Singapore and China to launch direct currency trading on Oct 28

A clerk arranges bundles of 100 Chinese yuan banknotes at a branch of China Merchants Bank in Hefei, Anhui province in this March 17, 2014 file photo. -- PHOTO: REUTERS
A clerk arranges bundles of 100 Chinese yuan banknotes at a branch of China Merchants Bank in Hefei, Anhui province in this March 17, 2014 file photo. -- PHOTO: REUTERS

SINGAPORE and China will launch direct trading between the Singapore dollar and the Chinese renminbi from Tuesday, in a move set to lower currency conversion costs and boost their already strong trading links. 

The launch, coming a year after both sides agreed on the proposed tie-up, was announced on Monday by Chinese Vice-Premier Zhang Gaoli at a high-level annual bilateral meeting in eastern Suzhou that he co-chairs with Singapore Deputy Prime Minister Teo Chee Hean.

"The Chinese want to look at partners that have a well regulated market and a good reputation as they internationalise the yuan. They look at Singapore and find us a useful partner to have," said Mr Teo at the sidelines of the Joint Council for Bilateral Cooperation (JCBC) - the highest-level bilateral negotiation mechanism. 

Mr Zhang also announced that Singapore has been chosen as one of the investment destinations under the RMB Qualified Domestic Institutional Investor (RQDII) scheme, which will give Chinese institutional investors access to Singapore's capital markets.

China is Singapore's largest trading partner. Singapore was also the largest foreign investor in the world's No. 2 economy last year.

As part of efforts to internationalise the renminbi, China has launched direct trading with several currencies: the euro, the British pound, the Japanese yen and the New Zealand dollar.

Both direct currency trading and the RAQII were identified as areas for further cooperation at the JCBC meeting held in Singapore in October last year.

At this year's meeting of the JCBC both sides signed several new pacts on such areas as cooperating on intellectual property protection. Existing agreements on the training of and exchanges among officials were also renewed on Monday.

Top of the agenda was a proposed third government-to-government project in western China - an idea broached by Mr Zhang last year - but there was little progress on that front.

Minister of Social and Family Development Chan Chun Sing, who is Singapore's point-man on the proposed project, said that a joint ministerial meeting had been held over the weekend.

He said both countries will now embark on a joint evaluation of the three shortlisted Western cities for a possible project that will focus on modern connectivity and modern services. The three cities are Chongqing, Chengdu or Xi'an.

Mr Teo said exploratory studies should conclude by next year in time for the bilateral milestone of 25 years of diplomatic ties between Singapore and China.

Singapore and China have two existing government-to-government projects in the Suzhou Industrial Park and the Tianjin Eco-city, which were launched in 1994 and 2008 respectively.

There are also several bilateral projects led by the private sectors and backed by the governments.

esthert@sph.com.sg