Welcome Remarks by Ms Jacqueline Loh, Deputy Managing Director, Monetary Authority of Singapore, at Singapore-Shanghai Financial Forum on 17 November 2015
Shanghai Municipal Financial Services Office Secretary-General Mr Yao Jiayong
Ladies and Gentlemen
1 Good morning. It gives me great pleasure to extend a warm welcome to all of you to the inaugural Singapore-Shanghai Financial Forum.
2 We are delighted to have the opportunity to co-organise this milestone event with the Shanghai Municipal Financial Services Office (Shanghai FSO). MAS and the Shanghai FSO have a longstanding relationship, regularly exchanging ideas to develop platforms and opportunities to promote closer collaboration between our markets. Today, we are pleased to see this close engagement come to fruition, and bring to you this forum where market participants from two of Asia’s leading financial centres can exchange views, network, explore partnerships and seek out new business opportunities.
Strong China-Singapore Financial Cooperation
3 China and Singapore have established a strong foundation for financial cooperation over the years, buttressed by close trade and investment relations between the two countries as well as with the Southeast Asia region. China is Singapore’s largest trading partner while Singapore is China’s largest foreign direct investor. This year is a particularly meaningful one as our countries celebrate 25 years of diplomatic relations, culminating in the state visit by President Xi Jinping just two weeks ago.
4 During President Xi’s visit, China and Singapore agreed to establish an all-round cooperative partnership that evolves in tandem with the development needs of both countries. Financial cooperation is a key pillar of this partnership, and strengthens Sino-Singapore bilateral relations at a time when China is pursuing financial sector reform, RMB internationalisation and capital account liberalisation.
5 MAS has worked closely with the People’s Bank of China (PBC) to promote greater use of the RMB in the region. To this end, we are glad that RMB activities – in deposits, trade finance, FX and capital markets – have grown steadily, and Singapore is now the second largest offshore RMB market globally.
6 Allow me to highlight the key RMB initiatives that MAS announced last week. These measures build on the success of our RMB cooperation with China, and expand the channels for cross-border RMB flows.
i. First, the existing cross-border RMB initiatives between Singapore and the China-Singapore Suzhou Industrial Park (SIP) and Sino-Singapore Tianjin Eco-City (SSTEC) will be expanded to the cities of Suzhou and Tianjin. With this expansion, corporates across Suzhou and Tianjin will be able to avail themselves of a range of financing and investment opportunities in Singapore, including borrowing from banks and issuing bonds. With the announcement of Chongqing as the location for the third Singapore-China government-to-government project, the same initiatives will be extended to the Chongqing Municipality.
ii. Second, companies in these three cities that issue RMB bonds in Singapore will be allowed to fully repatriate the proceeds raised for onshore use. This relaxation will give greater flexibility for qualifying Chinese corporates to explore varied financing options in Singapore’s market, particularly in RMB bond issuance, and add to the breadth of Singapore market’s RMB product offerings.
iii. Third, Singapore’s quota under the RMB Qualified Foreign Institutional Investor (“RQFII”) scheme will be doubled to RMB 100 billion, in light of the strong demand by Singapore-based asset managers and investors.
iv. Finally, MAS and the PBC have agreed to renew and enhance the bilateral currency swap arrangement established between both central banks when it expires in March 2016. This will anchor market confidence and underpin the growth of the RMB market by providing liquidity support to market participants in Singapore.
7 With the new RMB measures, we believe that our strong RMB ecosystem will continue to play a key role in facilitating greater use of RMB as a trade and investment settlement currency outside of China. In this light, Singapore has strongly supported the inclusion of the RMB into the IMF’s Special Drawing Rights basket of currencies.
8 In the next phase of financial cooperation, Singapore and China will place greater focus on the capital markets, where we see significant untapped potential given the synergistic attributes of our markets. There are two specific areas where Singapore can play a complementary role to China’s capital markets:
- First, Singapore has a strong institutional investor base which can complement China’s large retail investor base. Singapore’s assets under management reached S$2.4 trillion in 2014, representing a growth rate of 30% year-on-year. Chinese companies can diversify their funding sources by seeking direct financing from these investors, via listings or bond issuances in Singapore. At the same time, China can also enhance the breadth and depth its capital market by enabling more investors in Singapore to access its capital markets directly.
- Singapore also has a deep and liquid derivatives market, and this provides a strong channel for corporates and investors to manage and hedge their risk exposures and financial positions as they invest in countries around the region. We believe that there is great scope for exchanges in both China and Singapore to collaborate on new product development and cross-listing of financial derivative products, which will cater to the growing needs of corporates and investors as they continue their investments in China.
9 There will be two tracks of engagement to advance our capital market collaboration. One, MAS and China Securities Regulatory Commission (CSRC) will hold regular high-level dialogues to strengthen regulatory cooperation. Two, MAS and CSRC will lend support to the market participants, including Exchanges, to forge partnerships and explore collaboration on product development.
Strategic partnership between Singapore and Shanghai
10 Aside from fostering financial cooperation at the national level, we also believe in establishing strong partnerships with key Chinese cities. Singapore and Shanghai enjoy robust economic and trade relations, with bilateral trade increasing 5.6% year-on-year to reach US$12.8 billion last year. Singapore’s investments intro Shanghai grew by a remarkable 78% year-on-year to US$2.2 billion in 20141. This provides a strong foundation to develop closer financial linkages in support of these real economic activities. Indeed, we are delighted to have the opportunity to work with Shanghai FSO on this.
11 Financial linkages between Singapore and Shanghai are already strong. All three Singapore banks have headquartered their China subsidiaries in Shanghai for close to ten years, and were also among the first few foreign banks to open sub-branches in the Shanghai free trade zone. Their office buildings also feature prominently in Shanghai’s illustrious Lujiazui district. This is a strong commitment demonstrated by our banks to contribute to Shanghai’s development as a financial centre.
12 Shanghai is one of the leading financial centres in China and Asia. The Chinese State Council has clearly given Shanghai the national mandate to be established as an international financial centre by 2020. I am impressed by the significant progress achieved by Shanghai, in particular the setting up of the China (Shanghai) Pilot Free Trade Zone to lead in financial reforms. Shanghai’s financial market turnover volume in third quarter of 2015 increased by 120% year-on-year2, a telling indicator of the vibrancy of their market. We are therefore excited to organise today’s forum to allow financial players in both centres to network, interact and seek greater business opportunities.
13 I see potential for us to collaborate in three aspects.
(i) First, Singapore and Shanghai market players can forge strong partnerships to leverage on their respective strengths and become more competitive in each other’s markets, and in the region. For instance, Shanghai corporates and financial institutions can leverage on the comprehensive network and capabilities that Singapore-based financial institutions (FIs) have established in ASEAN to expand into the region. Besides offering a variety of financing options, Singapore FIs can bridge the language and cultural gap for Chinese companies that are less familiar with the region. Singapore-based companies and FIs can also work closely with Shanghai corporates and FIs to expand their outreach particularly in the neighbouring Jiangsu and Zhejiang provinces.
Another example is in the asset management space. Singapore-based and Shanghai-based asset managers and banks can work together to develop and distribute suitable RQFII and Renminbi Qualified Domestic Institutional Investor (RQDII) fund products in each other’s markets. Such collaborations can help our asset managers build up their brand name and market knowledge, and strengthen our industries’ capabilities over time.
(ii) Second, Singapore can be a strategic partner for the pilot initiatives launched to develop Shanghai’s financial centre. Singapore banks as well as other Singapore-based financial institutions can partner with Shanghai’s financial authorities to be the first batch of foreign financial institutions to utilise new measures implemented at the China (Shanghai) Pilot Free Trade Zone. Given their international experience, Singapore FIs will be keen to participate in pilots for new policies, systems and processes, and this can help relevant authorities to fine tune their initiatives before rolling out to the broader market. The setting up of the Free Trade Account system, a new accounting system to track cross-border flows, is a prime example where Singapore banks have worked closely with PBC Shanghai to test and implement this innovative mechanism.
(iii) Third, to have regular sharing of experiences and to learn from each other on how best to capture growth opportunities and address challenges amidst a fast-changing external environment. Let me highlight two examples:
First, asset securitisation. Singapore has seen good growth in asset securitisation over the years, which expanded the variety of capital market solutions for companies to seek financing and for investors to participate in yield-generating assets. As an example, Real Estate Investment Trusts (REITs) and business trusts have developed as a mainstream asset class over the last ten years in Singapore. It offers companies an additional channel to recycle capital for mature assets like commercial properties and frees up capital for new investments. Asset securitisation is a new developmental focus in China, where efforts are underway to broaden direct financing channels to support real economic needs. Total issuances of asset-backed securities in China’s interbank market reached RMB 266 billion in October this year, 30% higher over the same period last year3.
Second, financial technology. This is a rapidly evolving area in both our financial centres. In particular, we have seen rapid adoption of innovative financial technology platforms in China’s market. One example is MYBank which is a privately-owned internet bank approved by the China Banking Regulatory Commission to provide 100% digital and branchless banking operation that will serve customers 24 hours a day. Singapore has set our vision of building a Smart Financial Centre where innovation is pervasive and technology is used widely. With that, MAS has committed significant resources to support the fintech efforts of financial institutions, and to create an ecosystem conducive for innovation while fostering safety and security. To-date, we have seen a number of banks and insurance companies setting up their innovation centres in Singapore. We can expect a very interesting discussion in all these topical subjects at the Plenary Sessions today.
14 MAS and Shanghai FSO have lined up a distinguished panel of speakers from both Singapore and Shanghai, to discuss a wide-range of topics which are important to the development of our markets. I encourage all of you to participate actively, make new friends, and have many fruitful interactions and exchange of ideas.
15 As the Chinese saying goes, 千里之行，始于足下。Today marks the first step to establish a regular dialogue between our markets, augmenting our long term partnership with Shanghai. I look forward to work with Shanghai FSO and the industry to make this forum even bigger and better in the future editions.
16 On this note, I wish you enjoy the rest of the forum and benefit from the fruitful interactions.
17 Thank you.1 Source: IE Singapore
2 Zheng Yang: Shanghai will be established as International Financial Centre by 2020, 5 Nov 2015