Five things you should do now if you want to trade offshore renminbi in future

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Billions and biliions

Despite people pouring cold water on the expectation that the renminbi will be fully internationalised within the decade, there is growing excitement aboutLondon’s potential to become a key offshore renminbi trading centre. 

Reuters has run various conferences on the growth in the renmimbi market, pointing out that the market for offshore renminbi bonds has grown to 180bn yuan ($29bn) since the first Chinese sovereign bond was launched in 2009.

Now, RBS has set up a new team in London with the purported aim of helping European and Chinese companies, “tap into each other’s markets.” Janet Ming, new head of the EMEA China desk, is moving from Shanghai to London to lead the business.

HSBC is also investigating the potential of the offshore renminbi market, and has appointed Paul Gooding, former head of European credit trading markets, to look into it.

So what should you do now if you aspire to be big in renminbi, one day?

1. Get onto an Asian emerging markets desk. Wait.

“Banks in London are not going to be hiring renminbi-specific traders,” says the head of emerging markets trading at one brokerage firm. “To begin with, they’ll just incorporate renminbi into their Asian currency desks. If you want to get in at the start, that’s where you should be. In three to five years’ time, maybe there’ll be an opportunity to focus on renminbi, but there certainly isn’t now.”

2. Position yourself as an FX trader at an Asian-focused bank

US banks are unlikely to lead renminbi in trading. You are advised to position yourself at the likes of Bank of China, Standard Chartered, or HSBC.

3. Position yourself as an FX trader in one of the non-Asian banks participating in the forum for London as an offshore renminbi market

HM Treasury, the Hong Kong Monetary Authority, and several banks, have initiated up a forum looking at the opportunities for developing London as renminbi trading centre.

Alongside HSBC and Standard Chartered, the banks involved are Deutsche and Barclays. The group meets for the first time in May.

4.  Nurture relationships with international corporates issuing RMB bonds

David Pavitt, head of FX emerging markets trading at HSBC in London, says corporates account for 70% of the banks’ renminbi business globally.

The FT says international corporates issuing renminbi bonds in recent months include: Unilever, Caterpillar, McDonalds, Volkswagen, Fonterra, BP, BSH, Air Liquide and Tesco.

5. Nurture relationships with European corporates who might be interested and able to engage in renminbi hedging

Corporates invoicing in renminbi rather than dollars can negotiate discounts of up to 7%, suggests Pavitt. This creates a strong incentive for larger corporations, which have the scale to switch their invoice currency, to invoice in Renmimbi. Smaller corporates will lack the resources to cope with the change.

Pavitt told FX Week

that much of the future growth of the Renminbi market in London is likely to come from continental and Eastern Europe, as well as the UK.