RMB funding in S Asia: Singapore to be conduit

Singapore is set to play a leading role in providing renminbi-based funding for multi-billion dollar infrastructure projects in South Asia, DBS Group Chief Executive Officer Piyush Gupta said on Friday.

"Singapore's role as an RMB conduit into South Asia will definitely happen," he said, projecting Asian trade's greater reliance on the renminbi, or yuan, in the coming decade.

Speaking to reporters at the ongoing South Asian Diaspora Convention in Singapore, Gupta highlighted the funding deficit faced by infrastructure projects in India and the rest of the region, while the high saving rate among the Chinese was boosting the RMB deposit base in Hong Kong and Singapore, already estimated to be over $3 trillion.

But Gupta also noted the obvious challenges of getting the RMB directly transacted between China and India and underlined Singapore's role as an intermediary for Chinese currency flows in regional trade.

Going forward, Asian trade would not necessarily be dollar-denominated, he said, anticipating more and more RMB-funded deals.

He said the RMB's role in the regional trade would materialise faster in comparison to the 20 years taken to establish euro-dollar

transactions.

The Chinese were also taking a step-by-step approach toward internationalising the RMB.

Though the Chinese are cautious in internationalising the RMB, it would definite happen, beginning with regional trade, he said.

Elaborating further on Singapore's role in South Asia, he said the city state has to expand the scope of its hinterland from its dependence on South-East Asian countries.

Comparatively and competitively, Hong Kong has a larger hinterland of China, but Singapore's South-East Asian hinterland was small and it would be important for the island state to expand its scope by covering South Asia.

Gupta also impressed upon DBS's strategy for the Indian market, saying the focus would be on infrastructure projects, especially through project financing.

"We are going to focus on developers or infrastructure providers and industries where we have comfort and once we get more comfortable with the process, we can scale up our activities," he said.

He also disclosed that plans were afoot to promote a Project Finance Agency in Singapore, partly for the city state to play a role in infrastructure development.