What Is an Offshore Credit Card?

Offshore RMB refers to the operation of RMB deposits outside China. Businesses where both parties to the transaction are non-residents are called offshore financial services. ^[1] Offshore markets provide offshore financial services.

Offshore RMB

Offshore RMB refers to the operation of RMB deposits outside China. Businesses where both parties to the transaction are non-residents are called

In February 2004, ^[4] Hong Kong banks began trial personal RMB business, including deposit, remittance, exchange and credit card business. Each person does not exchange more than 20,000 yuan equivalent per day. The accumulation of water has become a deep source. By the end of July 2010, Hong Kong's RMB stock had reached 103.7 billion yuan.

In July 2010, the "Clearing Agreement" signed by the People's Bank of China and the Hong Kong Monetary Authority was a major breakthrough in the RMB market outside Hong Kong. "Water" first lived abroad, with conditions to accept larger and more "fish". At the same time, policy makers have fully realized that at this stage, the nutrients in the offshore RMB market can only come from domestic sources, so the RMB backflow mechanism has been quickly activated, allowing overseas water to connect with domestic revenues, which in turn can make overseas Develop larger and more products. Allowing overseas financial institutions to invest overseas RMB deposits in the domestic interbank bond market, as well as the small QFII, which has long been expected to be introduced, will quickly lead to the development of insurance products and fund products with higher returns than deposit products. And banks with higher income sources can also attract more RMB savings products at a larger scale and more favorable prices, thereby increasing the enthusiasm of RMB exchange abroad and trading partners' use of RMB.

Generally speaking, in the formation stage of the offshore RMB market, the Hong Kong market has more than 100 billion yuan of stocks, which are mainly held by individuals. The initial driving force is the expected appreciation of the renminbi, and investment products are deposits, government bonds, insurance and Funds are one of the few fixed income products. With the gradual opening of the channels for Hong Kong's renminbi to return to the mainland, revenue has become the main driving force for holding renminbi. At this point, it can be said that the offshore RMB market in Hong Kong has initially formed.

Offshore RMB growth stage

Different from the previous stage, the main function and goal of the RMB offshore market growth stage is to develop enough, sufficient scale, enjoy higher returns, and trade more active products to activate, activate and increase the two main players under the trade The flow of water from the channel has attracted a wider range of trade settlement partners to start using RMB, so that the offshore RMB market has entered a mature stage at an early date.

The development of larger-scale RMB products is to attract more institutional investors to participate in RMB investment, thereby attracting large-scale trading partners to use RMB on a larger scale. The development of more dynamic RMB products is to increase the leverage of offshore RMB liquidity. The stock of renminbi in the overseas market is inherently limited. An active secondary trading market for renminbi products in the offshore market can provide sufficient driving force to increase the liquidity of the renminbi. If the stock of one dollar can bring about the transaction volume of seven or eight yuan, which is equivalent to the outflow of seven or eight yuan, the leverage effect will be obvious. Whether RMB products can have a higher trading volume depends to a large extent on the level of product revenue. The products with higher revenue are more likely to promote higher secondary market transactions.

In order to develop a product of sufficient scale, enough, and active trading, two important topics must be studied: first, there must be sufficient initial RMB liquidity to ensure the success of issuance and trading; and second, there must be a smoother RMB return Domestic channels to create a source of product revenue and encourage product distribution.

On December 16, 2011, the Pilot Measures for the Domestic Securities Investment of RMB-qualified Foreign Institutional Investors by Fund Management Companies and Securities Companies was issued.

Offshore RMB maturity stage

Once the offshore RMB market has sufficient scale and liquidity, and products are gradually diversified, a large number of import and export companies may begin to choose to settle in RMB. At this time, the Hong Kong offshore RMB market has entered a mature stage. A large amount of RMB will flow in and out of the two main channels of outflow and inflow under the RMB trade mentioned above. The amount and pressure of water are different from the previous ones, because the design of artificial water discharge, water injection and backflow in the first two stages is different. At this time, the water is the natural inflow and outflow under the trade item. At the same time, a large amount of RMB will naturally exist in overseas circulation for a long time, which will further promote a virtuous circle of overseas RMB and product growth.

At this time, the size of the market will far exceed the first two stages, and the main driving force comes from the RMB's trade settlement. These funds may come from the trade RMB settlement of neighboring countries and regions, and the arrangements of RMB swap agreements reached between the central banks of these countries and the People's Bank of China. The function of the RMB trading market has begun to change from an activator and promoter of RMB trade settlement to a server.

Overview of offshore RMB

In summary, 2010 is the stage of formation of the offshore RMB market. The main characteristics of this stage are: the RMB exits the country in a thin stream of long-term flow, and is included in small amounts by individuals; the products are mainly based on savings and fixed interest rates, which are basically market-driven; the main driving force for income is the expected appreciation of the RMB, and it begins to shift to fixed income.

At the same time, market construction has begun in an all-round way, starting from free circulation overseas and beginning to enter the initial preparations for the renminbiization of the entire market.

Beginning in 2011, we hope that policy makers can gradually reach a consensus on the development path and begin to promote the fast track of the offshore RMB market into the growth stage. The most prominent manifestations of the fast lane are:

1. The scale, diversification of RMB overseas products and the rise of the income curve;

2. The initiative and enthusiasm of the policies and measures for the outflow and return of RMB have been greatly enhanced;

3. The secondary market transactions of RMB products have increased significantly.

Implementation of the normal reserve ratio policy

On January 18, 2016, the central bank released news that since January 25, 2016, the normal deposit reserve ratio policy has been implemented for overseas financial institutions to deposit in domestic financial institutions (referred to as offshore RMB). The central bank explained that overseas financial institutions did not include offshore central banks (monetary authorities) and other official reserve management institutions, international financial organizations, and sovereign wealth funds.

Based on a 17% reserve requirement ratio, this reform will lock in around 221 billion yuan. ^[5]