Renminbi is still a one-way bet

    Updated: 2013-05-11 05:51

    By Andy Seaman(HK Edition)

      Print Mail Large Medium  Small 分享按鈕 0

    A few days ago the renminbi hit a 19-year high to close at 6.1707 per dollar in Shanghai. This is against a backdrop of growth that is slowing a little from the recent boom years. Yi Gang, director of the State Administration of Foreign Exchange and deputy governor of the People's Bank of China, commented during the National People's Congress that the renminbi exchange rate is closer to its equilibrium. However, all the signs are that the appreciation will continue, as the currency gets more international use and global investors increase their holdings, especially with the mainland tightening monetary policy while the rest of the world is still loosening.

    First, the Chinese mainland accounts for 11 percent of global GDP. It is the largest trading economy having overtaken the US with 10 percent of world trade, and accounts for 9 percent of global foreign direct investment. As a portfolio investment destination, most investors are underweight on the mainland, largely due to the low weight it has in indexes.

    This is especially true for fixed-income investors, as indexes such as the JPMorgan Global Bond Index for emerging markets have no weighting for the mainland at all. Part of the reason for this is that at present, many investments on the mainland are not available to international investors due to controls. However, the currency is investable, and has provided a steady return to investors with extremely low volatility. The volatility of the renminbi is only a tenth of that of the Australian dollar and the Brazilian real, for example, due to the managed band around the central fixing in which it is managed.

    According to World Bank's 2011 estimate, the renminbi is still extremely undervalued, with purchasing power parity estimated at around 4.19, versus the spot rate of 6.23.

    Renminbi is still a one-way bet

    The mainland also continues to work towards expanding the role of the renminbi globally. Trade pricing and settlement is one area where they have made great progress, with 12 percent of the economy's trade settled in renminbi by August 2012; this is expected to increase to 30 percent by 2015. Currency swap lines have been introduced with central banks in many countries and regions to facilitate settlement. These include Taiwan, where 46 domestic and foreign banks now offer renminbi products and services, Brazil, Singapore and many other trading partners. Both the UK and France are in discussions about swap agreements. Australia recently set up direct foreign-exchange trading between the Australian dollar and the renminbi, without going via the dollar. London, Hong Kong, Singapore and Taiwan are all major centers for offshore renminbi deposits. According to SWIFT (Society for Worldwide Interbank Financial Telecommunication), renminbi payments grew by 171 percent between January 2012 and January 2013, and the use of the currency is larger than the Danish krone, the New Zealand dollar and has recently overtaken the Russian rouble.

    Moreover, the mainland is gradually shifting from an investment-driven economy to a consumption-driven growth model. It now has the largest number of 246 million active smartphones in the world, having overtaken the US. Another interesting trend is that consumers are splashing out on diamonds for their weddings in big cities. By 2011, the mainland had become the second-biggest diamond market after the US, with annual sales of $9 billion. By 2012, 80 percent of couples getting engaged in Shanghai and Beijing bought diamond engagement rings.

    Undoubtedly, growth in China will slow from the boom industrial years, as first quarter GDP growth unexpectedly fell to 7.7 percent. However, China has strong parallels with Japan from the 1970s to the 1990s, when growth slowed gradually but the yen continued to appreciate for 28 years. The People's Bank of China is likely to follow a very similar course as Japan. We are now seeing the beginning of this tightening and the consequent currency appreciation, which will be combined with ongoing liberalization of the renminbi.

    All in all, I still see the renminbi as a one-way bet. It will continue to grow in global importance, and also appreciate in 2013, even though the country's growth will be slower.

    The author is a fund manager at London-based fixed-income fund management firm Stratton Street Capital.

    (HK Edition 05/11/2013 page6)

    亚洲国产AV无码专区亚洲AV | 波多野结衣中文在线| 亚洲精品无码Av人在线观看国产| 亚洲高清有码中文字| 国产无遮挡无码视频免费软件| 中文字幕一区二区三区永久 | 日韩中文字幕精品免费一区| 日韩AV无码精品人妻系列| 高清无码午夜福利在线观看 | 中文字幕一区二区免费| 少妇人妻88久久中文字幕| 久久伊人亚洲AV无码网站| 日韩精品真人荷官无码| 亚洲Av永久无码精品三区在线| 亚洲中文字幕无码一区二区三区| 亚洲AV无码不卡在线观看下载| 东京热无码av一区二区| 亚洲AV日韩AV永久无码久久| 国产精品99久久久精品无码| 最近免费中文字幕大全高清大全1| 无码中文av有码中文a| 国产亚洲中文日本不卡二区| 少妇中文无码高清| 国产又爽又黄无码无遮挡在线观看 | 亚洲AV无码一区二区乱孑伦AS| 久久精品中文字幕有码| 欧美在线中文字幕| 狠狠干中文字幕| 中文字幕夜色资源网站| 中文字幕在线观看亚洲| 欧美亚洲精品中文字幕乱码免费高清 | 久久久久久精品无码人妻 | 无码国产福利av私拍| 亚洲AV日韩AV永久无码久久| 亚洲A∨无码无在线观看| 日韩人妻无码精品久久免费一| 久久精品中文字幕无码绿巨人| 无码国产午夜福利片在线观看| 色偷偷一区二区无码视频| 精品欧洲AV无码一区二区男男 | 狠狠精品久久久无码中文字幕|