CAP­I­TAL CON­TROLS SEEN HURT­ING YUAN

Fitch warns Bei­jing’s mea­sures may af­fect in­ter­na­tion­al­i­sa­tion of cur­rency

New Straits Times - - Business -

BEI­JING with Alibaba Group Hold­ing Ltd to In­done­sia, a coun­try of 260 mil­lion that’s ex­pe­ri­enc­ing a surge in smart­phone us­age and mid­dle-class af­flu­ence.

It will also be buy­ing into a lo­cal ally ahead of a po­ten­tial push into the re­gion by Ama­zon.com Inc.

China’s two big­gest e-com­merce

“Poli­cies to con­tain cap­i­tal out­flows and on­go­ing con­cerns over cur­rency de­pre­ci­a­tion are likely to hold back in­ter­na­tion­al­i­sa­tion in the short term,” said Fitch.

“Progress to­wards the Chi­nese yuan be­com­ing a more im­por­tant global cur­rency has lost mo­men­tum over the last two years, not­with­stand­ing its land­mark in­clu­sion in the In­ter­na­tional Mone­tary Fund’s (IMF) Spe­cial Draw­ing Rights cur­rency bas­ket late last year,” it said.

But a grad­ual in­crease in hold­ings of yuan by re­serve man­agers could still sup­port China’s rat­ing pro­file over time, Fitch added.

The pro­por­tion of in­ter­na­tional cur­rency pay­ments de­nom­i­nated in yuan fell to 1.8 per cent in March from two per cent last year, it said, cit­ing SWIFT data.

Still, high­light­ing data from the China Cen­tral De­pos­i­tory & Clear­ing Co, Fitch said the share of ex­ter­nal hold­ings of Chi­nese gov­ern­ment bonds dur­ing the same pe­riod rose to 3.9 per cent play­ers have both poured ma­jor sums into South­east Asia, capped by Alibaba’s ac­qui­si­tion of a con­trol­ling stake in Lazada Group SA last year.

In­done­sia alone as an e-com­merce mar­ket is ex­pected to climb to US$65 bil­lion by 2020 from just US$8 bil­lion now, ac­cord­ing to a re­cent re­port by from three per cent.

About 17 per cent of China’s trade deals were set­tled in the yuan last year, off a peak of 26 per cent in 2015 and 22 per cent in 2014, ac­cord­ing to Reuters cal­cu­la­tions based on of­fi­cial data.

Yuan set­tle­ments were close to zero in 2009, when in­ter­na­tion­li­sa­tion was seen as a way for firms to re­duce cur­rency risks and also to chal­lenge the US dol­lar’s role as the world’s ma­jor re­serve cur­rency.

The yuan could be used as a re­serve cur­rency in the long term, given the global im­por­tance and in­ter-con­nect­ed­ness of China’s econ­omy, said Fitch.

Data re­leased by the IMF in March showed China’s share of al­lo­cated cur­rency re­serves to­talled just over one per cent, or US$84.51 bil­lion (RM365.93 bil­lion).

The yuan has sta­bilised this year due to curbs on cap­i­tal out­flows and a re­ver­sal of the US dol­lar rally, fol­low­ing a fall of 6.5 per cent last year. Reuters Mac­quarie Re­search.

Toko­pe­dia was co-founded by Wil­liam Tanuwi­jaya, the son of a fac­tory worker, in 2009.

The busi­ness model is sim­i­lar to that of Alibaba’s on­line em­po­rium, match­ing cus­tomers with mer­chants in­stead of sell­ing prod­ucts from its own shelves. Bloomberg

BLOOMBERG PIC

JD.com Inc’s plan to in­vest in PT Toko­pe­dia, one of In­done­sia’s largest on­line mar­ket­places, may pro­pel it past US$1 bil­lion in val­u­a­tion.

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