Working with the right yuan
The steady growth of RMB-denominated business in Hong Kong and beyond is spurring investment opportunities, giving individuals and institutions another way to share in China’s economic expansion. As the currency also acquires greater international standing, there remains a potential “early mover” advantage, as well as the chance of comparatively attractive returns for those already using RMB for savings or investments.
For banks in Hong Kong, this presents a welcome problem. They must ensure that employees in both their wholesale and retail operations are trained, tested and licensed to deal with the technicalities of a semi-specialised area of business. Thinking ahead, they also have to plan for recruitment, transfers or rotations to give sufficient hands-on experience to staff in a sector that could see an exponential level of growth in the next few years.
“RMB bonds and time deposits, which offer returns of around 3 per cent, are quite popular with our customers,” says Cindy Fu, regional head of capital market products and securities for Standard Chartered Bank (Hong Kong). “But the range of RMB-denominated products now includes many other choices for different types of investor.”
Outlining what is available, Fu points first to mutual funds and asset-management options. These are currently handled under Beijing’s RMB qualified financial institutional investors (RQFII) quota, where individual participation starts from 10,000 yuan. Then there are tailor-made products, which the bank structures for high-net-worth investors. These typically involve an RMB deposit with a higher interest rate for the second year, but with the actual amount depending on the underlying performance of a linked foreign currency.
Besides that, there are “dim sum” bonds, insurance contracts, exchange-traded funds (ETFs) – which can have dual classes for RMB and Hong Kong dollars – and a growing number of Hang Seng-listed stocks traded in RMB.
“There are already seven such stocks and I foresee more RMB-denominated listings on the local exchange,” Fu says. “As for funds, it all depends on Chinese government policy and if they release more quota to overseas institutions for onshore investment.”
When training staff to understand what products are available and how they work, Standard Chartered has a straightforward approach.
“For us, RMB products are just one of the investment options on offer,” Fu says. “Training is across the board for all the products we roll out and essentially the same as for handling investments in, say, Australian or US dollars.”
That entails a detailed review of both in-house and local regulatory requirements before anyone can deal directly with customers. If selling insurance, for example, staff need the relevant licence. If selling or advising on funds, they must be registered with the market watchdog, the Securities and Futures Commission, which is the minimum regulatory requirement. As and where necessary, the bank also provides courses, seminars and updates.
“Everything is jurisdiction-specific for financial products and licensing,” Fu says. “An RMB product sold in Hong Kong may be different from what is sold on the mainland and subject to different rules.
“Our focus is to fulfil regulatory requirements and product-training needs in Hong Kong. There is no reason to send staff to the mainland to gain RMB experience or expertise.”
Mindful of high-level plans for achieving international reserve currency status, US banking giant Citi is also seizing the opportunity to expand the scope and scale of its RMB business.
The bank already offers a full range of RMB products including cash management, treasury and trade services, along with foreign exchange dealings. Citi also claims leadership in the dim sum bond market in Hong Kong and broke new ground as the first global bank to issue sole-branded RMB credit cards in China earlier this year.
Building up these areas has led to additional hiring, in particular for RMB-related trade finance, custody and cash management. On occasion, experienced bankers – in most cases fixed-income specialists – have been switched from other duties to focus on RMB developments.
When filling such roles, the bank makes a point of requiring fluency in Putonghua.
“Regardless of where you want to work in banking, language ability is becoming as important as gaining a first-class education,” says James Griffiths, a spokesperson for Citi’s investment bank in Asia-Pacific.
“In addition, we expect potential RMB bankers to show intellectual curiosity with a desire to understand the different dimensions of a project, as well as strong analytical skills, personal motivation and a balanced academic background.”