Singapore Says Renminbi Investments to be Part of Official Foreign Reserves


Wednesday, June 22, 2016 11.42 AM / News

The Monetary Authority of Singapore (MAS) announced today that it will be including its Renminbi (RMB) financial investments as part of its Official Foreign Reserves (OFR) from June 2016 onwards.  This move recognises the steady and calibrated liberalisation of China’s financial markets, and the growing acceptance of RMB assets in the global portfolio of institutional investors. 

Since 2012, MAS has been making RMB financial investments through China’s Qualified Foreign Institutional Investor and interbank bond market schemes.1 Investing in China has provided portfolio diversification benefits for MAS. Although part of MAS’ foreign assets, it was not possible to include these investments in OFR as there were previously restrictions on the repatriation of these funds.2

Over the past year, China has taken significant steps to liberalise access to its foreign exchange and securities markets for foreign institutional investors. For example, access to China’s interbank bond market was granted to most foreign institutional investors, and investment quotas were eliminated. Restrictions on inbound and outbound remittances have been lifted and no prior approval is now required for the repatriation of funds invested in China’s interbank bond market.

The International Monetary Fund (IMF) announced in November 2015 that the RMB met the criterion of a freely usable currency and would therefore be included in the SDR basket with effect from 1 October 2016. It was reported by the Fund that RMB-denominated assets comprised 1.1% of total foreign assets4 held by official holders of foreign exchange as at end-2014. 

MAS Deputy Managing Director, Jacqueline Loh, said: “The inclusion of RMB assets in MAS’ OFR is timely. China’s calibrated financial liberalisation in the past year has encouraged growing international acceptance of the RMB. An example is the set of initiatives between China and Singapore announced in November last year to further expand channels for cross-border RMB flows and support the greater use of the RMB outside China.

1 The Qualified Foreign Institutional Investor scheme, introduced in 2002, allows eligible foreign institutional investors to invest in equities and bonds listed on China’s domestic exchanges, up to the allocated quota. The interbank bond market, China’s over-the-counter market for the trading of bonds, was opened to foreign central banks in 2010, with investments subjected to the allocated quota.

2 The IMF defines reserve assets as “external assets that are readily available to and controlled by the monetary authorities for meeting balance of payments financing needs, for intervention in exchange markets to affect the currency exchange rate and for other related purposes (such as maintaining confidence in the currency and economy, and serving as a basis for foreign borrowing).” 

3 Refer to announcements made by the People’s Bank of China and State Administration of Foreign Exchange in February and May 2016.

4 These include both reserve assets and other foreign currency-denominated assets. 

5 See MAS Media Release “Cross-Border RMB Flows and Capital Market Connectivity Between China and Singapore to Strengthen”, 9 Nov 2015.

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