Ties to drive de­mand for RMB ser­vices

While de­mand for yuan-de­nom­i­nated prod­ucts still lim­ited, lower costs could spur 2-way ac­tiv­ity

China Daily (USA) - - ACROSS AMERICAS - By PAUL WELITZKIN in New York paulwelitzkin@chi­nadai­lyusa.com

As the US and China con­tinue to deepen financial ties, the devel­op­ment of prod­ucts and ser­vices for Chi­nese cur­rency in the US will in­crease, par­tic­i­pants at a New York fo­rum were told Mon­day.

“The de­mand for RMB-de­nom­i­nated prod­ucts and ser­vices in the US is mod­est, but it is grow­ing,” Mary Schapiro, for­mer chair of the US Se­cu­ri­ties and Ex­change Com­mis­sion and vice-chair of The Work­ing Group on US RMB Trad­ing and Clear­ing told the HSBC China Fo­rum.

The Work­ing Group is backed by sev­eral ti­tans of US fi­nance who want to es­tab­lish the trad­ing and clear­ing of the ren­minbi (RMB), or yuan, in the US. Michael Bloomberg is the group’s chair­man. For­mer US Trea­sury sec­re­taries Ti­mothy Gei­th­ner and Henry Paul­son serve as co-chairs.

By mak­ing it eas­ier for US in­sti­tu­tions to make or re­ceive RMB pay­ments, the group be­lieves it will lead to lower trans­ac­tion costs and in­crease eco­nomic ac­tiv­ity be­tween the two na­tions. As part of their bi­lat­eral sum­mit last year, Pres­i­dent Barack Obama and Pres­i­dent Xi Jin­ping agreed to strengthen financial co­op­er­a­tion, in­clud­ing dis­cussing mech­a­nisms “to fa­cil­i­tate ren­minbi trad­ing and clear­ing in the United States”.

He­len Wong, the chief ex­ec­u­tive for Greater China at HSBC, noted that as China ex­pands its mid­dle class and ser­vice sec­tor, the US could be poised to profit.

“For the US, with its ad­vanced ser­vice sec­tor, China rep­re­sents a huge op­por­tu­nity,” Wong said.

She also noted that the ren­minbi will en­ter the In­ter­na­tional Mon­e­tary Fund’s Spe­cial Draw­ing Rights bas­ket of cur­ren­cies on Oct 1, join­ing the dol­lar, euro, pound and yen. That is also ex­pected to in­crease de­mand for RMB trans­ac­tion ser­vices.

Wong said that the RMB is al­ready among the top six pay­ment cur­ren­cies in the world.

By in­creas­ing RMB trans­ac­tion ser­vices in the US, Schapiro said both US and Chi­nese com­pa­nies will ben­e­fit.

“The US and China are each other’s largest trad­ing partners,” Schapiro said. “The Chi­nese will have greater flex­i­bil­ity when fi­nanc­ing US in­vest­ments. Small busi­nesses in the US will not be at a dis­ad­van­tage be­cause they don’t have ac­cess to an in­ter­na­tional trad­ing desk.”

“China’s sec­ond-quar­ter GDP of 6.7 per­cent was bet­ter than ex­pected,” Wong said. “The wor­ries about China’s eco­nomic slow­down have dis­si­pated for the mo­ment.”

For the US, with its ad­vanced ser­vice sec­tor, China rep­re­sents a huge op­por­tu­nity.”

He­len Wong, chief ex­ec­u­tive of Greater China HSBC

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