This serves to provide a safe and efficient clearing and settlement platform that supports trade and investment flows in renminbi. A nationwide awareness program by the banking institutions and the business chambers is also creating greater awareness on renminbi for trade settlement and investment. The Bank has also participated in the Chinese interbank bond market. In 2011 alone, the size of renminbi trade settlement in Malaysia expanded by four times from the level a year ago, reflecting a growing interest in renminbi as a settlement currency. The expansion in renminbi usage has also been underpinned by a diffusion of corporate players, both in size and across the sectors. Not only has the number of corporate players increased, but there has been a shift in relative significance in the use of renminbi as a trade settlement currency from the smaller to the larger corporations. There has also been more widespread corporate participation from a larger cross-segment of economic activities, namely the commodity based industries, manufacturing and services sectors that also includes tourism and education. There has also been an increase in the number of financial institutions participating in renminbi trade settlements. There are now 19 financial institutions that facilitated such trade settlements, double the number in 2009. More recently, there has been an increase in the use of the renminbi as an investment and funding currency. In the first seven months of this year, renminbi deposits in the banking system had tripled.

Also evident is the growing interest in raising financing in renminbi to meet funding requirements, with two issuances of offshore renminbi sukuk out of Malaysia and a renminbi bond issuance by Malaysian corporations. The progress made thus far, while modest, has significant potential given the significant volume of the bilateral cross-border trade and foreign direct investment between our economies. Trade settled in renminbi currently only represents slightly above 1% of Malaysia’s bilateral trade with China. There is therefore potential for this to increase. In addition, funding and foreign direct investment activities in renminbi have also increased with  2  BIS central bankers’ speeches  the greater awareness on the use of renminbi for the settlement of trade and direct investment transactions and on the potential to raise financing by businesses. Important to this initiative is the access to a wider array of portfolio investment avenues in renminbi. The availability of renminbi bonds and sukuk as well as other financial products for portfolio investment will not only encourage renminbi receivables, but it will also help to build a pool of trade-driven renminbi liquidity in the Malaysian market. Another important channel that would support the use of renminbi in trade and investment is repatriation as foreign direct investment in real sector activities in China increases. Raising funding in renminbi has also emerged as a further form of business in the Malaysian financial system. This has been the conventional channels by the banking institutions and the issuance of renminbi instruments in the bond and sukuk market in Malaysia.