London – The Standard Chartered Renminbi Globalisation Index, or the RGI, rose 1.2% to 2,048 in November from the previous month mainly driven by cross-border Renminbi payments, said per Standard Chartered.
It echoes recent data showing that 22% of China’s goods trade was already settled in Renminbi as of November. Three quarters of cross-border Renminbi payments came from the offshore centres of Hong Kong, London and Singapore. The RGI is likely to rise to at least 2,500 by end-2015, with the main drivers being the continued emergence of new offshore centres and further policy liberalisation from China, especially the establishment of new onshore Free Trade Zones. But RGI growth in 2015 is likely to be slower than 2014 on concerns of a slowing Chinese economy coupled with expectations of continued mild Renminbi depreciation in the first-half of 2015.
The UK bank revised its USD/CNY forecast, expecting it to peak in the second quarter at 6.28, before ending 2015 at 6.12 on anticipation of weakening USD and China benefiting from strengthening domestic and global growth. It expects RMB deposits in Hong Kong to reach CNY1.05 trillion by end-2015. Sentiment towards the Renminbi should gradually improve by the second half, alongside stronger incentives to use and hold Renminbi offshore by corporates on expectation of further policy liberalisation. Also, the market could see a more balanced flow between northbound and southbound trading under the Shanghai-Hong Kong Stock Connect programme.
