The author is ANZ (The Australia and New Zealand Banking Group) Research
Singapore and China agreed on new initiatives to strengthen financial cooperation and regulation.
Specifically, Singapore will be granted an RQFII (RMB Qualified Institutional Investor) quota of RMB50 billion.
Singapore will be considered as one of the investment destinations under the new Renminbi Qualified Domestic Institutional Investor (RQDII) scheme. This will allow qualified Chinese institutional investors to use RMB to invest in Singapore’s capital markets.
Direct conversion between Singapore dollars and RMB will be established.
New measures are being studied to allow cross-border flows of RMB between Singapore and Suzhou Industrial Park (SIP) as well as Tianjin Eco-City (TEC).
The Singapore Exchange and Shanghai Futures Exchange have signed an memorandum to strengthen collaboration in the joint development of commodity derivatives.
The two sides will cooperate on banking regulations.
As we noted before, direct conversion with CNY and the RQFII license are natural developments following the signing of a bilateral local currency swap agreement with China.
Singapore and China recently expanded the size of swap to RMB300 billion. Today’s announcement is largely expected.
The high profile announcement of RQDII scheme distinguishes Singapore from other recent deals. It will allow Singapore to capture the outbound flow of Chinese wealth.
With the official clearing facility fully operating, Singapore is now fully equipped to be an offshore RMB business center. As an Asian wealth market and international financial center, the RQFII and RQDII licenses could enhance Singapore’s capability as a RMB investment hub.
(The article has been edited for clarity)