After four years of heady expansion, the offshore renminbi markets have moderated their rates of growth, but their underlying prospects are stronger than ever.
There is a growing chorus of sceptics who believe that the renminbi internationalisation project has plateaued and will struggle to get to the next level before China dismantles the rest of its capital controls, which is unlikely in the immediate future.
But this is a misunderstanding of the dynamics of the market. Short-term pressures and structural changes mean that judging interest in the broader renminbi internationalisation project by looking only at the levels of offshore deposits and the dim sum bond market is misleading.
Some of the froth of the early days has evaporated, but the credibility of the market is growing; this is reflected in the underlying data. Notwithstanding the cheapness of dollar borrowing and the fact that mainland banks have reached their quota limits on new offshore paper, new issues surged close to 47 billion yuan (HK$58 billion) in March. Overall issuance for the first quarter of the year was up 16 per cent, quarter on quarter.
But despite these signals of strength, the feverish days of unsustainable growth are over. Investors are taking a more sober view.
The renminbi will continue to appreciate this year, but currency gains are just one factor in an investment equation that also takes into account yield curves and China's economic outlook. With all these indicators set fair, the overall international investment in renminbi is set to grow, and grow faster than the headline data on renminbi deposits or even dim sum bond issuance indicates.
The expansion of investment options, particularly the hugely popular Qualified Foreign Institutional Investor programme, are diluting interest in older investment channels. Demand for renminbi will continue to grow as the regulatory environment becomes liberalised.
Renminbi trade settlement is growing, hitting 15 per cent of China's overall trade in the first two months of this year, up from 12 per cent in 2012. This, combined with new payments and cash management solutions being tried out by the authorities, will open up new sources of demand for offshore renminbi assets.
Settling in renminbi is still more challenging than settling in dollars: the financial infrastructure is still developing; the risks are unfamiliar to new clients; and at times of financial stress, businesses are less willing to abandon tried and tested systems for something new.
Old habits are hard to change, but new renminbi offshore settlement centres - Taipei has already started trading and Singapore is expected to follow shortly - will also draw more players into the renminbi orbit.
And although the offshore renminbi market has so far been largely bypassed by the global hunt for yield, mostly because the liquidity pool remains too small for the big global players, this will change.
But it will be a closely managed change. It is clear that the relaxation of capital controls will be a gradual process, designed to shield the nascent market from large and potentially destabilising currency flows.
The renminbi will not replace the dollar as the world's dominant currency any time soon, but the world is hungry for an alternative, and the renminbi is the only candidate. The time when the renminbi will stand alongside the dollar as a viable global settlement, investment and ultimately reserve currency is not only foreseeable, but close.
Candy Ho is HSBC's head of renminbi business development for the Asia-Pacific global markets