China’s overseas investment schemes set to boost yuan
Expanding the offshore pool is likely to help balance the mainland's international payments
The mainland is studying pilot schemes that will allow domestic investors to make overseas investments using the yuan, a move that could pump fresh oxygen into the stagnant offshore yuan pool.
"The central bank is designing [renminbi qualified domestic institutional investor] and QDII2 schemes to enable investment in offshore markets," said Wang Dan, deputy director general in the monetary policy department at the People's Bank of China.
Yuan deposits in Hong Kong, the biggest offshore yuan hub, stood at 937 billion yuan (HK$1.2 trillion) at the end of August, the lowest level since February.
The yuan pool expanded much more slowly this year than expected, mainly because of new ways for foreign investors to use yuan on the mainland to buy high-yielding assets and yuan being cheaper in offshore markets.
As an example of foreign investor interest in onshore yuan assets, the 270 billion yuan renminbi qualified foreign institutional investor quota granted to Hong Kong was exhausted in less than three years.
The accumulation of yuan deposits outside the mainland has for years relied heavily on cross-border trade settlement, with some additional flows from overseas direct investment and mainland travellers converting currency overseas.