China December New Yuan Loans Miss Expectations

The race is on to become China's new offshore RMB center

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Up to 10 cities around the world are competing to become an offshore renminbi center, and the growing rivalry has led to a Hong Kong official's call for China to further relax trading rules for the currency in his territory, the International Finance News reports.

Laura Cha, chairwoman of Hong Kong's Financial Services Development Council, which is an advisory body set up by the territory's government, suggested that Beijing relax the 20,000 yuan (US$3,300) daily cap set for currency conversion in the former British colony.

The proposal seeking favorable treatment was a rare move as Hong Kong has enjoyed the advantage of Beijing offering similar policies in the past, said the paper, which is affiliated with the state-run People's Daily.

The business surrounding the Chinese currency is growing in importance. Besides the minimum 7% return on the yuan or renminbi, which is appreciating against the US dollar, trading of the currency can also boost the financial sector and related services.

Daily trades in the Chinese currency of between US$1 billion and US$1.5 billion have also allowed Hong Kong to narrow the gap with Singapore, another financial hub in the region, in terms of foreign exchange transactions.

Candy Ho, HSBC's head of renminbi business development for the Asia-Pacific global markets, said that the position of being an offshore renminbi center allows a country or a region to take part in China's economic growth as Beijing is in the process of liberalizing its financial sector.

Besides Hong Kong and Singapore, contenders for such a position include Luxembourg, Paris, London, Frankfurt, Zurich, Geneva, Sydney and Taipei, the paper said.

Meanwhile, there is a notably absence of US cities on the list since there is no demand for US companies doing business around the world to use a currency other than their own, which is still a major reserve currency, according to Ho.

Hong Kong has the edge in the race given its close proximity to China, the paper said, adding that Singapore would play an important role in promoting the use of the Chinese currency in Southeast Asian countries as China's second-largest trading partner since 2012.

London, which processes 41% of the world's foreign exchange trades, is confident of securing the position as an offshore center after China granted the city an RQFII (Renminbi qualified foreign institutional investor) quota of 80 billion yuan (US$13.2 billion).

On the other hand, Luxembourg's stock exchange had the world's second-largest dim sum bond listing — only behind Hong Kong — and competitively low tax rates, while Paris claimed to have 20 billion yuan (US$3.3 billion) in yuan deposits, the largest amount in the Eurozone, the paper said.

Chinese Currency - The Yuan, The Renminbi Or What?
RMB, CNY, CNH, ¥ - Confusion abounds on how to talk about the People’s Currency

It’s getting more and more press, is the currency of the People’s Republic of China, as the country moves ever closer to centre stage in the global economy and its currency is promoted to ‘second-most-traded’ status, supplanting the euro. Yet how to describe that currency remains a mystery to much of the English-speaking world’s business and financial media.

It’s well enough recognised that the words ‘yuan’ and ‘renminbi’ are needed in one way or another, but the dilemma demonstrably lies in when and why to use the one or the other. As we’ll shortly see, some folk use both for good measure. And what about the symbols. Can we use ‘¥’? And is it RMB or CNY, or for that matter CNH?


Examples of Unregulated Usage


By way of illustrating the murkiness which abounds, consider these examples from a range of media –

We’ll start with this description on the website of currency converter xe.com –

The Chinese Yuan Renminbi is the currency of China.


Here we have terminology shared by the European Central Bank, which has a page dedicated to the ‘Chinese yuan renminbi (CNY)’. Note though the ECB’s use of the lower case.


And here, on 5 January this year, the Daily Telegraph takes a bob each way –

Any such move could greatly complicate the City of London’s plans to become the top market for global trading of the yuan or renminbi,


This notion that ‘yuan’ and ‘renminbi’ are interchangeable words is widespread in the financial media. Here’s Singapore’s Straits Times on 3 December last –


The market share of the yuan, also known as the renminbi (RMB), in traditional trade finance reached 8.66 per cent in October,

And Germany’s Der Spiegel back on 10 May 2011 –

In addition to the dollar and the euro, Belke believes that the Chinese yuan, also known as the renminbi, has the best chances of establishing itself as an international key currency, …


Notice that it’s the ‘Chinese yuan’ here, suggesting there may be others. And ‘yuan’ by itself is also not enough for the China Post, a leading Taiwanese daily, with this in a piece from 18 December last –


The Chinese yuan appreciated significantly against the greenback this year …

Very possibly that other yuan is in Taiwan itself, given that- as we’ll see below - ‘yuan’ effectively means ‘dollar’, the English name for the Taiwanese currency.
Evidence of interchangeability between ‘yuan’ and ‘renminbi’ when referring to specific amounts of the Chinese currency is also readily found on the financial pages. Here’s the New York Times from 6 March last year –

… data from the People’s Bank of China showed the central bank and commercial banks in China had bought a record 683.7 billion renminbi, the equivalent of $109.9 billion, worth of foreign exchange in January.


Likewise in the Sydney Morning Herald of 19 April 2012 –

The 2 billion renminbi senior unsecured bond was priced with a yield of 3 per cent …

But if it’s yuan you want, see this from Reuters on 6 January this year –

The Export-Import Bank of China (Chexim) plans to issue up to 4 billion yuan ($660.99 million) of dim sum bonds in Hong Kong to institutional investors,


Making a Stand


Uncomfortably perched as we are on the horns of this particular dilemma, here at iNVEZZ.com we’ve decided to take a stand, backed by exhaustive (!) research, and albeit we don’t have a China hand amongst us.


There’ve been several commentaries on what to call the Chinese currency over the past few years, most somewhat tongue in cheek and some with more than a whiff of condescension. That’s an attribute also evident in the description of Chinese currency debt instruments as ‘dim sum’ bonds – as witness the Reuters extract above – which is somewhat akin to describing US dollar bonds as ‘apple pie’ paper or perhaps sterling gilts as ‘rosbif’ bonds.
No commentary that we’ve come across really nails down the issue though, so here follows iNVEZZ.com’s own take on matters.

 The words ‘yuan’ and ‘renminbi’ are only interchangeable when referring to China’s currency in a generic or abstract way. Thus, we can say either that ‘the yuan has appreciated 10 percent against the dollar’ or that the renminbi has done so.


 ‘Renminbi’ cannot however be used as a unit of account, ie, we can’t talk of X number of renminbi, as the NY Times and Sydney Morning Herald erroneously do in the above extracts. This is because ‘renminbi’ literally translates into English as ‘people’s currency’ and is conceptual rather than concrete.


 Specific amounts of the currency must be described as ‘yuan’ – there appears to be no plural form of the word yet in circulation – and if the word is used as opposed to its symbol (as to which, see below) it follows the amount, as in the Reuters item above.


 The word ‘yuan’, though literally meaning ‘round piece’, effectively translates into English as ‘dollar’, but not so much the modern version as the dollars of Spanish origin – and primarily the ‘pieces of eight’ of piracy parlance – which by common consent became the trade currency in 19th Century China.


 Etymologically speaking, there is a close association between the Chinese yuan, the Japanese yen and the Korean won, with them each sharing the Chinese character for the respective words until 20th Century language reform in the latter two countries.


 Though their depiction in the respective languages is now different, the monetary symbol for the yuan and the yen remains the same, namely ¥, though of course the symbol is much more associated with the Japanese currency. The Korean won incidentally – both North and South variants – uses the symbol ₩.


 In terms of the three-letter currency code system, that ordained for the yuan by the ISO – the International Organisation for Standardisation – is CNY, derived from the two-letter country code for China (CN) and the letter ‘Y’ for yuan. So we can write amounts of yuan preceded by CNY.


 That being the case, it’s not helpful that there is another commonly-used three letter code for the yuan, which is ‘RMB’ and which of course derives from ‘renminbi’. It’s especially unhelpful that RMB is used by the People’s Bank of China in its official translation into English of its published reports and briefings, albeit to refer to the currency in general terms and not for specific amounts. The PBoC routinely writes the amount followed by the word ‘yuan’. Unlike the Shanghai Stock Exchange though, which uses ‘RMB’ instead of ‘CNY’ before stated amounts of the currency.


 We can’t leave this overview without mentioning yet another three-letter code for the Chinese currency, namely ‘CNH’. This is not ISO-recognized but is in widespread use for yuan-denominated bonds issued outside of mainland China and thus – largely – free of the exchange rate and yield controls imposed by the People’s Bank of China. The trade started in 2004 in Hong Kong, part of China but a semi-autonomous ‘special administrative region’ until 2047 and hence the identifier ‘H’ in the code.


How We’re Doing It Here at iNVEZZ.com


Given the foregoing, here at iNVEZZ.com we’re going to use ‘yuan’ and ‘renminbi’ interchangeably when describing or referring to the Chinese currency in a generic or general way, as in, eg, ‘The yuan has firmed 0.3 percent against the US dollar in today’s Asian trading’, or ‘Trading in the renminbi has been unusually muted today’.

When it comes to specific amounts though, we’re going to put ‘CNY’ ahead of the amount, as in, eg, ‘The CNY3.5 billion bond issue is a first for the third-ranked Shenzhen Stock Exchange ‘. We are not going to use ‘RMB’ for this or indeed any other purpose and we’re confident that the People’s Bank of China – and the Shanghai Stock Exchange for that matter - will soon come around to our way of thinking. We’ll reserve ‘CNH’ for writing specifically about an ‘offshore’ yuan bond issue.
Also, our feeling is that the ¥ symbol should be the sole preserve of the yen, its primary home these many years. Though, this is a stance which may need revision as the yuan starts to dominate the financial news, which it seems hell-bent on doing.

And, while we might on occasion write a specific amount followed by the word ‘yuan’ (a la the PBoC and various media), our take is that if we don’t write, eg, ‘1,500,000 dollars’, which we don’t, we shouldn’t write ‘1,500,000 yuan’.


So that’s it, in a rather large nutshell. All you ever wanted or needed to know on how to refer to the Chinese currency. And then some. But we’re open to other points of view, for which a comments box is conveniently located below.

Updated Thoughts On The Yuan

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Several months ago I wrote an article in which I suggest that investors consider buying the Chinese yuan. Since then we have seen a modest appreciation of about 1.47%.

In the article I gave three reasons for investors to consider such a position.

1. Base money supply for dollars is growing faster than base money supply for yuan.
2. There is a massive credit bubble in China, which implies that there will be deflation in China's future that will make yuan holdings and the highest quality yuan-denominated debt instruments increase in value should this bubble burst.
3. Demand for the yuan outside of China is growing.

Recently I suggested that there might be a fourth reason--China may back its currency with gold.

In this article I want to briefly provide an update to these points. Simply put, all of these reasons for owning some yuan either through an ETF (CYB, CNY, FXCH) or preferably more directly through a Chinese bank account are in tact. In fact they are more acute than they were back in May when I first address them.

Base Money in China vs. the U. S.


Base money in China has been essentially flat in China. In May it stood at 5,560 billion yuan. In December the figure stood at 5,640 billion yuan--a 1.44% increase.

Ghana will allow trading in Chinese yuan this year - BoG

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Ghana will allow banks to quote yuan rates and sell the Chinese currency this year as more businesses in West Africa’s second-biggest economy trade with the Asian nation.

“Many more people are traveling to China to do business and we think we should make life a bit easier for them,” Bank of Ghana Governor Kofi Wampah said by phone today from the capital, Accra. “It will also ease pressure on the cedi as this will decrease the demand for dollars.”

Ghana’s cedi has dropped 20 percent against the dollar since the start of 2013 as companies demanded the U.S. currency to pay for imports in one of the continent’s fastest-growing economies. Traders heading to China need to take dollars that would later be converted to yuan, according to Wampah.

The cedi weakened 0.4 percent to 2.3888 per dollar by 1:33 p.m. in Accra and traded at 0.39 cedis per Chinese renminbi, according to data compiled by Bloomberg.

The central bank introduced new currency-trading regulations for banks to improve liquidity and boost transparency, Wampah said, without giving details on the rules.

2013-01-15 02:11 GMT | [CNY - New Loans]

• past data is 625B
• forecast data is 600B
• actual data is 483B according to the latest press release

if actual > forecast = good for currency (for CNY in our case)

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China December New Yuan Loans Miss Expectations


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Chinese banks extended CNY 482.5 billion in new yuan loans in December, less than CNY 570 billion forecast by economists, data released by the People's Bank of China showed Wednesday.

In November, banks extended a total of CNY 624.6 billion in local currency loans.

The broad money aggregate, M2 money supply, increased 13.6 percent year-on-year in December, compared with expectations for a 13.9 percent rise. This was also slower than 14.2 percent growth in November.

China's aggregate social financing came in at CNY 1.23 trillion in December, unchanged from November, but higher than the expected CNY 1.14 trillion.

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The Chinese government has the strongest position to be able to truly legitimize the sharing economy. Instead of being seen as a threat or as a simple acquisition by other large businesses and governments, the Chinese have so far hastily embraced the growth the sharing economy brings to its service industry. While facing multiple challenges, the sharing economy will be able to thrive, and it must do so in China by encouraging regulation and cooperation, as opposed to litigation.

Additionally, the sharing economy must focus on the positive social benefits it brings participants, while building and maintaining relationships with key stakeholders, who, to a certain extent, are participants themselves.

The sharing economy is an indicator of strong economic growth, and can truly become a leading vehicle for change and economic prosperity as China moves into the future.


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