In the latest agreement, China will extend its so-called renminbi qualified foreign institutional investors (RFQII) program to Singapore, allowing Singapore-based banks and asset managers a quota of Rmb 50 billion ($8.2 billion) to invest in Chinese securities, the Monetary Authority of Singapore said.
Under a similar arrangement struck last week with Britain, that quota was set at Rmb 80 biliion for financial institutions based in that country. Hong Kong is the only territory with an existing RFQII arrangement.
Under RQFII, those holding renminbi offshore are able to invest directly in mainland Chinese assets – from stocks to bonds to money market funds. By widening the investment options for renminbi sitting outside China, the system is partly designed to encourage the use of the currency for trade settlement.
It also helps to increase foreign participation in China's domestic markets, something the authorities have been keen to do in an attempt to attract more long-term investment.
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For Singapore, a tiny island nation of only 5.3 million people, the agreement with China marks another significant step in building itself up as the renminbi hub for southeast Asia.
One of China's biggest state-owned banks, Industrial & Commercial Bank of China, in May started clearing services for renminbi transactions in Singapore.
In September, Singapore overtook Japan as Asia's biggest foreign exchange center for the first time, making it the third-largest such hub in the world after London and New York.