Yuan move sign of Chinese mkt liberalisation: RBS

In an interview to CNBC-TV18, Woon Khien Chia, managing director, RBS Global Banking and Markets explains that the adverse risk environment in the market was clouding investors’ perception about the positive move of the yuan.

Chia also clarifies that the lending was a move towards market liberalisation necessitated by the movement of a lot of offshore currency to the global market. Below is the edited transcript of the interview. Also watch the accompanying video. Q: What do you further expect from the Chinese currency?
A: I actually do read it as a positive move although the market reaction today wasn’t too positive. And I think that’s because of a couple of things. One, today’s risk environment is not very positive after what we have seen on Friday in Europe and US. Second, the due to this adverse risk environment the market’s outlook is very, very short-term.
All they can see is that China’s GDP has not been good and that the trade surplus has been shrinking. Investors cannot believe that this move is a positive move in terms of market reform and that they should actually react positively to the move. Q: Another point of discussion was the lending data. Would you see it as a sort of replacement for monetary policy? Is this a tweaking of the monetary policy or would you not view it in the context of a completely independent currency move?
A: I don’t see this as a monetary policy move. This is a move towards market liberalisation. And it has become a necessity due to the expansion a lot of offshore Chinese Yuan to the global market.
The treasury, going forward, is focus on more inflows and outflows. With a market in the offshore that has no trading band, and an onshore market with a trading band, obviously entails freeing up one side or tightening up the other.
It’s good that they choose to free up one side which means that the thinking is more positively towards reform and opening up the market even further.