CURRENCY-SWAP AGREEMENT BETWEEN CHINA AND SINGAPORE

Column: 1217

CURRENCY-SWAP AGREEMENT BETWEEN CHINA AND SINGAPORE: 14.

Mr Teo Siong Seng asked the Senior Minister (a) if he will provide

Column: 1218

details of the S$30 billion currency-swap agreement between the People's Bank of China and the Monetary Authority of Singapore; and (b) what impact will this have on Singapore's trade and investment linkages with China.

The Minister for Trade and Industry (Mr Lim Hng Kiang) (for the Senior Minister): Mr Speaker, Sir, under the arrangement, the Monetary Authority of Singapore (MAS) and the People’s Bank of China (PBC) will exchange Singapore dollars for Chinese Yuan. The swap facility will provide Chinese Yuan liquidity of up to RMB150 billion and Singapore dollar liquidity of up to S$30 billion. The effective period of the arrangement is three years, in line with that of the other PBC Renminbi swap lines, and can be extended by agreement between the two sides.

The objective of the swap line is to promote bilateral trade and direct investments for economic development of our two countries. Trade and direct investment between Singapore and China, as well as between ASEAN and China have grown substantially in recent years.

This swap line will further strengthen these trade and investment linkages and, in particular, improve the availability of financing facilities for firms based in Singapore and the region that import from and invest in China. MAS is currently working with the PBC to operationalise the workings of the swap line.

Mr Teo Siong Seng (Nominated Member): Thank you, Minister, for the explanation. I have two questions. One, does the Singapore Government foresee that one day, it will become the RMB swap centre in Southeast Asia versus Hong Kong for the North Asia region? Two, what company in Singapore would qualify for this facility? Does it have to be a Singapore-owned company or as long as the company is registered in Singapore?

Column: 1219

Mr Lim Hng Kiang: Mr Speaker, Sir, as Members are aware, currently, the Chinese are keen to internationalise the renminbi and the main vehicle for doing so is through Hong Kong. But having this swap line, we are encouraging them to also provide the facility through Singapore. We can imagine or we can expect the Chinese to do so bilaterally with other Southeast Asian countries. To the extent that Singapore is the financial hub for Southeast Asia and the trade and investment facilitator for many of the deals and many of the MNC operations in Southeast Asia, then, of course, Singapore can aspire to be a renminbi centre for Southeast Asia. But we must also recognise that there will be bilateral arrangements.

Companies which can benefit from this will be largely trading companies and also companies that intend to invest in China. Those companies which are based in Singapore can make use of this facility. As I said, the issue is in the details. How this will work is largely back to back and, therefore, we need specific transactions and specific deals to operationalise the whole procedure.