Corporate treasurers need to increase their understanding of China's FX regulations as a way of dealing with volatility and risks in the financial markets.
Panellists at The Asset 2ndAsia Treasury & Trade Summit were one acknowledging the renminbi's growing importance in treasury. Efforts from Chinese regulators to attract long-term inflow into China is proof of the currency's expanding role in global trade.
“The world is about volatility. Treasurers should increase their understanding of the regulations. We can see that the regulators are encouraging longer-term inflow into China,” says Carmen Ling, global head renminbi solutions for corporate and institutional clients, Standard Chartered Bank during the treasury summit held today at Four Seasons Hotel, Hong Kong.
Ling says the renminbi is becoming increasingly important in international trade. The sudden devaluation of the renminbi early this year that caught corporate treasurers by surprise was a wake-up call.
“The Chinese interbank bond market is third biggest in the world. We have seen Shanghai free trade zone and pan-China setting up offshore renminbi cash pool. The depreciation of the renminbi caused a lot of outflow,” Ling says.
“I was very surprised with the renminbi depreciation. But the renminbi depreciation is not end of the world. The supply chain has to convert. Our suppliers in China do not have to worry too much,” says Raj Rai, managing director, Asia treasury centre of IKEA.
Corporates are also realizing the increasing relevance of renminbi bonds, such as Panda bonds, as a financing tool.
“Panda bonds are very important in making the renminbi international. It's important for the issuers because they will have a source of funding and they can also diversify (their funding sources). Also, Hong Kong funds sold in China increased a lot, which means Chinese investors are interested in diversifying their assets,” Ling says.
