WEBVTT 1 00:00:01.016 --> 00:00:11.911 Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities. 2 00:00:12.733 --> 00:00:15.296 Make sure you're subscribed to stay up to date with new episodes. 3 00:00:15.637 --> 00:00:17.800 Thanks for listening, and now onto today's show. 4 00:00:20.402 --> 00:00:22.304 Hello, my name is Andrew Crook from FinanceAsia. 5 00:00:22.624 --> 00:00:31.112 I'm delighted to be here with HSBC's Oliver Kadim, who's head of the Institutional Client Group in Asia, and Veena Chung, Global Head of RMB Internationalization. 6 00:00:31.713 --> 00:00:36.478 And we're talking about the evolving usage of RMB from potential to practicality. 7 00:00:37.599 --> 00:00:42.684 Oli, to start off, what's driving the acceleration of RMB usage more recently? 8 00:00:43.200 --> 00:00:44.942 Well, good to see you, Andrew and Veena. 9 00:00:45.222 --> 00:00:46.284 Pleased to be here, as always. 10 00:00:46.724 --> 00:00:49.587 To answer that question, you really have to look where China trades. 11 00:00:49.687 --> 00:00:55.654 And China is now trading, as far as trading partners, over 120 markets globally. 12 00:00:56.155 --> 00:01:02.943 So the Remembe use is following that flow of trade, and of which we try to sit in the middle of it, obviously, as the world's number one trade bank. 13 00:01:03.603 --> 00:01:31.068 Remember, internationalisation, which we're going to say a lot today on this podcast, which is hard to say ten times fast, continues to follow a path characterized by a combination of progressive liberalisation, infrastructure expansion, such as the Connect schemes, which we've all been involved in, and we'll talk about more later, deepening offshore liquidity, such as the five-year China government bond, futures in Hong Kong, and we'll discuss some of the other up-and-coming changes, which the exchange and were announced in July. 14 00:01:31.708 --> 00:01:32.048 Thank you. 15 00:01:32.108 --> 00:01:40.993 And in what's obviously a volatile current macro environments, where do you currently see the strongest value RMB plays for institutional investors? 16 00:01:42.432 --> 00:01:43.012 Good question. 17 00:01:43.172 --> 00:01:51.716 I think institutions are incorporating Remembi exposure into their broader toolkit for building more diversified and resilient portfolios. 18 00:01:51.756 --> 00:01:55.238 Resilience gets used a lot this year, or certainly since last year. 19 00:01:55.818 --> 00:01:56.698 Resilience comes up a lot. 20 00:01:56.718 --> 00:02:03.201 Remembi assets can behave differently from US dollar, euro due to different market cycles, helping portfolio resilience. 21 00:02:03.241 --> 00:02:04.982 That comes up a lot with our clients. 22 00:02:05.322 --> 00:02:16.145 access to a broader opportunity set such as China's onshore bond market adds depth and variety, especially for investors seeking high quality duration and liquidity options. 23 00:02:16.205 --> 00:02:22.847 So change is good, correlation or not being correlated to certain markets makes a big difference. 24 00:02:22.867 --> 00:02:27.528 So we're seeing all of that front and centre when people are deciding whether they now hold renminbi. 25 00:02:28.208 --> 00:02:29.029 Thank you. 26 00:02:29.129 --> 00:02:37.353 Veena, how have clients shifted from using RMB mainly for settlements and investments to embedding it now in day-to-day Treasury? 27 00:02:38.914 --> 00:02:49.559 We continue to see the increasing volume of RMB settlements and the clients have shifted to more sophisticated and proactive RMB usage. 28 00:02:50.240 --> 00:02:54.002 From currency optimisation standpoint, Treasuries are 29 00:02:55.757 --> 00:03:10.360 using RMB position more deliberately, such as holding RMB when it improves the interest funding cost and the liquidity efficiency, and reducing it when it doesn't. 30 00:03:10.860 --> 00:03:22.243 So when RMB funding is competitive, clients are using RMB as the low cost funding source for working capitals and trade related needs. 31 00:03:22.923 --> 00:03:23.683 Increasingly, 32 00:03:24.495 --> 00:03:38.486 clients are also treating RMB as a functional liquidity currency, optimizing where the cap sits and mobilizing it for better interest outcomes and reduce the trap liquidity. 33 00:03:39.907 --> 00:03:50.936 And I see treasuries and finance operations like kitchens for companies, for institutionals, clients, they are developing RMB products, 34 00:03:51.538 --> 00:04:02.163 it's important for them to check if R&B as an ingredient is integrated to the kitchen so that the settlement can be efficient and the business can scale. 35 00:04:03.473 --> 00:04:03.793 Thank you. 36 00:04:04.233 --> 00:04:05.193 A question to both of you. 37 00:04:05.453 --> 00:04:18.056 HSBC recently commissioned Finance Asia to conduct a survey on RMB internationalisation, future trends and usage among institutional investors. 38 00:04:18.136 --> 00:04:26.757 With that in mind, how are you seeing evolving trading patterns influence RMB flows and liquidity needs? 39 00:04:27.417 --> 00:04:31.378 And what role do offshore RMB centres play in supporting that activity? 40 00:04:31.798 --> 00:04:35.060 Great that you mentioned that survey and thanks for all your help in putting that together. 41 00:04:35.881 --> 00:04:44.887 The survey was sent out to over 120 institutions to really get a very short and honest answer on their thought on the RMB and RMB internationalisation. 42 00:04:45.547 --> 00:04:46.608 Feedback's been great. 43 00:04:46.628 --> 00:04:50.551 It's been sent out to our partners with really, really strong feedback. 44 00:04:50.611 --> 00:04:52.072 So thanks again for putting that together. 45 00:04:52.452 --> 00:04:53.773 But to answer the question, Veena? 46 00:04:54.113 --> 00:04:54.393 Yes. 47 00:04:55.054 --> 00:04:59.757 Our survey points to the strongest RMB link capital flow growth. 48 00:05:00.699 --> 00:05:21.936 between China and Anxian, Asia and Middle East corridors, driven mainly by the expanding global footprint of Chinese mainland business, and the broader shift in trade and investment connectivity, as well as the supply chain integration. 49 00:05:22.857 --> 00:05:29.382 So R&B flow more frequently and operational, not just occasional, 50 00:05:29.953 --> 00:05:31.714 large value transactions. 51 00:05:32.514 --> 00:05:46.742 Offshore hubs enable RemiBee scaling by providing deep liquidity pools, efficient clearing and settlement infrastructure, and risk management tools, helping clients bridge onshore and offshore requirements with stronger operational control. 52 00:05:47.002 --> 00:05:49.203 Once again, resilience gets mentioned a lot. 53 00:05:49.643 --> 00:06:04.226 Hong Kong remains the key, handing around 75% of global offshore renminbi payments and hosting the deepest offshore renminbi liquidity pool, with renminbi deposits and certificates of deposits exceeding, what's the number in renminbi? 54 00:06:04.546 --> 00:06:07.927 renminbi 1 trillion renminbi and growing. 55 00:06:08.747 --> 00:06:15.709 Vina, the survey also shows positive acceptance among institutional investors of digital yuan or ECMY. 56 00:06:16.209 --> 00:06:19.290 How do you see institutions benefiting from using it? 57 00:06:20.990 --> 00:06:29.012 Yes, it's very encouraging to see 90% of the respondents would consider adopting digital currencies. 58 00:06:29.532 --> 00:06:49.378 So digital yuan, or ECNY, is an emerging payment rail, offering potentials for quicker payments and reduced settlement friction, especially important and valuable for cross-border transactions and multi-party workflows. 59 00:06:50.657 --> 00:06:56.860 We also see it complements the traditional payment rails in a broader ecosystem. 60 00:06:57.701 --> 00:07:05.225 We have institutional clients tasted the efficiency in some form in the current testing stage. 61 00:07:06.346 --> 00:07:17.272 And in a multi-dimensional financial framework, HSBC stands ready to enable tokenized deposit, smart contract, programmable features, 62 00:07:18.213 --> 00:07:26.299 for better transparency, simpler integrations, and less frictions for settlement certainty. 63 00:07:26.899 --> 00:07:32.143 We look forward to expand the use cases with our institutional client. 64 00:07:33.303 --> 00:07:33.624 Thank you. 65 00:07:33.844 --> 00:07:45.352 I guess to bring this all together, when a client asks you how should they approach the RMB, whether it's for payments, whether it's for trade, whether it's for investments, what do you tell them? 66 00:07:46.158 --> 00:07:48.759 It depends on the type of institutional client I happen to be talking to. 67 00:07:48.799 --> 00:07:50.760 I'll start with their portfolio strategy. 68 00:07:51.420 --> 00:08:01.025 Be clear what role Ruminbi should play within that strategy, whether it's for diversification, risk reduction, access to China's onshore opportunity set. 69 00:08:01.525 --> 00:08:10.348 If you want exposure to China's capital markets, look at the connect schemes as a key route to access onshore equities and bonds. 70 00:08:10.368 --> 00:08:14.690 We saw back in July a number of new policies that are coming in. 71 00:08:14.810 --> 00:08:18.012 Raminbi denominated gold futures, that's going to make a difference. 72 00:08:18.052 --> 00:08:21.653 Obviously the story around Hong Kong being a hub for gold. 73 00:08:21.953 --> 00:08:26.355 Swap Connect, SFC is now in discussion with the PBOC to further enhance Swap Connect. 74 00:08:27.015 --> 00:08:35.378 Eligible collateral, acceptance of onshore China government bonds and policy bank bonds held under Northbound Bond Connect as eligible collateral. 75 00:08:36.118 --> 00:08:38.259 The other one, electronic bond trading platform. 76 00:08:38.379 --> 00:08:40.959 The one I'm most excited about, Southbound Bond Connect. 77 00:08:41.440 --> 00:08:47.101 Enhancement of Southbound Bond Connect to include Hong Kong dollar and CNH bond related products. 78 00:08:47.542 --> 00:08:51.563 And lastly, strategic cooperation in cross-border Reminbi business. 79 00:08:52.766 --> 00:08:59.175 MOU between Hong Kong Exchange and SIPs to explore strategic cooperation in cross-border Reminbi business. 80 00:08:59.555 --> 00:09:03.521 So once again, out of five or six policies, over three or four, 81 00:09:04.762 --> 00:09:07.103 blatantly turning towards Remembi. 82 00:09:07.743 --> 00:09:17.166 So to answer your question, when we've heard from all of our institutional investors, to believe in the Remembi story and to make it more on that internationalization journey, they need to have liquidity. 83 00:09:17.646 --> 00:09:27.649 And I think some of these measures that have been brought in over the last month or so, and will continue with Venus guidance, for HPC to advise our clients on how we can best have access and use Remembi more. 84 00:09:28.505 --> 00:09:29.606 Very exciting time. 85 00:09:29.626 --> 00:09:30.246 It really is. 86 00:09:30.826 --> 00:09:52.277 So beyond the market access and infrastructure upgrades that you just mentioned, I see built operational readiness and embed RMB into your invoices, accounts, connectivity, multi-currency structure, risk framework and accounting practices. 87 00:09:53.918 --> 00:09:56.519 So that RMB is properly 88 00:09:57.188 --> 00:10:00.450 integrated to the treasury setup before you scale. 89 00:10:01.951 --> 00:10:14.778 We have seen, you know, the best approach is that start with a clean and clear use case with treasury objective and expand corridor and corridor. 90 00:10:15.525 --> 00:10:29.693 so that RMB adoption is usually seen as a steady integration journey, not a one-time switch built now for a more balanced multi-currency world. 91 00:10:30.233 --> 00:10:31.093 Thank you, Veena and Oli. 92 00:10:31.354 --> 00:10:33.435 Thanks for sharing your thoughts and your expertise. 93 00:10:33.815 --> 00:10:35.716 A lot of exciting times ahead for the RMB. 94 00:10:35.936 --> 00:10:36.676 Thank you, Andrew. 95 00:10:37.297 --> 00:10:37.637 Thank you. 96 00:10:38.354 --> 00:10:41.360 Thank you for joining us at HSBC Global Viewpoint. 97 00:10:41.801 --> 00:10:43.183 We hope you enjoyed the discussion. 98 00:10:43.945 --> 00:10:46.630 Make sure you're subscribed to stay up to date with new episodes.