Barry Whiteside: Fiji's Chinese renminbi trading platform
Address by Mr Barry Whiteside, Governor of the Reserve Bank of Fiji, at the launch of ANZ
Fiji's Chinese Renminbi Trading Platform, Suva, 25 February 2013.
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Salutation
H.E. Huang Yong (Ambassador of the Peoples Republic of China)
Mr Vishnu Mohan (ANZ Bank, Chief Executive Officer Pacific & Fiji)
Mr Li-Gang Liu (ANZ Chief Economist, Greater China)
Distinguished Guests
Management and Staff of ANZ Bank
Ladies and Gentlemen
Good evening and a belated Gong Xi Fai Chai (Happy Chinese New Year).
Introductory remarks
Let me first thank Mr Mohan for the kind invitation to officiate at this launch of your Renminbi
(RMB) Trading Platform. This is another milestone event for Fiji and indeed for the Pacific, as
ANZ will be the first commercial bank in our region to offer RMB transfers. I am told that
following the Fiji rollout a similar process will be facilitated for ANZ Papua New Guinea,
Vanuatu and the Solomon Islands.
We have been closely following the developments on the RMB internationalisation and it has
now come to our shores. We also have a special interest in the RMB as China is now our
fifth largest trading partner, having recently dislodged Japan from that position.
Deregulation of the financial system and new products
I can recall the Reserve Bank initially embarking on a path towards deregulating the financial
system in the early 1980s to encourage innovation and make the market more efficient. As
such, we always welcomed the introduction of new financial products and services into the
market as well as new players, provided they met our requirements. The rapid global
technological advancements over the last decade continue and we do not intend to be left
too far behind.
Today's event and launch is one more example of one of our long time financial players
maintaining its pace of innovation. More and more services and products are now being
made available to make banking efficient and more accessible to the public. In Fiji we have
seen the introduction of ATMs, EFTPOS, phone banking, internet banking, SMS banking,
FijiClear or real time settlements and foreign exchange hedging to name just a few services.
Some innovations are more visible than others. We of course take all these in our stride and
often wonder how we ever managed without them. The horror is that we are getting close to
the day when we will spend more time with our smart phones than with our partners,
because they do more for us!
Jokes aside, I am pleased to say that ANZ has been at the forefront of a number of the
changes I have mentioned here in Fiji. It was also the first bank in our modern era to roll out
direct banking services to the rural communities and the first lending institution to introduce a
SME-focussed product line following the announcement of Government's SME Credit
Guarantee Scheme. ANZ is also playing its part in our overall financial inclusion drive to take
banking to the unbanked.
Let me also add that ANZ Fiji has been continuously assessed by the Reserve Bank as a
sound and resilient bank with strong capital and earning base as well as holding the largest
market share. It is known for its compliance with international prudential standards. The fact
that it has recently moved its Pacific Regional Office to Fiji also speaks volumes for the faith
this bank has in our country.
Chinese economy & Fiji-China relationship
Ladies and gentlemen, I will not delve in detail on the rapid growth in the Chinese economy
and its emergence as a major player on the global stage. This was more than adequately
covered by ANZ's Chief Economist, Mr Liu, in his presentation this morning. However, it is
important to highlight that China's economy is the second largest in the world and also that
China surpassed the United States last year to become the world's biggest trading nation,
with total annual flows reaching US$3.9 trillion. In this regard, the RMB is clearly expected to
play a greater role in international economic and financial activities.
Since 2009, the Government of the People's Republic of China and its central bank have
been progressively deregulating and internationalising the country's currency. This
liberalisation of the RMB presents business opportunities and has seen a surge in RMB
offshore deposits, RMB bonds issuance and trade payments through Hong Kong, the
premier offshore RMB business centre. More than 10 percent of China's cross-border trade
is now settled in RMB with over 70 countries already doing business in the currency.
Fiji has a long-standing cordial relationship with China, having established diplomatic
relations in 1975. China is becoming an increasingly important bi-lateral trade partner. Our
trade with China has increased almost ten-fold from F$35 million in 2000 to over
F$300 million in 2012. As I highlighted earlier, it is now one of our top five trading partners. In
September last year, the Fijian Government signed three agreements with the People's
Republic of China to expand economic and technological cooperation and offer concessional
loans for infrastructure projects.
ANZ's RMB currency exchange & benefits to Fiji
Today's launch of the RMB currency exchange is therefore timely and a step in the right
direction for Fiji. ANZ Bank's new facility will enable trade and investment between Fiji and
China to be directly settled in RMB. I have been informed that in this first phase of the rollout,
customers will be able to negotiate Spot FX rates and Forward rates for hedging purposes. I
also note that over the next 6 months ANZ will introduce further RMB-denominated products
such as trade finance instruments (including Letters of Credit) and RMB deposit accounts.
We at the Reserve Bank are excited by this initiative for a number of reasons. First, the RMB
trading platform will allow local businesses an opportunity to negotiate improved commercial
terms as Chinese suppliers who currently invoice in US dollars will no longer need to build in
a FX margin. Both Fiji businesses and consumers should benefit from the removal of the
extra conversion costs associated with denominating transactions in US dollars.
Secondly, Fiji businesses can now access a wider pool of mainland suppliers as we will now
have the flexibility to pay in their local currency.
The third possible benefit is that Chinese investors into Fiji can now convert RMB directly into
Fiji dollars. This new initiative will also greatly assist Government and statutory corporations
that have RMB denominated loans to make repayments in a more straight forward and cost
effective way without first converting to US Dollars.
Finally, as you are all aware, Fiji's exchange rate is pegged to our five major trading partners'
currencies. Even though China is now one of the top five trading partner countries, its
currency is still not part of our exchange rate basket as almost all trade with China is
currently denominated in US Dollars. However, with the introduction of this trading platform
and likely increased trade settlement using the RMB, there is the strong possibility of the
Chinese currency being part of the Fiji dollar basket in the not too distant future.
Economic update
Ladies and gentlemen, the Reserve Bank remains bullish on our economic prospects and
supports the notion underpinning the 2013 National Budget that the fundamentals are being
laid and the best is yet to come. Throughout 2012 domestic demand had been buoyant and
investment continued to pick up. As a result, our labour market is finding some traction.
However we are always prone to the threat of natural disasters and Cyclone Evan showed
that we must not be complacent. There also continue to be risks on the external front with the
recent downward revisions in global growth.
Despite the downside risks the Reserve Bank's twin objectives of low inflation and a
comfortable level of foreign reserves presently remain intact. Inflation fell to 1.5 percent in
December then blipped upwards to 3.2 percent in January following Cyclone Evan. Our
endyear expectation is around 3 percent. Foreign reserves are currently at $1.6 billion or
sufficient to pay for just under 5 months of imports of goods and services.
Before I close I would just like to mention that the credit rating agency Moody's recently
upgraded Fiji's credit rating outlook from 'negative' to 'stable', citing improved fiscal and
macroeconomic outcomes and the stability of Fiji's external payments position. This is now in
line with the rating and views of another agency, Standard & Poors, and puts a positive spin
on our economic outlook.
Conclusion
Ladies and gentlemen, I have taken up a lot of your time and it is my great pleasure to
launch ANZ's Renminbi trading platform today. I hope all local businesses that have links
with the Peoples Republic of China will explore doing business in RMB from now onwards.
Once again, my sincere thanks for inviting me here today. I congratulate Vishnu and his ANZ
Bank Team for this initiative and I wish you every success as you roll out your new product.
Shieh shieh, thank you and Vinaka Vakalevu.