Singapore’s RMB Qualified Foreign Institutional Investor (RQFII) quota for investment in Chinese financial markets will be doubled in a move aimed at strengthening cross-border flows in the yuan between the two countries, Singapore’s central bank said on Monday.
The Monetary Authority of Singapore said the city-state’s quota under the RMB Qualified Foreign Institutional Investor (RQFII) scheme would be increased to 100 billion yuan ($15.72 billion) from 50 billion yuan previously.
The RQFII programme is the yuan-denominated version of the Qualified Foreign Institutional Investor (QFII) scheme, which was created by China to allow foreigners to invest in Chinese capital markets.
“This is in response to the strong interest by Singapore-based asset managers and investors to invest in China,” the MAS said in a statement.
The announcement came in the wake of a state visit by Chinese President Xi Jinping to Singapore last week to mark 25 years of formal diplomatic relations between the two countries.
The MAS said China and Singapore also agreed to extend to Chongqing Municipality the same cross-border RMB initiatives that are now in place for Suzhou and Tianjin.
“This means, for example, that Singapore-based banks will be allowed to lend RMB to companies in Chongqing and Chongqing-based companies may issue RMB bonds in Singapore and fully repatriate the proceeds,” the MAS said.
In addition, the MAS said it had agreed with the People’s Bank of China to renew and enhance the bilateral currency swap agreement established between the two central banks.
The existing swap agreement was signed in March 2013 and is due to expire in March 2016, the MAS said.
Under the current arrangement, up to 300 billion yuan in yuan liquidity can be made available to eligible financial institutions operating in Singapore, while up to 60 billion Singapore dollars ($42.10 billion) in Singapore dollar liquidity can be made available to eligible financial institutions in China.
($1 = 6.3600 Chinese yuan) ($1 = 1.4252 Singapore dollars)
(Editing by Sam Holmes)