Singapore banks will be allowed to lend yuan to companies in Suzhou and Tianjin, while firms in the two Chinese cities can issue yuan bonds in the Republic, as part of new cross-border initiatives for the Chinese currency.
The moves, announced by the Monetary Authority of Singapore (MAS) after a high-level bilateral meeting in Singapore yesterday, are an expansion of existing initiatives implemented since July last year in the Suzhou Industrial Park (SIP) and the Tianjin Eco-city (TEC).
The MAS said in a statement that Singapore and China are also seeking to boost financial connectivity to support projects under the "One Belt One Road" initiatives - China's schemes aimed at revival of two ancient Silk Road routes - to facilitate access by Chinese companies to Asean markets through Singapore.
Other new initiatives include allowing Suzhou and Tianjin companies to repatriate 100 per cent of proceeds raised from bonds issued in Singapore. Currently, companies in SIP and TEC can repatriate up to 50 per cent of such proceeds. MAS said "the greater flexibility will provide a stronger incentive for corporates in Suzhou and Tianjin to raise RMB funds in Singapore". The yuan is also known as the renminbi (RMB).
Also, SIP firms will be allowed to borrow from Singapore-based companies - a move aimed at facilitating the Chinese firms' overseas expansions through Singapore and providing them with a stronger incentive to set up finance and treasury centres here, said the MAS.
The new initiatives were agreed at the annual meeting of the Joint Council for Bilateral Cooperation. It was co-chaired by Deputy Prime Minister Teo Chee Hean and Chinese Executive Vice-Premier Zhang Gaoli.
The existing initiatives - confined to the two Sino-Singapore government-led projects to boost their development - allow banks in Singapore to lend yuan to companies in the SIP and TEC. They also allow corporates in the two projects to issue yuan bonds in Singapore, while individuals in SIP and TEC can make yuan remittances to settle current account transactions and direct investment in Singapore- based firms.
Singapore banks and companies have welcomed the new initiatives.
Mr Benjamin Quek, head of China business office at OCBC Bank, said the new initiatives will be a boon as "we are able to support many more businesses that previously were unable to access offshore funding".
Mr Li Xiaomin, 40, a Singapore permanent resident and owner of WinTech Nano-Technology that registered in the SIP in 2012, said he would study the new yuan initiatives carefully amid ongoing talks with potential joint partners.
"Companies like ours that are new to China will always welcome greater flexibility through financing options," he told The Straits Times.
