Bank of China released the Off-shore RMB Index (ORI) for the third quarter of 2023. The results showed that at the end of the third quarter of 2023, the ORI stood at 1.88 percent, an increase of 0.21 percentage points from the end of the second quarter of 2023, and 0.18 percentage points higher than the forecast value.
During the third quarter of 2023, the volume of RMB foreign exchange (FX) trading in major off-shore markets expanded rapidly, showing an increasing share in global FX trading, which led to a quick rebound in the ORI. The off-shore RMB market in the third quarter was characterized by the following features:
First, the balance of RMB deposits in major off-shore RMB markets continued to grow, with RMB deposits in Hong Kong's banking system exceeding 950 billion yuan ($134.33 billion), reaching a high level since the second half of 2015. The growth in RMB deposits provided greater liquidity support for investment, financing, and trading in off-shore markets, contributing to the expansion of the off-shore RMB market.
Second, the volume of RMB FX trading rose rapidly. London, Hong Kong, and Singapore saw the RMB FX trading grew by 20 percent, 32 percent, and 26 percent quarter-on-quarter, respectively, with the combined account for 67 percent of the global total, driving up the global share of RMB FX trading.
The expansion in RMB deposits, loans, and financing in off-shore markets contributes to more related hedging demands and a more active RMB FX derivatives trading. In London, for example, RMB forwards and swap transactions in the third quarter rose by 31 percent and 50 percent quarter-on-quarter, respectively.
Third, RMB financing remained active in the off-shore market. In the third quarter of 2023, a relatively wide interest rate differential between the RMB and the US dollar was maintained. The issuance amount and outstanding balance of off-shore RMB bonds for the quarter continued to rise on a quarter-on-quarter basis. The balance of RMB loans in the off-shore market continued to grow, among which the balance in Hong Kong increasing by 86.4 billion yuan ($12.22 billion) from the previous quarter, or by 29 percent quarter-on-quarter.
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