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RMB FDI launches into countdown control flow is the key
On April 21, Peng Xingyu, vice president of the Hong Kong Monetary Authority, said at a seminar that RMB direct investment (FDI) is expected to be launched in the second half of the year. On April 18, the Director of the Second Division of the Monetary Policy of the People's Bank of China also stated in public that the general framework for the RMB FDI pilot policy has been formed and may be released in the next one or two quarters. The attitude of the two authoritative departments means that the introduction of RMB FDI has entered a countdown. On the same day, a spokesperson for the Hong Kong Monetary Authority told the reporter that the RMB FDI is dominated by the Chinese government and the HKMA will fully cooperate. However, there is currently no specific plan for the RMB FDI, so the impact on the Hong Kong Monetary Authority policy is difficult to assess. Supervision is the key to the lack of currency exchange. Regulators need to consider how to monitor and manage the speed and quota of capital entry. The background of RMB FDI is the internationalization of the RMB. Since 2009, China has successively introduced regulations on cross-border trade RMB settlement and domestic enterprises using RMB for overseas investment (ODI). In March of this year, the Ministry of Commerce issued regulations on the return of overseas RMB to domestic investment for the first time, but the regulations on RMB FDI have never been introduced. Li Bo said that this is mainly because the current FDI policy has been quite perfect, and the RMB FDI policy needs to be closely linked with the current FDI policy. Maintaining the authenticity of the RMB FDI transaction is a test for the regulatory authorities. Cui Li, former head of China's Hong Kong Monetary Authority and chief economist of China's Macroeconomics Research Department of the Royal Bank of Scotland, believes that the key to convergence is the exchange. “In the past, FDI needed the approval of the Ministry of Commerce, determined the amount of the project and the way the funds were entered, and then exchanged money through the People’s Bank. Without the link of currency exchange, the regulatory authorities need to consider how to monitor and manage the speed and quota of funds. "Cui Li analysis. She expects that the procedures approved by the Ministry of Commerce are unlikely to change, and the changes should be technical. "How to get in, where to open an account, there is no regulatory requirement. Previously it was the SAFE, how to monitor now, how to master its speed." In early January, Zhang Jianjun, president of the Shenzhen Branch of the People's Bank of China, revealed that Shenzhen and other The region is already exploring the RMB FDI business, and Shenzhen made about twenty or thirty transactions last year. Li Bo said in a recent statement that the central bank will select projects that comply with regulatory policies and industrial policies to conduct pilot trials of RMB FDI cases. "The general framework of the RMB FDI pilot policy has been formed, but it is necessary to form a consensus between the bank and the enterprise, and the policy will be reported to the relevant departments for approval before being released." Li Bo said. It is estimated that the scale of over 100 billion Li Bo said that the central bank has conducted two rounds of research with relevant departments and learned that the demand for RMB FDI is very strong. This conclusion was also confirmed by Deutsche Bank. In a survey of 44 multinational companies operating in China by Deutsche Bank, up to 65% of respondents said that if the Chinese government liberalizes RMB FDI, it would feel like using the RMB financing in Hong Kong and remitting it to the mainland. interest. There are two reasons for this: First, compared with domestic RMB, the financing cost of RMB in Hong Kong is lower; Second, although the cost of RMB financing in Hong Kong is not significantly lower than the financing cost of US dollars or Hong Kong dollars, it will still be RMB. Financing is of interest because their business objectives are not foreign exchange arbitrage, but they hope to reduce the foreign exchange risk of future RMB cash flow through this move. On April 20, the data released by the Ministry of Commerce showed that in March 2011, the actual FDI was US$12.52 billion, up 32.9% year-on-year. The actual FDI in the first three quarters was US$30.34 billion, up 29.4% year-on-year. Many people worry that the renminbi FDI may cause hot money to flow in. Ma Jun (column), chief economist of Deutsche Bank Greater China, believes that under the premise of guaranteeing the authenticity of FDI, the replacement of foreign currency FDI by RMB FDI does not increase the domestic money supply and the central bank's hedging pressure. "The impact of the return of RMB FDI on China's monetary policy is neutral. A company originally used US dollars to enter China to do FDI, the US dollar entered the territory, the central bank was forced to buy dollars, and buying dollars would create liquidity. Now replace the yuan. There is no additional creation of new liquidity, nor does it cause the central bank to generate new hedging pressure. Such financing methods in Hong Kong should be encouraged." Ma Jun told reporters. Ma Jun estimates that about 50 billion US dollars will be invested in the mainland through Hong Kong. Even if the conservative assumption is that 20% of it is replaced by RMB FDI, the total size of RMB FDI will reach 20 billion US dollars (about 130 billion yuan) in the next two years. Cui Li believes that the significance of RMB FDI is part of the process of RMB internationalization. The RMB is not only used as a currency in trade settlement, but also as a currency in investment, and this does not involve the expansion of new capital projects. At the same time, it also opened a window for overseas RMB, which can go to domestic investment, share the domestic interest return, and reduce the pressure on the domestic central bank's foreign exchange reserves.