Move set to lower cost of doing business and boost trade links
By Esther Teo, China Correspondent In Suzhou, The Straits Times, 28 Oct 2014
By Esther Teo, China Correspondent In Suzhou, The Straits Times, 28 Oct 2014
SINGAPORE and China will start direct currency trading today, in a move set to lower the cost of doing business. It will also boost the already strong trade links between the two as Beijing pushes to internationalise the yuan.
Chinese Vice-Premier Zhang Gaoli announced the move yesterday at a high-level bilateral meeting in eastern Suzhou that he co-chaired with Singapore Deputy Prime Minister Teo Chee Hean.
Chinese Vice-Premier Zhang Gaoli announced the move yesterday at a high-level bilateral meeting in eastern Suzhou that he co-chaired with Singapore Deputy Prime Minister Teo Chee Hean.
Mr Teo indicated that direct currency trading could be a game-changer.
"This is a very major and significant development. I still remember my first visit to China 30 years ago. The currency was not even unified then and we had foreign exchange certificates. (The yuan) was not tradable at all," Mr Teo told reporters.
"But today, we have direct trading between the (yuan) and the Singdollar... It will reduce the cost of doing business and make it more convenient," he added.
Before this, companies that wanted to convert large amounts of the Singapore dollar to yuan, or vice versa, had to do so via an intermediate currency.
Last year, bilateral trade rose 11 per cent year on year to reach $115.2 billion. Singapore is China's largest foreign investor with US$7.3 billion (S$9.3 billion) worth of investments last year, while China is Singapore's largest trading partner.
Yesterday, the Monetary Authority of Singapore also said it has proposed to allow China-incorporated financial institutions to issue yuan-denominated debt instruments in Singapore directly. This will help to diversify long-term funding for Chinese financial institutions by allowing them to tap the global institutional investor base in Singapore, it added in a statement.
Amid reforms to internationalise its currency, China has launched direct trading with several currencies: the euro, the British pound, the Japanese yen and the New Zealand dollar.
Direct trading was one of the key outcomes at last year's Joint Council for Bilateral Cooperation (JCBC) meeting in Singapore. But no official start date was given then.
Direct trading was one of the key outcomes at last year's Joint Council for Bilateral Cooperation (JCBC) meeting in Singapore. But no official start date was given then.
Mr Teo is on a three-day trip that kicked off on Sunday in conjunction with the 20th anniversary of the Suzhou Industrial Park (SIP) and the 11th JCBC.
He said a proposed third government-to-government project in China's western region was discussed, with the aim of reaching a conclusion in "concept, location and some programmes" by next year.
The SIP and Tianjin Eco-City, two government-to-government projects launched in 1994 and 2008 respectively, have played key roles in earning Singapore the title of the largest and busiest yuan centre outside of China.
Companies in both parks, for instance, can take yuan loans from banks in Singapore. Loans of almosttwo billion yuan (S$417 million) have already been made since the initiatives started three months ago, according to MAS.
Yesterday, leaders from both sides stressed the need to come up with innovative ways to keep the parks relevant to China's development stage.
"We hope to see some of these projects that we've been discussing reach a good point next year to help us mark the 25th anniversary of diplomatic ties between China and Singapore in a significant way," Mr Teo added.
Singapore is also working with Beijing on a wide range of issues, with five memorandums of understanding inked yesterday.
They include cooperation on environmental issues, exchange programmes for officials, intellectual property and a framework agreement for the National University of Singapore to expand its presence in the SIP.
Direct currency trading 'will have far-reaching effects'
By Mok Fei Fei, The Straits Times, 28 Oct 2014
By Mok Fei Fei, The Straits Times, 28 Oct 2014
THE multibillion-dollar trade between China and Singapore will become less costly from today, thanks to a landmark decision by China to allow direct trading of its currency and the Singdollar.
Local companies and banks say the move is far more than a technical adjustment to the complex foreign currency markets but one that will have far-reaching effects.
They note that it will cut business costs and currency conversion fees, and likely increase trade flows between the two countries while leading to new investment products being created.
Singapore's ambitions to become a leading hub for clearing business deals struck in yuan will also get a huge boost and companies with dealings in China will find life a lot easier.
Up to now they have had to obtain the yuan-Singdollar exchange rate by getting the rates for a third party currency, typically the US dollar. This caused exchange conversion costs to be incurred twice. Those costs will now be avoided as the rate will be set directly by the banks.
Financial experts note that it is a coup for Singapore to join the handful of countries like the United States, Japan and Australia whose currencies trade directly against the yuan.
In practical terms, the Chinese units of Singapore's three lenders have been made market makers for trading the currencies. This means they will quote a bid and ask price.
Ten other banks, including the Chinese units of foreign banks HSBC and Standard Chartered, join the Singapore banks as market makers.
Bilateral trade flows could rise as a result of the reduced foreign exchange conversion losses.
DBS China chief executive Neil Ge said: "Given that China is Singapore's largest trading partner and Singapore is China's largest foreign direct investor, more robust yuan trading and liquidity will further boost two-way trade and investments."
OCBC economist Tommy Xie said bilateral relationships could be boosted as the Singdollar will be more attractive as a payment currency for trade and investment between both countries.
Bilateral trade has been on the rise, hitting $115 billion last year. It totalled $89.1 billion for the first nine months this year, above the $83.1 billion over the same period last year, according to trade agency IE Singapore.
UOB China president and CEO Eric Lian noted: "Customers... can expect lower foreign exchange conversion costs as well as faster payments and receipts for their transactions."
Ms Elim Chew, president of fashion retailer 77th Street, told The Straits Times: "The direct trading will help to cut a lot of foreign exchange costs for us, especially when we do a lot of buying of raw materials."
Singapore, China 'working towards more cooperation'
Talks on proposed third bilateral project also going well, says DPM Teo
By Esther Teo China Correspondent In Beijing, The Straits Times, 29 Oct 2014
Talks on proposed third bilateral project also going well, says DPM Teo
By Esther Teo China Correspondent In Beijing, The Straits Times, 29 Oct 2014
COOPERATION between Singapore and China has seen "tremendous impetus" judging from the high-level bilateral meetings held this week, said Chinese State Councillor Yang Jiechi.
At a meeting with Singapore Deputy Prime Minister Teo Chee Hean at the Zhongnanhai compound, where China's top leaders work and live, Mr Yang said projects like the Suzhou Industrial Park (SIP), the Tianjin Eco-City and the proposed third government-to-government project had all been given a boost.
"With the guidance of leaders of both countries and the joint efforts of our peoples, continuous progress has been made in China-Singapore ties," he added.
In response, Mr Teo said both countries had "excellent discussions" in a broad range of areas.
"We reviewed progress in the Tianjin Eco-City and discussed further areas of cooperation," he said. "We also inaugurated important new areas of cooperation such as the direct trading of the renminbi and Singapore dollar which commences today."
Discussions on the proposed third bilateral project were also "going well", he added.
Mr Teo, who wrapped up his three-day official visit yesterday, co-chaired the annual Joint Council for Bilateral Cooperation (JCBC) with Vice-Premier Zhang Gaoli on Monday.
New milestones such as direct currency trading and a widening scope of cooperation in areas like social governance and financial services were discussed.
The JCBC is the highest-level mechanism for bilateral cooperation. This year's meeting was held in eastern Suzhou city in conjunction with the 20th anniversary of the SIP.
The SIP and Tianjin Eco-City, launched in 1994 and 2008 respectively, are the first two government-to-government projects. A third was proposed by Mr Zhang at last year's meeting in Singapore.
Mr Teo also met Central Military Commission vice-chairman Fan Changlong, who noted the close ties between China and Singapore, drawing on an anecdote that touched on his friendship with Mr Teo.
He said Mr Teo had made "great effort" to have a breakfast meeting with him when he made a brief stopover in Changi Airport last July en route to Australia.
"We had a very friendly exchange during that meeting, through which you expressed affection towards the Chinese people and friendship towards myself. I was deeply moved by that," Gen Fan said.
He also noted the "fruitful exchange" during the JCBC meeting that led to cooperation between both countries being improved and further expanded. The direct currency exchange, for instance, is very significant for China too, he said, even as Beijing pushes to internationalise the yuan.
Separately, Mr Teo also met former vice-premier Li Lanqing to thank him for his significant contributions to bilateral relations and the development of the SIP, according to a Singapore Foreign Ministry statement.