Xinhua Insight: Shanghai vows greater access to financial markets for offshore investors with renminbi

China will further open its financial markets in Shanghai to global investors as part of the country' s push for its currency Renminbi to be used globally for investment, a Shanghai financial official said on Saturday.

Most of China' s financial markets -- those for trading stocks, bonds, currency, commodities, and derivatives -- are housed in Shanghai. Zheng Yang, director of Shanghai' s financial service office, told a forum in the city on Saturday that the city will invite more global investors to trade in its financial markets as part of an effort to expand investment options for offshore investors holding the Chinese currency, also known as the yuan.

Zheng added that offshore entities could also issue yuan-denominated products in Shanghai' s financial markets to broaden the yuan' s appeal as an investment currency.

"Opening the domestic financial market to global investors is an integral part of renminbi globalization," Zheng said. "Only when there are effective channels for offshore investors to invest their renminbi holdings can the currency be more used globally."

China has sought to raise the yuan's global profile to a level commensurate with the country' s economic status. It hopes the yuan will be more used for cross-border trade payment, investment and also as an alternative reserve currency to the U.S. Dollar.

Zheng said the city will use the Shanghai free trade zone to explore opening financial markets' to global investors. Qualified offshore institutions will be allowed to issue yuan-denominated bonds in Shanghai, Zheng said. The city will also explore ways to let offshore investors to participate in trading in China' s onshore bond market and invest in other financial products.

The Shanghai FTZ launched an international board for global investors to trade spot gold contracts using the Chinese currency in September. Yuan-denominated crude oil futures are also in the pipeline, with trading expected to be launched later this year.

Shanghai Stock Exchange, China Financial Futures Exchange and Deutsche Borse also signed a deal last month to establish a joint exchange in Frankfurt to trade yuan-denominated securities and derivatives.

Offshore investors based in Hong Kong have been able buy stocks listed on the Shanghai Stock Exchange since November under the Shanghai-Hong Kong Stock Connect but are subject to a daily quota 13 billion yuan and an aggregate quota of 300 billion. A similar program linking the stock exchange in Hong Kong and Shenzhen will be launched sometime this year.

The renminbi is increasingly used in cross-border payments. It is now the world' s fifth largest payment currency and accounts for 2.18 percent of payments worldwide, according to SWIFT.

Hong Kong is the largest offshore yuan center, which has more than 1 trillion yuan in deposit and handles more than 70 percent of offshore yuan payments. The Asian financial hub has also become a market for dim sum bonds, which are issued by Chinese firms in Hong Kong to raise offshore yuan, with outstanding obligations at 374 billion yuan.

Leung Kam-chung, CEO of Hong Kong' s Nan Fung Group, said Hong Kong' s legal framework and mature, international market could offer lessons for Shanghai to open its financial market wider to global investors.

China' s Belt and Road initiatives, which seeks to strengthen ties with countries on the ancient silk road trade routes both on land and sea with investment in road, rail, energy and other infrastructure, could also provide opportunities to use China' s yuan for investment.

"Investment projects under the Belt the Road initiatives should try to use more yuan for equity and debt financing," said Chen Siqing, vice chairman and president of Bank of China.

With China becoming the largest consumer of a number of commodities, it should also seek a stronger pricing power over these commodities using its currency, said Gao Feng, President and Chief Country Officer of Deutsche Bank China. Endi