result in greater transparency in China’s bond markets. In addition, eligible foreign-invested groups will soon be able to serve as class A lead underwriters in the Chinese Inter-Bank Bond Market (CIBM) for all bond types. One important change coming this year is that China will permit foreign entities to wholly-own Chinese securities companies, futures companies and fund management companies. For instance, in July 2019, the Chinese Financial Stability Development Committee (FSDC) announced numerous measures developed to further promote international involvement in China’s financial markets from both international investors and financial institutions. This past year, a number of key steps were taken to increase offshore adoption of the RMB. ![]() In an attempt to open its markets, China has been engaging in efforts across the country’s financial sector to internationalize the RMB. Opening China’s Markets, Internationalizing the RMB This presents important opportunities for both financial institutions and international investors that will be transacting in renminbi (RMB), China’s official currency. Significant efforts have been made by China to open up its markets to foreign companies looking to do business in the region. 2, 3Today, China is a significant contributor to the global economy, representing 16% of the worldwide domestic product. 1As the world’s second largest economy, China is also the number one exporter globally. China remains one of the U.S.’s largest trading partners. ![]()
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