Singapore Takes China's Currency Another Step Towards Global Status

Tom Burroughes

24 June 2016

The march of the Chinese renminbi towards becoming a global currency continued this week, with the Monetary Authority of Singapore saying it will include financial instruments denominated in the currency as part of its official reserves.

The move begins from this month, MAS said in a statement.

“This move recognises the steady and calibrated liberalisation of China’s financial markets, and the growing acceptance of renminbi assets in the global portfolio of institutional investors,” the watchdog and central bank said.

Although not an entirely free-floating currency, the renminbi has already developed as a recognised international unit of exchange, reflecting moves by the Communist-led country to open up its capital and investment markets in recent years. Among notable recent moves has been inclusion of the renminbi into the basket of major currencies used by the International Monetary Fund for its Special Drawing Rights system. Restrictions on inbound and outbound remittances have been lifted and no prior approval is required for the repatriation of funds invested in China’s interbank bond market.

Since 2012, MAS has made renminbi financial investments through China’s Qualified Foreign Institutional Investor and interbank bond market schemes. Although part of MAS’s foreign assets, it was not possible to include these investments in official foreign reserves as there were previously restrictions on the repatriation of these funds, MAS said. Their inclusion is "timely", it added.

“China’s calibrated financial liberalisation in the past year has encouraged growing international acceptance of the renminbi. An example is the set of initiatives between China and Singapore announced in November last year to further expand channels for cross-border renminbi flows and support the greater use of the renminbi outside China,” said Jacqueline Loh, MAS deputy managing director.