1

Renminbi rising Onshore and offshore

perspectives on Chinese

financial liberalisation

February 2014

2

Research questions

What is the expected pace of financial liberalisation in China?

What will happen next? What should be done next?

What barriers and obstacles are there to opening the capital

account?

What will the impact be of opening up?

Until then, how will the offshore market develop?

How do opinions on these issues differ between investors based

in mainland China and those outside it?

3

“Crossing the river by feeling for stones”

QFII

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

RMB

retail

banking

in HK

End of

peg to

US$

Dim

sum

bonds

begin QDII

Cross-

border

RMB

trade

settle-

ment

RQFII

Mutual

recogni

tion for

HK

funds

(?)

4

Rapid progress

• Renminbi overtook 22 currencies in past 3 years

Source: SWIFT Watch January 2014

5

Research methodology

6

Survey respondents

7

Key findings

8

A redback world…?

• 53% of IIs think

renminbi will one day

surpass US$ as major

reserve currency

9

Not so fast

• Majority think full liberalisation will happen within 10 years

• But 1 in 5 Chinese IIs think it will never happen

10

Ranking the renminbi

11

What will happen next?

12

What will happen next? (cont.)

13

What should happen next?

14

What should happen next? (cont.)

15

What will get in the way?

16

Effects of opening up

17

Effects of opening up (cont.)

18

Why go offshore?

19

What to buy?

20

Where to buy?

CORP-0955