Rising from $31.1bn in October to $33.8bn in November, China’s trade surplus is at the highest level since January 2009. This is in spite of the recent strength in renminbi, which appears likely to continue in the short term. Indeed, a factor that has been a major contributor to the rise in the surplus has been the slow growth of imports.
The strength of renminbi in the recent past is clearly expected to continue. Offshore renminbi (CNH) deposits in Hong Kong have been surging. This is at a time when the Hong Kong Monetary Authority (HKMA) has raised concerns over rapid growth in lending by the banks. It is highly likely that at least some of the increased deposits will find their way to CNH-denominated dim sum bonds.
Chinese banks are facing a number of challenges as the authorities in Beijing seek to crack down on the various excesses of the last few years. This is clearly having an impact on the banks’ performance metrics: as a result, they are in need of capital. In turn, the Hong Kong IPO market has received a boost on the back of this.
Trading in RMB grows
As China continues to internationalise its currency, a small but growing number of multinationals are now using renminbi in cross-border trade.
Denise Law is a researcher for Renminbi Compass in Hong Kong. (4m 13sec)
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