Continued RMB developments as part of internationalisation effort China’s progressive liberalisation and opening up of its financial markets as well as the growing offshore renminbi market has led to a rapidly growing share of their global bond and stock markets. The trend behind the internationalisation of renminbi is underpinned by the greater importance of China in international trade, investment and financial linkages and this presents opportunities for China’s key partners, including Malaysia. The rise of renminbi since 2009 coincided with China’s rise to become the world’s largest trading nation since 2013, with total trade of $ trillion in 2015. The early regulatory and government incentives to promote the use of renminbi proved important towards achieving this. Multinational companies (MNCs), 1/4  BIS central bankers' speeches  particularly those with significant operations in China, have followed with steps to operationalise the use of renminbi in their invoices and treasury pooling system across subsidiaries. Renminbi has now become the second most used global currency for trade finance, and the latest SWIFT data showed that renminbi is now ranked fifth as payment currency, compared to 17th place five years ago. In the investment sphere, foreign investors now have multiple channels in investing into China’s market. Apart from the Qualified Foreign Institutional Investors (QFII) program, China has granted wider access to the China Interbank Bond Market (CIBM), expanded the renminbi QFII (RQFII) program, and introduced the Hong Kong-Shanghai Stock Connect (as well as the incoming Hong Kong-Shenzhen Stock Connect) and Hong Kong-China mutual fund recognition (MFR) scheme.

The daily foreign exchange volume in Malaysia is around USD7-8 billion, while the renminbi FX transactions accounts for less than 1% of the daily volume. This certainly does not commensurate with the investment and trade relationship that we have between our two countries. How can we further build on this with the existing infrastructure in place? One area that Bank Negara is looking at is to learn from our baht-ringgit cross currency market framework that we developed with our Thailand counterpart by appointing market makers, which are given certain flexibilities to facilitate doing business. A similar framework could also be considered for the renminbi ringgit cross currency markets. This will enable the market maker banks to play a larger role in enhancing the renminbi FX activities, not only in the spot market, but also in the renminbi forward and swap markets, which will result in lower foreign exchange transaction cost to the real sector. Another area that we are developing is to introduce a flexible hedging framework for residents to hedge their foreign exchange exposures up to a certain limit. This framework is specifically made available for the USD/MYR and the RMB/MYR pair. Under this framework, within a small limit, it suffices for residents to declare their intent and they are free to manage their exposure within this. Last week, Bank Negara had begun engagement with the treasurers on this framework and we hope to finalise this soon for immediate implementation. 3. Third, is to capitalise on the infrastructure financing opportunities.