HSBC becomes first international bank allowed to remit yuan to China

The move is one of several indications that internationalisation of the Chinese currency is picking up pace again

PUBLISHED : Wednesday, 14 February, 2018, 6:10pm
UPDATED : Wednesday, 14 February, 2018, 10:11pm

HSBC said on Wednesday that it had helped a Chinese national remit yuan from Australia back to mainland China, the first international bank to do so since a rule change in January.

The transaction is an indication that the Chinese authorities have, albeit cautiously, expanded their drive to internationalise the yuan.

Previously, Chinese people living overseas could only send money back to China if it were denominated in other currencies, but this was changed according to a circular from the People’s Bank of China, China’s central bank, published on 5 January.

In 2016, China was the second largest remittance recipient after India, receiving US$61 billion, according to the most recently available data from the World Bank.

“By opening up cross-border RMB transactions to individuals, China is adding new impetus to the international use of its currency,” said Helen Wong, HSBC’s Greater China chief executive in a statement, using an abbreviation for the renminbi, another name for the yuan.

In a separate move, the PBOC on Tuesday said in a statement on its website that it had appointed JP Morgan as a yuan clearing bank in the United States, the first non-Chinese bank to have such a role globally.

Two reasons why China’s currency doesn’t have more global clout

Encouraging greater use of the yuan is a long-term policy goal for the central bank.

However, companies’ willingness to use the yuan, and Chinese authorities’ emphasis on policies to encourage them to do so, declined after the currency’s sudden devaluation in August 2015. The lacklustre interest was exacerbated in late 2016 as concerns about the pace of currency outflows caused the Chinese authorities to bring in capital controls.

By opening up cross-border RMB transactions to individuals, China is adding new impetus to the international use of its currency
Helen Wong, HSBC

The change in policy published on January 5 may indicate that the yuan’s internationalisation is gradually gathering pace again.

“We see recent encouraging signs that renminbi internationalisation could make a subtle return to being a policy focus,” said Standard Chartered analysts in a note commenting on the rule change.

“Overall, while the bias is still towards inflows over outflows, the authorities appear ready to re-accelerate renminbi internationalisation after a setback since 2015.”

In addition to allowing individuals to remit money to China in yuan, the circular also permitted foreign institutions to use the yuan in domestic carbon emissions trading and made changes to facilitate the use of yuan in foreign direct investments.