Deutsche Bank
Harnessing the
RMB opportunity
A brief guide to China’s global currency
A brief guide to China’s global currency 1
Contents
1. The road ahead for RMB internationalisation
3
2. Why adopt the RMB?
10
3. Foreign exchange and rates 12
4. Transaction banking
15
5. The offshore RMB fixed income market
23
6. FAQ for corporations
28
7. Keeping informed
32
A brief guide to China’s global currency 1
2 A brief guide to China’s global currency
The road ahead for RMB
internationalisation
Rapid growth in the global use of the renminbi will continue
for years to come, and is testament to China’s stature as a
prominent economy and trading power.
Renminbi (RMB) internationalisation is occurring
within the context of China’s managed transition
towards a more market-driven economy,
which necessitates greater mobility and
market-based pricing of capital. Since 2009,
the Chinese authorities have accelerated the
process of financial reform through currency
internationalisation, capital account opening
and the gradual liberalisation of domestic
interest rates. Although there continues to be
debate about the ideal sequence and timing
of reforms, Chinese policymakers have taken
significant steps to allow more flexibility in all
three areas.
The process of interest rate liberalisation has led
to the removal of nearly all restrictions on lending
rates, and increasing latitude for banks to set
deposit rates in relation to the People’s Bank of
China (PBoC) benchmark. Significant steps have
also been taken to allow more flexibility in the
exchange rate. In 2014, the daily trading range
against the US dollar (USD) was doubled from
1% to 2% and banks onshore were permitted to
set their own RMB/USD FX rates for retail clients.
The RMB is now fully convertible on the current
account, but also across an increasing number
of items on the capital account. Deutsche
Bank’s research department has projected that
China will complete the process of interest rate
liberalisation by the end of 2016 and make the
RMB fully convertible by 2020.
The internationalisation of the RMB has
outpaced other areas of financial reform,
entering an accelerated phase in 2014, as
new clearing banks were appointed in financial
centres across Asia, Europe, and in Canada. In
early 2015, the Chinese government and PBoC
have stated that China is working towards full
RMB convertibility under the capital account,
suggesting that the process of reform will
continue to see positive momentum.
However, RMB internationalisation has also
entered a phase when steady FX appreciation
can no longer be taken for granted. Indeed,
the value of the currency against the US dollar
weakened in 2014, reversing a multi-year trend
of appreciation. As the RMB trades with greater
two-way movement, its offshore use is becoming
less influenced by currency speculation and
more so by genuine business demand.
Redenomination of cross-border trade in RMB
may bring efficiency improvements, reduced
transaction costs and discounts in some cases.
The recent relaxation of regulatory restrictions
makes it easier for multinational companies to
manage cash across borders and move funds
from their China operations across borders
relatively freely. Currency risk can be neutralised
by raising capital in the offshore RMB bond
market to fund onshore subsidiaries. Investors
meanwhile gain unrestricted access to RMB
assets through international FX and debt
markets, and can now invest in onshore equities
through the pilot Stock Connect programme in
Hong Kong.
A brief guide to China’s global currency 3
Key Milestones in RMB internationalisation
2004 - 2006
2007
2008
2009
—Banks
—
allowed to take RMB
deposits and to conduct
conversion for individuals
capped at RMB 20,000 per
day in Hong Kong
—Corporates
—
allowed to issue RMB
bonds in Hong Kong
—Banks
—
started to earn
86.5bps deposit rate from
Shenzhen branch of PBoC,
after clearing charge from
the clearing bank Bank of
China (Hong Kong)
—Sharp
—
increase in RMB deposit
base in early 2008, driven by the
anticipation of CNY appreciation
(12% appreciation priced into
12-month NDF)
—Attractive
—
yield (3.0-3.5%) for both
retail customers and deposit-taking
banks
—In
— July 2010, the PBoC made significant
relaxations to the rules for the RMB
business in Hong Kong, allowing RMB
to circulate more or less freely in Hong
Kong and permitting CNH financial
products
—Current
—
account items include
merchandise trades, service trades and
other current account items
4 A brief guide to China’s global currency
2011
2012
—Retail
—
investors allowed to transfer RMB deposits
to other bank accounts and corporates allowed to
establish RMB accounts in Hong Kong
—Creation
—
of CNH FX and rates inter-bank markets
—RMB
—
supply rose due to spot CNY-CNH arbitrage
from exporters, and sharp increase in Hong KongChina cross-border settlement amounts
—Increased
—
issuances of RMB bonds and CDs
—RQFII
—
quota increased from RMB 20bn to
RMB 270bn
—MNCs
—
allowed to make RMB cross border loans
—Retail
—
customers received
RMB deposit rates in the
40-70bps range
—CNH
—
refers to the Chinese RMB
circulating in offshore markets, including
but not limited to Hong Kong
2010
Current account items: development of RMB cross-border trade settlement
schemes from 2009 to 2012
July 2009 –
RMB Cross-Border
Trade Settlement
Scheme launched
The RMB cross-border
trade settlement
scheme was launched.
Initially under the
pilot programme, a
total of 365 Mainland
Designated Enterprises
(MDEs) were permitted
to settle merchandise
exports in RMB.
Until Aug 2011 –
Expanded Scheme
Mar 2012 –
Full relaxation
The RMB cross-border
settlement programme
was expanded a few
times and by Aug 2011,
it was expanded
nationwide and to
all countries/regions
abroad, RMB trade
settlement applied
to merchandise and
services imports and
services exports; for
merchandise exports,
only MDEs were eligible
and the list of MDEs had
yet to be expanded.
Following the
announcement of “the
Notice of improving the
administration of MDEs
in RMB cross border
trade settlement”, the
RMB cross border trade
settlement scheme
became applicable for all
transactions under the
current account by all
eligible enterprises, both
exporters and importers.
2014
2013
Expanding offshore RMB business:
RMB Cross-border flows
— Feb 2013: RMB business in Taiwan was
officially launched with RMB deposits
— Feb 2014: PBoC issued Notice to support the
expansion of RMB cross-border usage in SHFTZ
— April 2013: PBoC signed RMB Clearing
Agreement with ICBC Singapore; PBoC
signed an MOU with MAS on cooperation
on RMB business in Singapore
— Mar 2014: PBoC liberalised FX deposit rate in
SHFTZ Enhancing offshore RMB liquidity facility:
— July 2013: The operations of the RMB
liquidity facility was enhanced to provide
overnight and one-day funds by the Hong
Kong Monetary Authority (HKMA)
Relaxing capital account access:
— May 2014: MNC cross-border FX cash pooling — May 2014: PBoC announced detailed
implementation rules on SHFTZ account
management and prudential management rules
— Jun 2014: Shanghai liberalised FX deposit rates Relaxing capital account access
— May 2013: PBoC allowed RQFII investors to
access China’s interbank bond market
— Mar 2014: Paris received RMB 80bn RQFII quota
— Oct 2013: Use of RMB allowed to settle
foreign investment in domestic financial
institutions
Relaxing capital account
access:
— Jan 2015: Switzerland
received RMB 50bn
RQFII quota
— Jul 2014: South Korea received RMB 80bn RQFII
quota, Frankfurt received RMB 80bn RQFII quota
— Nov 2014: Doha received RMB 30bn RQFII
quota, Canada received RMB 50bn RQFII quota,
Australia received RMB 50bn RQFII quota
Launch of HK-Shanghai Stock Connect programme
— Apr 2014: HK-Shanghai Stock Connect
programme announced
— Nov 2014: HK-Shanghai Stock Connect
programme launched
Launch of RMB QDII program
— Nov 2014: RMB QDII programme launched;
PBoC does not impose QDII quota
— July 2013: QFII quota increased to
USD 150bn from USD 80bn; RQFII
programme is launched in Singapore
and London
— Mar 2014: PBoC signed MOU with Deutsche
Bundesbank on RMB clearing arrangement
— Oct 2013: London is granted RMB 80bn
RQFII quota; Singapore is granted
RMB 50bn RQFII quota
— Jun 2014: PBoC appointed Bank of China
Frankfurt Branch as the RMB clearing bank in
Frankfurt and China Construction Bank London
branch as the RMB clearing bank in London;
PBoC signed MOU with Banque de France on
RMB clearing arrangement and Banque centrale
du Luxembourg on RMB clearing arrangement
— Sept 2013: Shanghai Free Trade Zone
(SHFTZ) established to test economic
and financial reforms within a pilot area
— Jan 2015: PBoC signed
MOU with Swiss National
Bank on RMB clearing
arrangement in Switzerland
— Expansion of RQFII programme
— Mar 2013: Expand RQFII programme
to financial institutions in Hong Kong;
removal of asset allocation requirements
Developing Shanghai FTZ:
Expanding offshore RMB
business:
— Nov 2014: RMB two-way cross-border cash
sweeping programme was expanded nationwide
(from SHFTZ)
— Mar 2013: Expanded RQFII programme to
financial institutions
— July 2013: Simplified RMB cross-border
settlement; onshore financial institutions
allowed to make RMB cross-border loans;
borrowing limit by onshore MCBs from
offshore participating banks increased
from 1% to 3%; tenor for such borrowing
extended from 3M to 1Y; free RMB flows
between onshore MCB accounts and
offshore RMB accounts allowed
2015
Expanding offshore RMB business
— Apr 2014: PBoC signed MOU with Bank of
England on RMB clearing arrangement
— Jul 2014: PBoC appointed Bank of
Communication Seoul as the RMB clearing bank
in Seoul and signed MOU with Bank of Korea on
RMB clearing arrangement
— Sep 2014: PBoC appointed ICBC Luxembourg
as the RMB Clearing Bank in Luxembourg,
appointed Bank of China Paris as the RMB
Clearing Bank in Paris
— Nov 2014: PBoC appointed Bank of China Doha
as the RMB Clearing Bank in Qatar, and appointed
ICBC Canada as the RMB Clearing Bank in
Toronto; signed MOU with Bank Negara Malaysia
on RMB clearing arrangement; and appointed
Bank of China Sydney as the RMB Clearing Bank
in Sydney
— Dec 2014: PBoC signed MOU with Bank
of Thailand on RMB Clearing arrangement
A brief guide to China’s global currency 5
Evolution of the offshore market
While previously official RMB clearing banks
existed only in Greater China and Singapore,
from 2014 onwards there has been a rapid
expansion of offshore clearing centres with ten
new jurisdictions announced: London, Frankfurt,
Paris, Luxembourg, Seoul, Qatar, Toronto,
Sydney, Kuala Lumpur, Bangkok and Zurich.
China’s approach has been to establish a
global network of offshore RMB clearing
banks, currency swap agreements, RMB
Qualified Foreign Institutional Investor (RQFII)
quota, along with an associated systems and
regulatory framework.
The RMB has also begun direct currency
trading against the euro, the British pound, the
Singapore dollar, the Korean won and the New
Zealand dollar. The RMB already had direct
currency trade with the US dollar, the Japanese
yen, the Australian dollar, Russia’s rouble and
the Malaysian ringgit.
Global RMB deposits
Total deposits in the offshore RMB market
stood at an estimated RMB 2.2tn by the end of
January 2015, up 35% from RMB 1.63tn a year
earlier. About 57% of global deposits were held
in Hong Kong (where the RMB retail conversion
limit was removed in November 2014) compared
to 67.5% in 2013 and 82% in 2012.
In 2014, RMB deposit growth was particularly
strong in Taiwan (up 40%), Macau (42%),
Singapore (32%), and various European centres.
In the span of just one year, South Korea has
emerged as a major jurisdiction in the offshore
RMB landscape, having quickly amassed the
fourth-largest RMB pool in the offshore market,
with the RMB now accounting for more than a
quarter of foreign currency deposits, from just
0.4% at the end of 2012.
A slowdown in the pace of offshore RMB
deposit growth observed from late-2014 and
early 2015 can be attributed to broad US
dollar strength and increasing volatility in
the CNH spot and forward markets. Despite
diminished expectations for RMB appreciation
vs. USD, Deutsche Bank expects the offshore
deposit base to continue expanding due to RMB
investment and diversification demand from
corporates, institutions, and foreign central banks.
Figure 1. Global RMB Deposit Balances
RMB bn
2500
2000
1500
1000
500
0
Q1 2015
2013
2012
2011
Hong Kong
Taiwan
Singapore
Macao
London
New York
Korea
Luxembourg
Paris
Source: Deutsche Bank, various central bank websites
RMB cross-border trade settlement
Since the first pilot scheme to allow crossborder RMB trade settlement was established
in 2009 and expanded to include all Chinese
provinces and global counterparties in 2011,
the˛redenomination of cross-border trade to
RMB has grown swiftly. The currency’s share
of trade settlement volumes has received a
further boost from the relaxation in management
and regulatory oversight of cross-border flows.
In 2014, RMB cross-border settlement flows
amounted to RMB 6.56tn, up 42% from 2014.
At˛the end of 2014, 21.6% of China’s crossborder trade was denominated in RMB,
compared to only 2.5% in 2010.
Deutsche Bank expects 25% of China’s global
trade volume to be denominated in RMB by the
end of 2015. By comparison, 30-40% of Japan’s
external trade is settled in yen, while 50-60% of
the Eurozone’s external trade is settled in euro.
Since October 2013, the renminbi has been the
second-most used currency in trade finance,
based on SWIFT data.
Figure 2. RMB is the second-most used currency
globally in trade finance (letters of credit and collection,
inbound and outbound traffic) based on value
%
90
80
70
60
50
40
30
20
10
0
USD
Jan 15
Jan 13
Source: Deutsche Bank, SWIFT
6 A brief guide to China’s global currency
RMB
EUR
JPY
Figure 3. Top five users of RMB in trade finance
Macau 0.9%
Taiwan 0.9%
Others 4.1%
Singapore 9.7%
China 63.5%
Hong Kong 21.0%
Source: Deutsche Bank, SWIFT
SWIFT data also points to continued expansion
in the use of RMB as a global payments
currency. In 2014, RMB payments grew in
value by 102% compared to an overall yearly
growth for all currencies of 4.4%.The expansion
in offshore RMB clearing centres will be an
important driver to fuel future growth in RMB
payments.
The offshore RMB fixed income market
Issuance of so-called “dim sum” products
reached a record high in 2014 with RMB 560bn
in gross supply, a 46% increase from 2013. The
total outstanding RMB fixed income market
increased in size by 31% year-over-year to reach
RMB 760bn at end-2014 (during the year, the
offshore RMB bond market grew 40% to RMB
500bn, while the certificates of deposit (CDs)
market grew 7%).
Much of this growth was driven by a large
wave of refinancing, as well as low swap rates
between the RMB and the US dollar, which
increased the appeal of dim sum debt on an
asset-swapped basis.
Regionally, in Taiwan, RMB Formosa bond
issuance rose 96%, bringing the total RMB
Formosa bond market to RMB 31.4bn. In
terms of issuers, supranationals and a number
of foreign states became more active in the
CNH bond market in 2014, with the British
government issuing the first non-Chinese central
government bond.
Despite its rapid development, the offshore
RMB bond market must grow and diversify
significantly more before it can rival China’s
onshore bond market in scale. Issuance in the
offshore RMB fixed income market has been
decelerating in early-2015, amid convergence
in China’s onshore and offshore rates and a
strengthening dollar.
Milestones in capital account liberalisation
Chinese policymakers have continued relaxing
capital account controls to allow more direct
investment flows into and out of China. More
than 30% of China’s (inward) foreign direct
investment by non-financial institutions is
now made in RMB, while Deutsche Bank
estimates that about 4.3% of China’s total
corporate outbound direct investment is RMBdenominated. Total inbound and outbound
RMB direct investment settlement flows in 2014
amounted to RMB 1.05tn, up 96% from 2013.
The most significant milestone of recent years
in the liberalisation of portfolio investment flows
was the launch of the Shanghai-Hong Kong
Stock Connect in November 2014. This mutual
market access scheme allows participants in the
two cities to invest in each other’s stock markets
without the need for institutional quota, and
is all the more significant considering that this
mechanism will expand to cover the Shenzhen
Stock Exchange and additional asset classes
over time.
Unsurprisingly, turnover was modest in
the initial months, as the scheme launched
before many global funds were able to satisfy
operational and regulatory considerations.
Deutsche Bank expects that the Stock Connect
scheme will attract more volumes over time as
more institutions become able to participate.
In early-April, a surge in purchases of Hong
Kong-listed equities by Chinese investors was
recorded after the Chinese securities regulator
authorised domestic mutual funds to use
the scheme without the need for Qualified
Domestic Institutional Investor (QDII) status.
The possible inclusion of Chinese A shares in
global benchmarks would serve as a catalyst
to increase the global appetite for domestic
Chinese equities, bringing higher inflows.
Progress in capital account opening is also
evident from the expansion of the RQFII
programme to new offshore centres in Europe,
North America, the Middle East, and Australia –
and the expansion of the total quota from RMB
400bn in 2013 to RMB 1tn as of March 2015;
the expansion of interbank bond market access
to foreign investors; the removal of the PBoC’s
quota control over the RMB QDII; the nationwide
expansion of an RMB cross-border cash pooling
programme; and the liberalisation of RMB crossborder financing in the Shanghai Free Trade
Zone and three other newly established Free
Trade Zones.
A brief guide to China’s global currency 7
These developments have broadened
cross-border investment channels and
enabled companies to access offshore
financing, improve treasury efficiency and
risk management. They also enhance the
mechanism for cross-border circulation of the
RMB, boosting the supply of offshore liquidity.
What’s next?
Offshore RMB market forecasts
Deutsche Bank expects the total pool of offshore
RMB deposits to reach 30% to RMB 3.25tn
by the end of 2015, fuelled by investment and
currency diversification by companies, financial
institutions, and foreign central banks.
The volume of offshore RMB FX spot and
forward trading is projected to rise to USD 14bn
per day from USD 12.5bn in 2014. Deutsche
Bank also expects the average daily turnover of
CNH cross-currency swaps to reach USD 1bn
by the end of 2015, while the market for CNH
options is expected to record an average daily
trading volume of USD 5.5-6bn, compared to
USD 5bn in 2014.
RMB-denominated trade settlement flows are
expected to grow by 17% in 2015 to RMB 7tn,
supported by the expansion of RMB business
to new offshore centres and the liberalisation
of cross-border flows. RMB-denominated trade
settlement is projected to account for 25% of
China’s global trade by the end of 2015, up from
21.6% in 2014.
Figure 4. RMB trade settlement to rise to 25% of China’s
global trade in 2015
30
8000
7000
25
6000
20
5000
15
4000
3000
10
2000
5
1000
0
0
2010
2011
2012
2013
Jan-Nov
2014
2015F
RMB trade settlement (RMB bn)
Share of RMB trade settlement
Source: Deutsche Bank
Expansion of Free Trade Zones in China
China continues to experiment with RMB
internationalisation and capital account
liberalisation within its free trade zones (FTZs).
Reforms originating from the Shanghai FTZ
(SHFTZ) have enabled companies to integrate
8 A brief guide to China’s global currency
their onshore RMB cash with their regional
and/or global cash pools. A pilot in early 2014
permitting two-way cross-border cash sweeping
for qualified companies within the SHFTZ was
expanded nationwide in November 2014. More
recently, qualified firms in the SHFTZ have been
allowed to borrow up to twice their capital
base in foreign or domestic currency through
overseas funding – double the previous limit.
In December 2014, the State Council announced
the creation of three new FTZs in Guangdong,
Fujian and Tianjin. The existence of four recently
established FTZs in the country suggests that the
pace of reform relating to cross-border investment,
trade and financial market development should
remain brisk.
Additional offshore RMB centres
The appointment of offshore RMB clearing
banks is critical to facilitating cross-border
settlement. Official clearing banks represent
more direct access to the Chinese financial
system, with second-order benefits for financial
institutions and customers. They also serve to
raise awareness among the local business and
investor communities that the local financial
system has the capacity to effect cross-border
RMB transactions on their behalf.
With RMB clearing banks now established
in most financial centres in Asia, Europe, the
Middle East and in Canada, Deutsche Bank
expects more RMB clearing banks to be
appointed in the Americas in 2015, most likely in
South America.
Expansion of two-way RMB investment schemes
Further liberalisation of outward RMB flows
will serve to both increase RMB supply to the
offshore market and also neutralise the impact
of RMB investment into China to improve
equilibrium in the balance of payments.
Deutsche Bank expects both corporate outbound
direct investment flows and the RMB qualified
domestic institutional investor (QDII) programme
to grow at a faster pace than in 2014.
The pace of quota approval under various RMB
investment programmes will likely be similar
to that in 2014. In 2014, RMB 142bn in RQFII
quota and USD 15.5bn in QFII quota was
granted, as well as approximately RMB 150bn
in quota under the PBOC’s interbank bond
market direct access programme. The likely
expansion of the Stock Connect programme
suggests that demand for additional RQFII
quota in Hong Kong will be modest.
Figure 5. RQFII Quota vs. Quota approved (RMB bn)
300
250
200
150
100
50
Switzerland
Luxembourg
Australia
Qatar
Canada
Taiwan
South Korea
Frankfurt
Paris
London
Singapore
Hong Kong
0
RFQII quota
RFQII quota granted
Source: Deutsche Bank
Special drawing rights status for the RMB?
The International Monetary Fund (IMF) is
conducting a comprehensive assessment of
the RMB to decide whether the currency will
be included in its special drawing rights (SDR)
currency basket. The SDR, an international
reserve asset, currently comprises the US dollar,
euro, Japanese yen and British pound and
represents a potential claim on the freely usable
currencies of IMF members.
The two necessary conditions to meet eligibility
for inclusion are that a currency should be
i) of the five IMF member countries with the
largest exports of goods and services, and
ii) freely usable. Deutsche Bank’s Economics
research team sees a 40% probability that the
RMB will become an SDR currency in 2015
and a 70% probability that this will happen by
the end of 2016. Inclusion in the SDR basket
will increase the incentive for global central
banks and foreign investors to accumulate RMB
assets, leading to more products being priced
in RMB.
A brief guide to China’s global currency 9
Why adopt the RMB?
Doing business in RMB can have a range of benefits, including
lower financing and transaction costs, reduced FX exposure,
improved supplier access and greater purchasing power.
Why an internationalised RMB matters to you
Unrestricted offshore access
to RMB trading, hedging and
financing
ower transaction costs for
L
foreign companies operating in
or buying from China
Greater investment choice and
yield opportunities for offshore
RMB deposits
Broader access to onshore buyers
and suppliers
Reduced FX hedging costs for
inward/outward investment
Ability to hedge RMB exposure
as its use in international trade
increases
A diversified and competitive
source of financing
Lays the path for eventual capital
convertibility
10 A brief guide to China’s global currency
Why trade CNH
with Deutsche Bank?
Deutsche Bank is an industry recognised world leader in all aspects of the
foreign exchange business:
— The No.1 provider of liquidity to Asian FX markets: 21.8% market share in
Asian FX trading (Euromoney Global FX Survey 2014)
— Transacted the first CNH cross-currency swap, FX swap and FX forward
— A leading market maker (broker estimates)
— The first bank to launch electronic trading of CNH (via Autobahn FX)
— A leading provider of structured CNH FX products
— One of the first banks to trade FX options onshore in China
— The first bank to provide live pricing for offshore RMB with local currency
pairs across all onshore Asian locations
We have a track record of providing award-winning solutions that enable
clients’ success.
TNo.1 FX Bank in Asia
Euromoney 2014
Top ranked in Global FX
Top ranked in Asian FX
Greenwich Survey 2014
Most Innovative Bank for Foreign Exchange
The Banker 2014
To harness opportunities presented by the internationalisation of the RMB,
it is critical to partner with a bank that can help you navigate its challenges.
Deutsche Bank for RMB solutions.
A brief guide to China’s global currency 11
Foreign exchange and rates
The CNH market is evolving into a fairly sizable and liquid
foreign exchange market, with a variety of instruments for
FX management and hedging. Meanwhile, capital account
liberalisations are increasing the scope for the cross-border
movement of money.
Liquidity in the offshore RMB FX market
continues to build thanks both to growing levels
of RMB cross-border trade and an offshore
RMB bond market that has experienced high
levels of growth and increased diversification.
Currency exposures can be managed via
CNH FX forwards, cross-currency swaps and
FX options. After experiencing substantial
growth in 2013, CNH FX option market trading
volumes dropped significantly in 2014 in
response to the weakening of the RMB against
the dollar, the widening of the USD-CNY
spot FX trading band – and subsequently, the
tightened regulation of the CNH structured
forward market in some countries.
Daily spot trading volumes in USD-CNH now
stand at over USD 20bn, up from zero in July
2010, and have long surpassed the daily trading
volumes of the non-deliverable forward market.
Daily spot fixing in USD-CNH is provided by
Hong Kong’s Treasury Markets Association.
What influences USD-CNH and
why does it diverge with the
onshore rate?
6.40
6.35
300
6.30
200
6.25
100
6.20
0
6.15
-100
6.10
-200
6.05
-300
-400
USD-CNY spot
Jan-13
Jul-13
USD-CNH spot
Source: Bloomberg Finance LP, Deutsche Bank
12 A brief guide to China’s global currency
-2.00%
-2.50%
-4.00%
pips
400
Jul-12
Figure 7. Implied appreciation: NDF vs. CNH market
-3.50%
Figure 6. USD-CNH and USD-CNY spot rates and spread
Jan-12
Over the longer term, demand for CNH will
primarily be supported by rising levels of RMB
trade and CNH asset creation, both of which
have a clear growth trajectory. Changes in
regulations (such as the change in net open
positions, expansion in RMB swaps between
PBo C and HKMA and the introduction of a
liquidity facility) have also supported liquidity
within the system and reduced volatility
between the onshore and offshore CNY
spot rates.
-3.00%
As a fully deliverable offshore currency, CNH
is exposed to supply and demand dynamics.
Following the widening of the USD-CNY intraday
trading band to +/-2%, the USD-CNH spot rate
traded at a discount to the onshore CNY spot rate
for most of 2014, driven by the strong USD trend
and by investor expectations for the currency’s
depreciation.
6.00
Ultimately, the onshore CNY rate continues to
serve as a soft anchor point for USD-CNH. While
there are deviations from CNY, levels usually
find their way back to an equilibrium as market
participants move between the curves to find
the most favourable rates.
Jan-14
Spot spread (RHS)
-4.50%
1M
CNY DF
3M
CNH DF
6M
9M
1Y
NDF
Source: Bloomberg Finance LP, Deutsche Bank
Risk management products
in USD-CNH
The CNH FX market provides a range of familiar
risk-management products, including FX
forwards, FX options, interest-rate swaps,
cross-currency swaps and bespoke structured
risk-management products. While liquidity for
some products is still low, like most aspects
of the CNH market, growth is on an upward
trajectory.
For example, the FX forward market now sees
daily volumes of USD 10bn equivalent per day
and tenors from three months to one year.
It has become a useful tool for corporations
and investors alike to either manage FX risk
or position for possible RMB appreciation.
By comparison, the USD-CNY NDF market
currently has USD 2bn of daily volume. Over
time, the NDF market will likely cease to exist
as market participants move to where liquidity
is best.
Deutsche Bank estimates average daily turnover
in the CNH FX options market grew substantially
since 2011 from USD 30m to USD 7bn in 2013,
with liquidity available in tenors from one
month to a year. However, with activities in the
CNH structured forward market moderating
substantially, daily turnover in the CNH FX
options market is around USD 5bn per day,
as of March 2015.
The CNH interest rate swap market is developing
at a subdued pace relative to the CNH crosscurrency swap (CCS) market. A CNH HIBORbased interest rate swap market emerged after
the introduction of CNH HIBOR fixing in the
Hong Kong interbank market in June 2013;
however, trading volumes remain low.
The most active offshore RMB interest rate
derivative market is the CNH cross-currency
swap (CCS) market, which has seen substantial
growth since the start of 2013:
— Market liquidity has improved significantly. In
particular, daily turnover in the two-year and
longer tenors has more than doubled from
levels in January 2013, to around 700m as of
March 2015; while the most liquid segment
remains the three-year or shorter tenor,
liquidity up to the 10-year tenor has improved.
— Increased CNH bond issuance has resulted
in higher demand for corporate funding/
liability hedging, particularly in the five-year
tenors since mid-2015.
Deutsche Bank believes the CNH CCS curve
is now the most important offshore RMB
benchmark interest rate curve for the following
three reasons:
— With deliverability, the CNH CCS curve is now
actively used by market participants for real
funding and hedging purposes.
— The CNH CCS market complements
the existing offshore RMB interest rate
derivatives market where Repo NDIRS
and SHIBOR NDIRS are traded.
— Participants in the CNH CCS curve have
become more diversified. Corporates, asset
managers, banks, hedge funds and high net
worth investors are the main players in the
market. The balance between their flows
determines the dynamic in the CNH CCS market.
We believe the expansion in market participation
has contributed to:
— higher turnover;
— a reduction in transaction costs, whereby the
bid-offer spread of the most liquid tenor has
narrowed from 5-10 basis points (bps) two
years ago to 3-6 bps for shorter tenors (threeyear or shorter) and 6-8 bps in the five-year
and longer tenors; and
— better risk distribution in the CNH CCS
market.
In our view, these positive developments in the
CNH CCS market facilitate further growth in the
depth of CNH cash, derivatives and structured
products.
— More real money and hedge fund investors
are trading the CNH CCS curve for hedging
or trading purposes.
Figure 8. Derivatives products for corporates
Deutsche Bank is at the forefront of financial engineering in the CNH market. Our client offering reflects the size and depth of
our trading business: we offer more competitive rates on a wider range of FX derivatives than any other bank, and in bigger
sizes and longer maturities.
Delta One
Lightly Structured
Complex Risks
—Short-term
—
FX Forwards
/ CCS
—Longer
—
term FX Forwards
/ CCS
—USD/CNH
—
FX option market
—Path
—
Dependent Instruments,
Target Profit Forwards and
variations
Corporate Demand
Corporate Demand
Corporate Demand
—Vanilla
—
Cash flow Hedging
—Lightly
—
structured products for
Cash flow hedging including
Risk Reversals
—Flexible
—
Instruments
to hedge USD-CNH
exposures across various
tenors
—Strategic
—
Liability
Management
—Digital
—
Options
—Knock-out
—
Options
—Hybrid
—
Solutions
—Commodity
—
and FX Hybrid
Hedging Instruments
Disclaimer: Use of certain products mentioned here are subject to clarification by regulators
A brief guide to China’s global currency 13
Why use Deutsche Bank
for your RMB trade needs?
We provide the full range of onshore and offshore RMB cash management,
trade finance, trust and securities services and have a strong grasp of the
regulatory environment.
— Full suite of onshore RMB cash management and trade finance services
— Corporate treasury support across RMB financing and risk management
— Comprehensive cross-border RMB solutions
— Agency and custody services for RMB assets
We have a track record of providing award-winning solutions that enable
clients’ success.
Best Trade Finance Provider
Euromoney 2015
Best Structured Trade Finance, China
Best Regional Renminbi Solution for Bosch Group
The Asset, Triple A Awards 2015
To harness opportunities presented by the internationalisation of the RMB,
it is critical to partner with a bank that can help you navigate its challenges.
Deutsche Bank for RMB solutions.
14 A brief guide to China’s global currency
Transaction banking
Redenomination of cross-border trade in RMB may bring
efficiency improvements, reduced transaction costs and
discounts in some cases. Meanwhile, the recent relaxation
of regulatory restrictions makes it easier for multinational
companies to manage cash and move funds from their China
operations across borders relatively freely.
Over the last several years, rapid expansion
of RMB infrastructure has seen the offshore
market transform from a “single hub” model
with centralised offshore RMB clearing in
Hong˛Kong, to a “multiple hub” model across
financial markets worldwide. As of March 2015,
China had signed 15 bilateral agreements with
foreign central banks to establish offshore
clearing arrangements.
These developments demonstrate a high level of
commitment from key international markets to
use the currency for trade and investment and
are enabling cross-border RMB payments
in non-Asian time zones. Deutsche Bank expects
brisk expansion of the offshore RMB market to
continue, supported by ongoing policy reforms
and expanded financial market infrastructure.
As the universe of RMB products further
diversifies, the infrastructure supporting
cross-border and offshore payments will also
continue to evolve. China is developing a new
Financial Market Infrastructure (FMI) known
as the Cross-Border Inter-Bank Payments
System (CIPS) in 2015 to address some of the
challenges of cross-border payments associated
with time zone coverage, payments routing
and interoperability with the infrastructure
for other currencies. There is a strong market
expectation that CIPS will enhance the RMB’s
efficiency and international accessibility for
market participants, and enable both foreign
and Chinese companies to receive and pay
more˛easily in RMB.
Use of RMB for trade settlement
The use of RMB in trade settlement has been the
primary building block in the internationalisation
of China’s currency. China’s cross-border trade
volumes settled in RMB were up 42% in 2014
from 2013 levels, which in turn were up 57%
from 2012 levels.
A key factor when selecting the currency for a
trade transaction is to determine which party
bears the associated exchange rate risk. The
main attraction for companies to settle trade
in RMB is the potential for better pricing when
transacting with a Chinese counterparty.
Market observations suggest that Chinese
exporters often add a buffer of as much as 5%
to guard against unfavourable exchange rate
movements.
If the two parties to a cross-border transaction
are willing to trade in RMB, then the Chinese
party may offer a discount, as the exchange rate
risk will be borne by the offshore counterparty.
This arrangement can be mutually beneficial as
the cost of hedging offshore can be significantly
lower than hedging costs onshore. Furthermore,
companies may be able to widen their supplier
and customer bases to include Chinese
companies which may previously have been
inaccessible due to an unwillingness or inability
to transact in a foreign currency.
From the perspective of a Chinese exporter,
settling cross-border trade in RMB reduces
administrative burdens, exempting them
from the Value-Added Tax (VAT) refund
verification which is required for settling in
foreign currencies. From the perspective of a
Chinese importer, settlement in RMB offers the
opportunity to issue an import letter of credit
in RMB with a tenor exceeding 90 days. By
comparison, settlement in foreign currency
would require the use of the issuing bank’s
short-term foreign debt quota (which is a scarce
resource that is subject to regulatory approval).
A brief guide to China’s global currency 15
Relevance of RMB trade for both exporters to
China and importers of Chinese goods
Invoicing goods in RMB may allow for the
following benefits:
— Growth in your client base, given the preference
for Chinese importers to pay in RMB
— The ability to minimise FX exposures related
to any RMB costs incurred in the sales
process
— Eliminate costs associated with foreign FX
conversion and regulatory approvals for
funding onshore subsidiaries
— Reduce supply chain costs by recycling
RMB received from sales to fund onshore
operations
Paying for goods in RMB may result in:
— A broader supplier base, given the preference
for Chinese exporters to invoice in RMB
— More favourable and transparent pricing
of goods
— Minimised FX risk by funding purchases
with RMB
— Reduced supply chain costs
Growing range of trade solutions
It is today possible to manage payment and
financing processes across the entire trade
lifecycle using the RMB, whether it is in the
form of import/export letters of credit (LC),
documentary collection and open account
payments, or associated trade finance.
Switching to RMB can often enhance supply
chain relationships and lead to improved
treasury efficiency. Adopting RMB for trade
finance and settlement can also allow for greater
flexibility in payment terms, potentially resulting
in a lower cost of funds.
To enable our clients’ success, Deutsche Bank
can provide a full suite of RMB trade services
with incorporated FX solutions. The following
are some typical examples:
i Companies invoice in RMB for an import/
export transaction with a Chinese
counterparty and use Deutsche Bank’s
offshore trade finance solution with
embedded deliverable forward contract
or non-deliverable forward (NDF) to satisfy
funding and FX hedging needs.
ii Companies invoice in RMB and use a letter
of credit, while Deutsche Bank confirms
and discounts RMB letters of credit in crosscurrency.
iii Companies use back-to-back letters of credit,
with one leg denominated in RMB.
iv Companies use cross-border RMB guarantees
to facilitate cross-currency trade finance from
cost-favourable markets.
Simplified procedures for RMB trade settlement
The nationwide rollout of the Simplified RMB
Cross-Border Payment Scheme in 2013 has
resulted in vastly more efficient RMB trade
settlement. RMB payments can be processed
prior to documentary verification to enhance
straight-through processing (STP) and further
automate cross-border payments. This has also
enabled companies to better integrate RMB
into their Electronic Data Interchange (EDI) for
expedited payments processing and treasury
management.
Figure 9. Corporate adoption of RMB in trade cycle
Using deferred/sight payment term to produce a
natural intra-company finance structure, and
gain access to lower cost of funds market
Overseas
Buyer / Seller
Corporate / Re-invoicing
centre
Invoice and settle in RMB or foreign currency flexibly to facilitate
effective use and management of FX
16 A brief guide to China’s global currency
China
Buyer / Seller
Cross-border solutions for working capital management
The RMB has rapidly emerged as a treasury
management currency, enabling corporates to
save cost, improve efficiency, manage risk and
enhance access to China.
Although the onshore RMB market is still
regulated, recent relaxations have expanded
the range of possible financing structures and
solutions available for multinationals (MNCs)
with operations in China. As a result, RMB
adoption may allow an MNC’s foreign exchange
management to be centralised in a regional or
global centre, with more efficient payment
and collection processes.
Apart from streamlining operations,
opportunities arising from capital account
liberalisation are also conducive to risk
management in FX hedging, trade financing
and debt-capital market (DCM) funding via
the offshore RMB market. Figure 12 presents
a summary of China’s prevailing cross-border
solutions.
Figure 10. Prevailing cross-border solutions with Mainland China
Injection
— Foreign Debt
— Capital Injection
Two-way cross-border
— Offshore RMB Bond
— SHFTZ RMB borrowing
— SHFTZ Free Trade Zone
Accounting Unit (FTU)
borrowing
— Offshore borrowing
in other pilot areas
Mainland
China
— RMB 2-way cash sweeping
— FCY cross-border scheme
Repatriation
— RMB/FCY cross-border external lending
— Dividend repatriation
A brief guide to China’s global currency 17
Figure 11. Pros and Cons of prevailing cross-border solutions
Dividend
Pros
Cons
— No need to repay
— Requires board resolution
— Must pay withholding tax
Cash Repatriation
RMB/FCY External
Lending
— RMB: i) Nationwide scope, ii) No lending
quota, iii) Easy execution
— FCY: i) Nationwide scope, ii) Easy
execution
RMB two-way Cash Pool
— Nationwide scope
— Two-way automatic sweeping to fully
leverage onshore and offshore intra-group
funding
— Frees inbound & outbound flows without
deal-by-deal regulatory approval
— Does not utilise foreign debt quota
FCY cross-border
scheme
— Nationwide scope
Foreign Debt
— Can borrow in RMB or FCY
— RMB: i) Requires deal-by-deal
manual execution, ii) Requires
positive financials
— FCY: i) Quota limited to 30% of
equity, ii) Need SAFE approval
— SHFTZ scheme: Leading entity
must be registered in SHFTZ
— Nationwide scheme: i) Need to
meet eligibility requirements:
3 years of operations and over
RMB 5 billion/RMB 1 billion sales
turnover for onshore/offshore,
respectively, ii) PBOC pre-filing is
required
— SAFE pre-filing is required
— Consolidated foreign debt/external lending
quota for all onshore participants’ usage
— Flexible source of offshore funds
— Quota is subject to borrowing gap
(i.e. the difference between the
total investment and the amount
of registered capital). Chinese
LLCs can apply for approval from
MOFCOM or SAFE to access
foreign debt.
— Need SAFE approval
Cash Injection
Capital Injection
— No need to repay
— May potentially enlarge the foreign debt
quota
SHFTZ RMB borrowing
— Quota is up to 100% of paid-in capital
— Does not utilise foreign debt quota
— More time consuming:
i) foreign capital injection requires
MOFCOM approval and SAFE
filing, ii) internal capital injection
needs board resolution
— Only applicable to corporates
registered in SHFTZ
— Funds can only be for the purpose
of self-usage for operating
activities. Borrowing tenor must
be over one year
SHFTZ FTU borrowing
— Quota is potentially up to 200% of capital
base
— Only applicable to corporates
registered in SHFTZ
— Can borrow in RMB or FCY
— Funds can only be for the purpose
of self-usage for operating
activities
— No borrowing tenor requirements
— Service is only available in banks
with FTU system
Offshore RMB Bond
— One-off large amount of stable funding
— Strict application requirements to
issue bonds
— Requires case-by-case approval
from National Development and
Reform Commission (NDRC)
— Currently no standard fund flow
mechanism from offshore to
onshore, requires case-by-case
approval
18 A brief guide to China’s global currency
RMB intra-group cross-border lending
Subject to participation criteria, PBOC approval
is no longer required if a China entity lends
its own RMB funds to an affiliated offshore
company. The application goes through an
onshore bank with responsibility for evaluating
eligibility, verification and processing.
Onshore subsidiary companies can lend
either to the offshore parent company, or
affiliates within same group. Mainland
Chinese entities are allowed to issue RMB
inter-company loans to their offshore parent
companies, subsidiaries and affiliates. The
lending quota is based on the entity’s equity
base (potentially up to 100%). Deutsche Bank
is among the leading banks in executing
RMB inter-company cross-border lending.
Our cash management system can achieve
automated sweeping to enable straight-through
processing of cross-border RMB payments.
Two-way cross-border cash sweeping to optimise
working capital and liquidity management
Two RMB cross-border cash sweeping schemes
are available. One scheme, announced by PBOC
in February 2014, allows cross-border cash
sweeping with the leading entity in the Shanghai
Free Trade Zone (SHFTZ). A second scheme
announced in November 2014 allows RMB twoway cash pooling on a nationwide basis.
The two schemes run in parallel, but are
characterised by different participation criteria
and parameters for the sources and utilisation
of funding. Under both schemes, cash pools
can generally be used to fund a company’s
own working capital needs. Entrusted loans
to non-member firms, financial and real estate
investments are not permitted.
The length of time required for implementation
typically ranges from four to ten weeks,
depending on the prior existence of a domestic
cash pool and offshore accounts. Deutsche Bank
was among the first foreign banks to introduce
automated RMB cross-border cash sweeping
services to clients in China and was the first bank
to execute a two-way cross-border sweep in
Shanghai under the PBOC’s nationwide scheme.
Recent regulatory changes have enabled twoway cross-border cash sweeping, significantly
Onshore
Offshore
alleviating
the problem of trapped cash in China.
RMB cross-border payments/collections-onBorder
Inter-company funding constitutes a reliable
behalf-of (POBO/COBO) and netting
Nationwide
and efficient source of funding
whereby cash
In the past, companies making overseas
generated within Mainland China can be used
Leading entity
payments, even to intra-group
companies,
Domestic RMB Cash Pool
Overseas
HQ/RHQ
(RMB
Special Account)
to fund offshore operations. Alternatively,
an
were required to provide underlying trade
overseas cash pool can be used to fund working
documents listing both counterparties behind
capital needs onshore without being subject to
the transaction. Under the PBOC’s recent
foreign
debt
Member
1 quotas.
Member 2
Member 1
Member 2
nationwide guidelines, eligible multinationals
Two-way cross-border sweeping
through this Special Account
Quota control on net Inflow
(from offshore
to onshore)
Border
Figure 12. Two-way cross-border cash sweeping: Shanghai Free Trade Zone (SHFTZ)
Onshore
Offshore
Border
SHFTZ
Leading entity in SHFTZ
(RMB Special Account)
Domestic RMB Cash Pool
Member 1
Overseas HQ/RHQ
Member 2
Member 1
Two-way cross-border sweeping
through this Special Account
Member 2
No Quota control
Figure 13. Two-way cross-border cash sweeping: Nationwide scheme
Onshore
Offshore
Border
Nationwide
Domestic RMB Cash Pool
Member 1
Leading entity
(RMB Special Account)
Overseas HQ/RHQ
Member 2
Member 1
Two-way cross-border sweeping
through this Special Account
Member 2
Quota control on net Inflow
(from offshore
to onshore)
Border
Onshore
Offshore
Border
SHFTZ
A brief guide to China’s global currency 19
can use netting to centralise RMB payments
and collections for individual member firms, or
for the group company. The new POBO/COBO
regulations make it possible to nominate one
entity within the group to transact payments
and collections on behalf of all group entities.
Similarly, payments can be made directly to any
offshore payment factory or netting centre as
an alternative to making a series of individual
payments to suppliers.
Cross-border netting allows companies
to reduce transaction fees and streamline
processes associated with internal workflow
and documentation.
Wider scope for offshore RMB borrowing
Offshore funds are typically available at lower
rates than onshore funds; however offshore
borrowing has generally been subject to the
limits of a foreign debt quota. Recent reforms
have broadened the scope for offshore
borrowing within pilot areas such as the SHFTZ,
the Qianhai Zone, Tianjin Eco-city, Suzhou
Industrial Park and the Kunshan Industrial
Experimental Zone.
Authorities have encouraged more offshore
financing in RMB by issuing rules that allow
firms within the SHFTZ to borrow potentially
up to twice their capital base through overseas
funding – double the previous limit. Deutsche
Bank’s product specialists can work with you
to determine the most suitable solution by
considering eligibility, scope of usage and the
applicable inbound quota for your business
Figure 16. Decision tree for cross-border solutions
Cash Outbound
Group
or Entity
level?
Entity
Group
Yes
China
Subsidiaries
Two-way
RMB
or
FCY?
RMB
In SHFTZ?
No
Group
FCY
Cash Inbound
No
Group
or Entity
level?
Entity
20 A brief guide to China’s global currency
In FTZ?
Yes
Cross-border Solution
Key Features
RMB External Lending
Nationwide;
No lending quota
FCY External Lending
Nationwide; Quota is 30%
of equity (50% for SHFTZ)
Dividend
Withholding tax applies
SHFTZ RMB two-way
c ro s s - b o rd e r c a s h p o o l
Only SHFTZ;
No quota;
Nationwide RMB two-way
c ro s s - b o rd e r c a s h p o o l
Nationwide;
Inbound quota is 10%
of equities
Nationwide FCY crossborder scheme
Consolidated foreign debt
& external lending quota
Foreign Debt
Subject to borrowing gap
SHFTZ RMB borrowing
Quota is 100% of paidin ca pita l
SHFTZ FTU borrowing
Quota is potentially up
to 200% of capital base
Other FTZ borrowing
Subject to specific FTZ
policy
Switching to RMB Payments:
A checklist of practical considerations for corporate treasurers
Although Renminbi adoption can bring a host of benefits, the crucial issue is implementation. Firsttime implementation will necessitate changes to existing treasury management processes, operating
procedures, accounting valuation, and contractual arrangements for cross-border trade receivables
and payables.
1. Identify the scope of internal changes
—Should I re-negotiate sales terms or pricing
with my trade counterparties?
—Should I ask my suppliers for a dual currency
quotation (RMB and USD) or a single currency
quotation (RMB only)?
—Which of my trade counterparties are more
likely to accept re-denominating into RMB?
—Will I gain any benefits at a cost level if I redenominate in RMB?
2. Internal awareness and education
—When USD is entrenched as the standard
payment currency, how can I introduce a new
currency to my internal stakeholders?
—What are the key aspects about paying in
RMB that my internal stakeholders need to
know?
—Who would I need to involve in a crossdepartmental work stream on RMB?
—Who can provide in-depth training /
workshops for various stakeholders within my
organisation?
—Which rules and regulations related to the
RMB do my stakeholders and I need to keep
abreast of?
3. Receivables and payables management
—How will the differences in permissible
trade tenors between currencies affect my
receivables and payables management?
—How can I manage the FX risk derived from
the onshore and offshore exchange rate
differentials for transactions with a long trade
tenor (especially for payables above 90 days)?
—How will I be able to manage my intercompany receivables and payables if I am
unable to net my RMB transactions?
4. Accounting, financial reporting and crossborder reconciliation of RMB exposure
—Since IFRS require the same internal RMB FX
booking rate for both onshore and offshore
subsidiaries, which booking rate should use
(e.g. CNY rate or CNH rate)?
—If I reflect my onshore RMB position using
offshore RMB exchange rates (CNH rate), will
it be in line with the requirements of China
Corporate Accounting Standards?
—What are the possible balance sheet
implications when reflecting exposure in a
CNY rate and in a CNH rate?
—As most of the China Corporate Accounting
Standards were created before the
internationalisation of the RMB, how should
I reflect my RMB receivables/payables from
offshore counterparties?
5. Tax implications of RMB re-invoicing and
redenomination
—From a tax angle, which transactions should
be re-invoiced as cross-border payments?
—How do I handle the Export Tax Rebate for
RMB transactions?
—What are the possible VAT (Value Added Tax)
implications for re-invoicing?
6. Offshore Regional Treasury Centres (RTCs)
for RMB payments
—Where should I set up a RTC or re-invoicing
centre?
—How do I set up a RTC to facilitate RMB
payments?
—How will a RMB RTC affect the way my
existing global treasury management
is set up?
A brief guide to China’s global currency 21
Why choose Deutsche Bank
for your inaugural CNH
bond deal?
Deutsche Bank has been actively involved in the offshore RMB bond markets and has
provided clients with innovative solutions since inception.
— A leading market maker in CNH bonds (broker estimates)
— Launched the first investable benchmark CNH bond index
(S&P DB ORBIT)
— Launched the first ever CNT issuance in Taiwan
We have a track record of providing award-winning solutions that enable clients’
success.
Most Innovative Investment Bank for Bonds
The Banker 2014
Best Global Debt House
Euromoney 2014
To harness opportunities presented by the internationalisation of the RMB,
it is critical to partner with a bank that can help you navigate its challenges.
Deutsche Bank for RMB solutions.
22 A brief guide to China’s global currency
The offshore RMB fixed
income market
The offshore RMB bond market continues to grow and diversify.
The offshore RMB fixed income market has
continued to grow with 2014 recording the
highest-ever volume of issuance – RMB 560bn in
gross supply, a 46% increase from 2013. Foreign
issuers became more active, deal sizes and
tenors grew, investors became more discerning,
and the growing universe of outstanding
bonds has made price discovery easier.
Offshore RMB certificates of deposit (CDs)
are roughly 33% of the market, while
offshore RMB bonds make up 67% of the
market. Average monthly net supply in the
fixed income market since 2014 has been
RMB 32bn, with RMB 29.5bn in new supply
in the first two months of 2015. FDI rules
introduced in 2012 have made it easier for
Chinese borrowers to issue offshore RMB
bonds and bring the proceeds onshore.
Figure 17. Offshore RMB fixed income instruments annual
net issuance (RMB bn)
450
Growing range of maturities
The market has developed from being
dominated by short-dated certificates of
deposit to longer-dated bonds over a range
of maturities. While most issuance remains
between 3-5 years, the introduction of high
quality investment grade names has allowed
maturities to extend up to the 30Y tenor.
Figure 18. Offshore RMB fixed income market maturity
profile in FY2014 (RMB bn)
250
200
150
100
50
0
1Y
2Y
3Y
4Y
5Y
7Y
10Y
Perp
Source: Bloomberg Finance LP, Deutsche Bank
400
350
300
250
200
150
100
50
0
2008
2009
Certificates of Deposit
2010
2011
Bonds
Source: Bloomberg Finance LP, Deutsche Bank
2012
2013
2014
Despite its rapid development, the offshore
market must grow and diversify significantly
more before it can rival China’s onshore fixed
income market in scale. Issuance has been
decelerating in early 2015, amid convergence
in China’s onshore and offshore rates and a
strengthening dollar.
While many aspects of the offshore RMB bond
market mirror those of Asia’s offshore G3 bond
market, there are important differences that new
issuers should consider. These relate primarily
to the remittance of RMB proceeds onshore
and the comparative cost of funds compared to
onshore bank loans.
A brief guide to China’s global currency 23
Figure 19. CNH deal sizes (Jan 2014 – Mar 2015)
<= 0.5 bn
>0.5bn - 1bn
>1bn - 2bn
6
10
%
84
Source: Bloomberg Finance LP, Deutsche Bank
10
<=1 Yr
>1 Yr - 3 Yrs
>3 Yrs - 7 Yrs
>7 Yrs - 10 Yrs
>10 Yrs
%
5
60
10
Source: Bloomberg Finance LP, Deutsche Bank
Figure 21. CNH bonds by issuer (Jan 2014 – Mar 2015)*
2
1
Banks
Financial Services
Supranationals
Real Estate
Commercial Finance
23
2
3
8
%
6
9
46
Deal sizes of RMB 1bn are common, while most
tenors are three years. Higher-rated issuers can
issue debt out to five or even seven years and
across multiple tranches.
Pricing varies, but the average yield on BBB
and above-rated bonds is 4.7% (March 2015,
Bloomberg Finance LP). This compares to the
official 5.75% three-year onshore loan rate set
by the People’s Bank
of China.
Who issues CNH bonds?
Figure 20. CNH deal tenors
15
What can you expect in terms
of price, size and tenor?
Diversified Banks
Government Development Banks
Transportation & Logistics
Others
Source: Bloomberg Finance LP, Deutsche Bank
The CNH bond market is truly international,
with borrowers from over 28 different
countries (excluding China, Hong Kong
and Macau).Financial institutions and
corporations are the largest issuers. The
vast majority of issued debt, however, can
be attributed to Asia-domiciled issuers.
The offshore RMB debt market continues to
expand geographically beyond its original
base in Hong Kong. The RMB Formosa
bond market in Taiwan, in particular, has
seen significant growth since mid-2014,
when investment restrictions on insurance
companies were relaxed. Deutsche Bank
sees significant growth potential for offshore
RMB fixed income markets in Europe
(particularly in London and Frankfurt) in the
next few years, supported by large volumes of
bilateral trades and cross-border investment
between China and Europe, and strong asset
diversification demand by European investors.
With many experts predicting that RMB
will become the fourth member of the G4
currency group, this market is becoming
a more attractive, diversified funding
channel for global corporate entities.
* Excludes CDs
Who buys CNH bonds?
Investors include institutional asset managers,
insurance companies, banks, hedge funds,
pension funds and retail investors. First
attracted to offshore RMB assets by the
prospect of RMB appreciation, investors
now also value the diversification benefits of
offshore RMB bonds as the market grows to
include more international credits.
The number of RMB-dedicated funds in
Hong Kong continues to grow, while
Deutsche Bank’s investable CNH bond index
(S&P DB ORBIT) provides a passive investment
option in a range of currencies.
24 A brief guide to China’s global currency
Remitting proceeds – what influences the approval process?
This depends largely on the type of remittance:
an injection of equity capital, a CNH shareholder
loan, or remittance for trade purposes.
Remittance for trade purposes does not require
regulatory approval.
Approval for equity capital injections are
typically dependent on the funds being used
as new capital or working capital funding. For
shareholder loans, approval is no longer required
but a filing with SAFE is now the standard
procedure and the amount is subject to the
foreign debt quota of the Foreign Invested Entity
(FIE) (up to 6x registered capital for local holding
companies).
Loans can be a simpler alternative, provided
there is sufficient capacity under a corporate’s
approved debt quota, as they can be serviced
without regulatory approval after registration
with SAFE. Repatriating dividends offshore to
service an injection of equity capital however
typically requires strict local regulatory
conditions to be met.
Preference will be given to entities that already
trade in RMB and therefore contribute to the
cross-border trade settlement scheme.
CNH Capital Injection
CNH shareholder loan
Volume
— Capital injections (including size)
require the approval of MOFCOM
— Maximum size of shareholder advance
is determined by the FIE’s unused
Foreign Debt Quota
Regulatory
approval
— MOFCOM Approval
— SAFE Filing
— SAFE Filing
— Subject to Borrowing Gap
Funding usage — Working Capital
— Capex Investment
— Refinancing onshore or offshore loan
— Working Capital
— Capex Investment
— Refinancing onshore or offshore loan
Timing to
receive funds
— Potential time consuming regulatory
approval process on capital injection,
and FCY conversion into RMB
— Potential time consuming regulatory
approval process on fund transfer and
FCY conversion into RMB
Repayment
and tax
— Withholding tax on dividend
repatriation: up to 10% (ultimate
tax rate depends on nationality)
— Tax rate may be reduced to 5% for
Hong Kong counterparty. Hong Kong
entity needs to demonstrate real
business operations
— Withholding tax on interest payments:
up to10%
— Business tax can vary
Currency risk
— Depending on currency pair of FDI and — Depending on currency pair of
actual utilisation
offshore loan and actual utilisation
Currency risk
hedging
— Allowed onshore
— Allowed onshore
Key benefits
— Capital injection enables entity to
increase its Foreign Debt Quota with
the increase of equity base
— Issuers will not rely on dividends for
debt servicing
— Once the intercompany loan is
registered with SAFE, any debt
servicing will be allowed automatically
A brief guide to China’s global currency 25
Typical timeline for a CNH bond transaction (first time issuer)
Action Steps
Week 1
Kick-off meeting with all professional parties
Regulatory approval process
Due diligence & preparation of documentation
Issue rating process (if required)
Preparation of marketing materials
Completion of preparation process
Announce transaction
Roadshow
Pricing and signing
Settlement and closing
Week 2
Week 3
Week 4
Week 5
Week 6
Week 7
Week 1-4
Appointand
Lead
Manager
and other
professional parties
Weeks
1-4 Appoint Lead Manager
other
professional
parties
Kick-off remittance
Kick-off
remittance
process
- liaisePBOC
with and
MOFCOM,
process
- liaise with
MOFCOM,
SAFE PBOC and SAFE
diligence session
Commence dueCommence
due diligence session
rating process (if required) and obtain issue rating
Commence issue
Commence
issue rating process (if required) and obtain issue rating
Week 5
Preparation of supplemental offering circular ("SOC"), principal documents ("PD" - subscription
agreement,
pricing
supplement,
trust deed, dealer
agreement),
opinions
and comfort
letters
Week 5Preparation of supplemental
offering
circularlegal
(“SOC”),
principal
documents
Week 8
IS
IS, LM
All
IS, LM, RA
Week 7
Finalise all documentation
(“PD” - subscription agreement, pricing supplement, trust deed, dealer agreement),
Prepare roadshow
presentation
legal
opinions and comfort letters
Week 8
Obtain Chinese regulatory approval-in-principle
Week 7 Roadshow commences,
Finalise all
documentation
release
of pricing guidance
Announcement of transaction (subject to market conditions)
Pricing of transaction
Prepare(T+5
roadshow
presentation
Week
9
Closing and settlement
business
days)
Week 8
Obtain Chinese regulatory approval-in-principle
IFC
IS, LM, IFC, U FC, LC, A
IS, LM
IS
IS, LM
IS, LM
IS, LM
Key
Roadshow commences, release of pricing guidance
IS
- Issuer
Announcement of transaction (subject to market conditions)
LM - Lead Manager
Pricing of transaction
IFC - Issuer's Foreign Counsel
UFC
Underwriters'
Foreign
Counsel
Week 9
Closing and settlement (T+5 business days)
LC - Local Counsels
A - Auditors
RA - Rating Agency
IS, LM
Key
IS - Issuer
LM - Lead Manager
IFC - Issuer’s Foreign Counsel
UFC - Underwriters’ Foreign Counsel
LC - Local Counsels
Secondary market trading
A - Auditors
RA - Rating Agency
DB ORBIT is available in a range of currencies
and returned 2.72% to RMB-based investors
and flat for USD-based investors in 2014. Visit
DBCNH <INDEX> on Bloomberg for index
performance in RMB, DBCNHA <INDEX> for
performance in USD terms and DBCNHAY
<INDEX> for index yields.
The secondary market for offshore RMB
bonds has been less active from mid-2014 to
early-2015, as a result of market concerns about
the risk of near-term currency depreciation, as
well as concerns about credit risk for Chinese
property names. Deutsche Bank expects
Figure 22. S&P DB Offshore Renminbi Bond Index
secondary market
Tracker (S&P DB ORBIT) USD total returns
trading to recover to about USD 3-3.5 bn a
122
month in late-2015
on improving risk appetite
– Appoint Lead Manager and other professional parties
IS
Weeks
1-5
117
and growing– supply.
Kick-off remittance process – liaise with MOFCOM, PBOC and SAFE
IS, LM
Week 6
112
– Commence due diligence session
107 principal documents (“PD” – subscription
– Preparation of supplemental offering circular (“SOC”),
agreement, pricing supplement, trust deed, dealer agreement),
legal opinions and comfort letters
102
– Commence issue rating process and obtain issue rating
The first investable CNH bond index
- S&P DB ORBIT
Week 7
– Finalize all documentation
97
92
As well as trading individual bonds, investors
– Prepare roadshow presentation
Jan-11
Jan-12
Jan-13
can also gain– Obtain
exposure
via
S&P
Deutsche
Bank’s
Chinese regulatory approval-in-principle
S&P
DB
CNH
bond
index
(CNH
total
return)
Offshore Renminbi
Bond Index Tracker (DB
– Roadshow commences, release of pricing guidance S&P DB CNH bond index (USD total return)
ORBIT)
– the–market’s
first investable CNH
Week 8
Announcement of transaction (subject to market conditions)
Source: Bloomberg Finance LP, Deutsche Bank
bond index. – Pricing of transaction
– Closing and settlement (T+5 business days, i.e. in week 9)
Key:
IS
– Issuer
LM – Lead Manager
IFC – Issuer’s Foreign Counsel
26 A brief guide to China’s global currency
Jan-14
All
IFC
IS, LM, RA
IS, LM, IFC,
UFC, LC, A
IS, LMJan-15
IS
IS, LM
IS, LM
IS, LM
IS, LM
Why use Deutsche Bank
for your RMB needs?
With a strong onshore presence in China, Deutsche Bank provides a comprehensive
range of products and services to suit your needs.
— First branch in China in 1872
— Locally incorporated in China in 2008
— Branch offices in Beijing, Shanghai, Guangzhou, Chongqing, Tianjin, Qingdao
— Domestic securities presence through securities joint venture, Zhong De Securities
— 30% stake in leading Chinese asset manager, Harvest Funds Management
— 19.99% stake in Huaxia Bank
— One of the first banks to execute onshore RMB FX option trades, CNH crosscurrency swaps, and CNH forwards
To harness opportunities presented by the internationalisation of the RMB,
it is critical to partner with a bank that can help you navigate its challenges.
Deutsche Bank for RMB solutions.
A brief guide to China’s global currency 27
FAQ for corporations
Doing business in RMB can have a range of benefits, including
lower financing and transaction costs, reduced FX exposure,
improved access to the Chinese market.
Cross-border trade and cash
management
Q: Can I pay or receive in RMB for cross-border
trade transactions with Mainland China?
Yes. Corporate entities in any part of the world
can pay and receive in RMB for settlement
of cross-border trade of merchandise goods
and services with Mainland China. All trade
counterparties domiciled in Mainland China with
export-import scope on their business licenses
are eligible for RMB trade settlement.
This implies that if you are buying or selling
goods and services with Mainland China in other
currencies, you can also freely re-denominate
these transactions into RMB. For your new
Chinese suppliers and buyers, it is also viable to
pay in or receive RMB under the aforementioned
prerequisites.
Q: Can I open RMB deposit accounts outside
Mainland China?
Yes. Corporate entities can open RMB deposit
accounts in accordance with the usual banking
practices and regulatory requirements in the
account-opening jurisdiction. For instance, both
local and offshore corporate entities can open
RMB deposit accounts in Hong Kong and banks
can provide RMB services in accordance with
prevailing banking practices applicable to other
foreign currencies.
Opening RMB deposit accounts with
Deutsche Bank is easy to do and follows the
same process as with deposit accounts for other
foreign currencies. You can hold RMB on time
deposit, structured deposit or simply use it as a
current account. While RMB cash accounts can
be overdrawn (subject to approval of relevant
credit facilities), securities settlement must be
pre-funded.
Converting your RMB into other currencies
offshore is unrestricted, as is using the RMB
in your account for cross-border trade with
China. While RMB foreign direct investments
and intercompany loans into Mainland China
are permissible, prior approval from the relevant
authorities in Mainland China is required.
28 A brief guide to China’s global currency
Q: Do I have to have an RMB deposit account in
order to make a payment to a supplier or receive a
payment from a business partner in RMB?
Not necessarily. You can make RMBdenominated payments to suppliers or receive
RMB-denominated payment from business
partners based either onshore or offshore via
Deutsche Bank’s cross-currency cross-border
payment platform, FX4Cash. You can maintain
an account with Deutsche Bank in your primary
operating currency (such as USD or EUR) and
control the spot RMB conversion on a 24hour basis, maximising control, transparency
and efficiency using Deutsche Bank’s market
leading FX4Cash platform.
Q: Are there any restrictions for RMB deposits and
fund transfers outside Mainland China?
No. As long as the RMB funds do not entail
cross-border flows back to Mainland China,
corporate entities can freely determine the
use of their offshore RMB funds. Similar to the
prevailing practices of other foreign currencies,
it is possible and viable to place deposits, make
withdrawals, and transfer funds into or out of
RMB accounts outside Mainland China.
In cases of cross-border flows of RMB funds into
or out of Mainland China, it is permissible under
the prerequisite that the fund transfer complies
with the rules and requirements of Mainland
China including but not limited to cross-border
trade settlement mentioned above.
Q: What RMB trade finance products are
available?
Key trade finance capabilities for documentary
trade and open account trade enabled in other
global currencies are also available in RMB at
Deutsche Bank. For instance, RMB import or
export letters of credit issuance, collection,
discounting and financing, pre-shipment
financing, receivables financing (with or without
recourse), supply chain financing of RMB
purchases and sales, as well as RMB letters of
guarantee are available in RMB or other global
currencies.
Deutsche Bank is also able to provide
customised RMB trade solutions to optimise
costs and gain efficiencies for your cross-border
trade financing needs.
Q: Can I send RMB payment instructions to
Deutsche Bank via electronic channels?
Yes. Your existing agreed channels for
payment instructions with Deutsche Bank,
such as electronic banking, host-to-host or
paper instructions, are also available for RMB
payments.
Q: Are all banks in Mainland China eligible to
provide RMB cross-border trade settlement
services?
No. Only qualified commercial banks, which
include Deutsche Bank, in Mainland China
approved by the PBoC upon inspection on the
readiness for RMB cross-border trade settlement
business are eligible to provide such services.
Q: What offshore RMB cash management
products are available?
You can manage your offshore RMB in much the
same way as other global currencies.
RMB accounts offer the same basic services
you would expect of any other cash account,
including overdraft facilities (subject to
approval), interest enhancements for offshore
deposits and fixed deposit facilities. Term
deposits as well as Deutsche Bank’s electronic
cash management and FX trading products are
also available for all CNH transactions. You can
manage your RMB cash balances with cash
sweeping, including zero and target balancing
services.
Q: What are some of the complexities that might
be expected with RMB adoption?
Adopting a new currency requires internal
stakeholder engagement, and likely changes
to accounting treatment, treasury practices,
processes and banking arrangements. Although
China continues to implement reforms,
regulatory and operational complexities remain
significant. Capital account controls mean that
companies must segregate their RMB funds
into onshore (CNY) and offshore (CNH) pools,
effectively treating the RMB as two currencies.
While the onshore exchange rate is highly
regulated, the offshore rate is marketdetermined, resulting in a spread between the
CNH and CNY, and different interest rates. This
means that companies must ensure that their
processes can distinguish between the two and
that they can respond to market movements.
These and other complexities associated
with qualification criteria, documentary
requirements, structures and quotas can create
inertia for RMB adoption. With the currency
exhibiting greater two-way volatility, there is
also a higher level of FX risk associated with
the RMB than in the past, when USD-RMB was
effectively a “one-way bet”.
There are also a number of reasons for possible
inertia on the part of the Chinese party to a
transaction. For instance, commodity inputs in
certain industries may be denominated in USD,
resulting in a natural hedge when invoicing is
USD-based. A Chinese exporter may also wish
to diversify its currency portfolio, or use USD
invoices to obtain USD-denominated trade
loans. There may also be internal incentive or
operational considerations.
Financing
Q: What is the process for issuing a CNH bond
and how long does it take?
Issuing a CNH bond follows much the same
process as any other offshore bond transaction
and typically takes around eight weeks.
Obtaining a rating is an important step as rated
bonds typically pay a much lower yield than
non-rated deals. A more detailed timeline with
step-by-step requirements for issuing a CNH
bond can be found on page 26.
Q: What trust and agency services are available
for my CNH bond?
Deutsche Bank can provide the full range of
trustee and agency services for CNH bonds
cleared through Euroclear/Clearsteam and
the Central Moneymarket Unit (CMU).
We can also act as a facility and security
agent for CNH loans in China and
Hong Kong, as well as providing agency
services for Escrow accounts in Hong Kong,
Shanghai, Beijing and Guangzhou.
Q: Who are the main buyers of CNH bonds?
Investors include institutional asset managers,
insurance companies, banks, hedge funds,
pension funds and high-net-worth retail
investors from within Asia and outside the
region. The number of RMB-dedicated funds
in Hong Kong continues to grow while the first
investable CNH bond index (Deutsche Bank’s
Offshore Renminbi Bond Index Tracker) provides
investors with a passive investment option for
the first time.
Q: Can I use proceeds from a CNH bond issue to
fund onshore subsidiaries?
Using proceeds from a CNH bond issue to fund
subsidiaries or invest onshore was made easier
after the introduction of new foreign direct
A brief guide to China’s global currency 29
investment (FDI) rules by China’s Ministry of
Commerce and PBOC in October 2011.
Risk management
The new rules provide clarity on the use of
FDI channels for transferring CNH into China,
including buying or setting up new companies,
making shareholder loans or transferring equity
stakes. Previously, the transfer of proceeds was
approved on a case-by-case basis.
Q: How can companies manage FX and interest
rate risk in CNH?
USD-CNH FX forwards are a common tool
to manage FX risk, with trading volumes of
around USD 10bn per day. Liquidity is mostly
concentrated in tenors of 3 months to 1 year,
although Deutsche Bank can provide liquidity
out to 10 years for CNH FX swaps and forwards.
Deciding whether to use an intercompany
loan or transfer capital as an equity stake has
its own considerations. The key benefit of an
equity capital injection is the relief of an onshore
subsidiary’s borrowing limits, although there
is a withholding tax of up to 10% on dividend
remittance. Inter-company loans however – after
being registered with SAFE – do not require
regulatory approval for debt servicing.
A more detailed overview of the remittance
process can be found on page 25.
Q: What financing alternatives are available
through the CNH market?
Using an intercompany loan structure with
a cross-currency swap (CCS) may result in
cheaper overall funding costs compared to
onshore loans and a potentially quicker way to
obtain financing compared to a CNH bond issue.
This structure sees a parent company swap
EUR or USD principal for CNH, which can then
be transferred to the onshore subsidiary via an
intercompany loan. The parent will receive a flat
Euribor or Libor rate that reflects their funding
costs, while paying a flat rate on their CNH loan.
The cross-currency swap market offers a
straightforward mode of hedging, with tenors
from 3 months to 10 years available, although
the most liquid segment remains the three-year
or shorter tenor. While an interest rate swap
market for USD-CNH exists, it is fairly illiquid.
FX options are also available, with both vanilla
and complex options traded in the CNH FX
option market. Deutsche Bank estimates that
average daily turnover in the CNH FX options
market grew substantially, from USD 30m
in 2011 to USD 7bn in 2013. However, with
activities in the CNH structured forward market
moderating substantially, daily turnover in the
CNH FX options market is around USD 5bn per
day, as of March 2015.
The USD-CNY non-deliverable forward (NDF)
market currently has USD 2bn of daily volume.
Over time, the NDF market will likely cease to
exist as market participants move to where
liquidity is best.
The subsidiary meanwhile services the cost of
the CNH loan directly with the parent, returning
the principal on the maturity date. To find out the
latest pricing on such a structure, please contact
your Deutsche Bank representative.
Offshore RMB: Opportunities for corporates
Offshore RMB services
Deutsche Bank capabilities and solutions
Category
Products
Tactical Risk Management
—— Vanilla Forward Hedging (Options, Forwards)
—— Flexible Forwards
—— Structured Cash-flow Hedging
—— Risk Reversals
—— Target Profit Futures and their variables
—— Hybrid Hedging Solutions
Strategic Risk Management
Financing
—— CCS in size and long tenors to match underlying Dim Sum Bond
—— CNH Bond + Cross Currency Swap package
—— CCS hedging behind intercompany loans
—— Structured Cross Currency Swaps
—— Balance Sheet Hedging
—— Options (e.g.call spreads) to hedge principal
only
—— CNH fixed rate loans
—— Dim-Sum Bond
—— USD Bond and EUR Bond
—— Trade Finance-related solutions
—— Dim Sum Bond Issuance
—— USD/CNH CCS
—— Synthetic RMB financing via USD funding + USD-CNH LHS CCS
—— FCY Financing
—— Synthetic USD financing via CNH debt + USD-CNH RHS CCS
Liquidity Management
—— Short-term investment products
—— Time deposits and certificates of deposit
—— Dual currency deposits
—— Auto-callables
30 A brief guide to China’s global currency
RMB FX markets: the basics
— Renminbi The official name of China’s currency (“the people’s currency”)
— Yuan The unit of account
— CNY The official ISO code used to denote RMB in FX transactions when it is traded onshore (in
Mainland China
— CNH The term used by market participants to describe RMB circulating outside Mainland China
(Hong Kong was the first major offshore market, hence the use of the letter ‘H’)
Although RMB is the name of the currency traded both onshore and offshore, there is a separation between the
two markets as China institutes capital controls on cross-border flows.
— The onshore CNY market remains restricted for foreigners
— CNH is an unrestricted, freely tradable currency in offshore markets
A key feature of CNY is that its exchange rate against the US dollar is fixed by a daily reference rate and an
allowable trading band by the People’s Bank of China, which also intervenes periodically in the market. In
comparison, the CNH exchange rate is driven by market demand and supply, although the overall supply of CNH
is influenced by policy.
While CNY and CNH are technically the same financial asset, the segmentation of the markets results in
divergences in onshore and offshore rates under different market conditions. Interest rates also diverge onshore
and offshore, with the Shanghai Interbank offered Rate (SHIBOR) being the standard benchmark onshore and
the CNH HIBOR serving as the CNH offshore benchmark.
The long-established non-deliverable forwards (NDF) market allows for the hedging of foreign exchange risk for
non-convertible currencies, and involves no actual exchange of RMB. However, the NDF market is becoming
increasingly marginalised as the CNH market becomes the primary venue for managing FX risk offshore.
A brief guide to China’s global currency 31
Keeping informed
Deutsche Bank is committed to keeping its clients informed
on the latest developments in RMB internationalisation.
Deutsche Bank’s fixed income and foreign exchange strategy teams produce a fortnightly report,
The CNH Market Monitor, which provides corporations and investors with insight and perspective
on the latest regulatory reforms, market developments, financing conditions and other key factors
influencing RMB internationalisation. To receive the report and keep informed, please contact our
research team or speak with your Deutsche Bank representative:
Linan Liu
Perry Kojodjojo
Sameer Goel
Greater China Rates
& FX Strategist
[email protected]
+852 2203 8709
Asia FX Strategist
Head of Asia Rates
& FX Research
[email protected]
+65 6423 6973
[email protected]
+852 2203 6153
Key contacts
Debt Capital Markets
Foreign Exchange & Rates
Transaction Banking
Herman van den Wall Bake
Jerry Li
Joe Ng
Head of FX and Rates
Trading, Asia
Head of RMB Payments and Product
Management, Asia
[email protected]
+65 6423 8581
[email protected]
+852 2203 8508
[email protected]
+852 2203 8243
Jacob Gearhart
Beng-Hong Lee
Venkatesh Somanathan
Head of Markets,
China
Regional Head, Trade Finance
Product Management, Asia
[email protected]
+86 (21) 2080 2801
[email protected]
+65 6423 6101
Head of Fixed Income
Capital Markets, Asia
Head of Global Risk
Syndicate, Asia
[email protected]
+65 6423 5934
Andrew Stephen
Head of Private Placements and
Local Currency Issuance Asia
Capital Markets &
Treasury Solutions
[email protected]
+65 6423 8554
Oliver Brinkmann
Credit Market
[email protected]
+852 2203 8535
Vishal Goenka
Head of Local Currency
Credit Trading, Asia
[email protected]
+65 6883 0666
Head of CMTS,
Greater China
Evan Goldstein
Global Head of Renminbi Solutions
CNH Remittance
Stephanie Miao
Amir Hoosain
[email protected]
+86 (21) 2080 2686
32 A brief guide to China’s global currency
Head of Product Management,
Greater China
[email protected]
+86 (21) 2080 2862
Trust and Agency Services
Ivy Fung
Head of Greater China Sales
Global Renminbi Solutions
[email protected]
+852 2203 6966
Senior Relationship
Manager, China
Louise Zhang
Director,
Global Renminbi Solutions
[email protected]
+852 2203 8429
[email protected]
+852 2203 7887
Custody and Clearing Services
Vicky Tsai
Head of Investor Services,
China
[email protected]
+86 (21) 2080 2894
This presentation is for information purposes only and provides a general overview of the range of services offered by Deutsche Bank AG. The general information
provided in this presentation is based on services as they may be offered to clients on the date this presentation was published 2015. This information is subject to
change. This presentation and the general information on the services offered by Deutsche Bank AG merely serve as an illustration; no contractual or non-contractual
obligations on the part of Deutsche Bank AG or its subsidiaries, or liability claims against Deutsche Bank AG or its subsidiaries, can be derived from them.
This document is intended for discussion purposes only and does not create any legally binding obligations on the part of Deutsche Bank AG and/or its affiliates
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mentioned herein may not be appropriate for all investors and before entering into any transaction you should take steps to ensure that you fully understand the
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including the possible risks and benefits of entering into such transaction. For general information regarding the nature and risks of the proposed transaction and types
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authority: European Central Bank) and, in the United Kingdom, by the Prudential Regulation Authority. It is subject to supervision by the European Central Bank
and by BaFin, Germany’s Federal Financial Supervisory Authority, and is subject to limited regulation in the United Kingdom by the Prudential Regulation Authority
and Financial Conduct Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority and regulation by the Financial
Conduct Authority are available on request. In the US this document is approved and or distributed by Deutsche Bank Securities Inc., a member of the NYSE, FINRA,
NFA and SIPC. In Hong Kong this document is distributed by Deutsche Securities Asia Limited (“DSAL”) and Deutsche Bank AG (“DBAG”). DSAL is an exchange
participant of The Stock Exchange of Hong Kong Limited and a licensed corporation with the Securities and Futures Commission. Deutsche Bank AG is regulated by
the Hong Kong Monetary Authority as a licensed bank.
May 2015
CNH solutions delivered
with global expertise.
Deutsche Bank provides a full suite of RMB solutions covering all asset classes
across cash management, trade finance, sub-custody, payments clearing,
securities and fund services, trust and agency services, foreign exchange,
capital markets, credit trading and beyond.
We have a track record of providing award-winning solutions that enable
clients’ success.
Top FX bank in Asia
Best Global Risk Advisor
Best Global Debt House
Best Trade Finance Provider
Euromoney 2014
Top ranked in Global FX
Top ranked in Asian FX
Greenwich Survey 2014
Most Innovative Bank for Foreign Exchange
Most Innovative Investment Bank for Bonds
Most Innovative Investment Bank for Emerging Markets
The Banker 2014
Structured Finance House of the Year
IFR Awards 2014
Loan House of the Year
Global Capital 2014
Currency Derivatives House of the Year
Asia Risk 2014
Our onshore presence in China gives us a strong grasp of the regulatory
environment. More importantly, when it comes to the RMB, we understand
that there can be no “one-size-fits-all” solution. We take the time to conduct
an analysis of clients’ requirements on an individual basis, and then design and
implementation bespoke structures that ensure our clients are best-placed to
seize this opportunity and realise its full potential.
To harness opportunities presented by the internationalisation of the renminbi,
it is critical to partner with a bank that can help you navigate its challenges.
Deutsche Bank for RMB solutions.
34 A brief guide to China’s global currency