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China, Singapore strengthen financial ties through RQFII quota of US$8b
Last Updated: 2013-10-23 09:45 | CE.cn
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By Li Hongmei

China and Singapore will unveil more investment options and launch direct trading between their currencies as Singapore seeks to enhance its position as Southeast Asia's yuan hub amid wider regional use of the currency.

Financial institutions in Singapore will get a 50 billion yuan (US$8.2 billion) quota to invest in Chinese mainland's securities market through the Renminbi Qualified Foreign Institutional Investor program, the Monetary Authority of Singapore, the de facto central bank, said in a statement.

Instead of using the dollar as an intermediary, the two countries will allow direct trading between the renminbi, also known as the yuan, and the pound to cut transaction costs and risks.

The latest moves coincide with the visit of Chinese Vice Premier Zhang Gaoli to Singapore, the largest foreign exchange trading center in Asia.

"Financial ties between the two countries have deepened considerably and Singapore is well placed to promote greater use of the yuan in international trade and investment in the years to come," MAS Managing Director Ravi Menon said in the statement.

Chinese institutional investors will also be allowed to use the yuan to invest in Singapore's capital markets.

"The new initiatives will further promote the international use of the renminbi through Singapore," the MAS said.

The Singapore dollar and the pound will join the greenback, the yen and the Australian dollar to have direct trading link with the yuan.

China and Singapore also said they will set up a working group to promote bilateral trade in services as well approving China-incorporated companies to list directly in Singapore instead of through entities incorporated outside China.

Ronald Wan, managing director at China Merchants Securities Co in Hong Kong, said Singapore's move further enhances the yuan's internationalization, and may threaten Hong Kong's position as the largest offshore yuan center.

The RQFII and direct trading agreements with Singapore were made a week after China and UK agreed on a similar package worth 80 billion yuan under the RQFII program.

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