Bank of China released the Off-shore RMB Index (ORI) for the second quarter of 2023. The results showed that at the end of the second quarter of 2023, the ORI stood at 1.67 percent, a decrease of 0.12 percentage points from the previous quarter and 0.13 percentage points lower than the forecast value.
At the end of the second quarter of 2023, the shares in the off-shore markets of the four major international currencies — the US dollar, euro, Japanese yen and the British pound — were 48.13 percent, 26.51 percent, 4.29 percent and 4.70 percent, respectively. The shares of the US dollar and Japanese yen decreased compared to the end of 2022, and the combined share of the four currencies totaled 83.63 percent, also a slight decline from the end of 2022. The off-shore market saw varying degrees of growth in RMB deposit balances, as well as in the financing and foreign exchange (FX) trading. The off-shore RMB market in the second quarter exhibited the following features:
More countries expanded the holding and using of RMB. The Central Bank of Russia released a report stating that the RMB's share reached a new high of 39 percent in Russia's FX trading market in March 2023. Then in April of the same year, Russian citizens purchased a total of 54.2 billion rubles ($667.90 million) worth of RMB. By the end of 2022, the RMB's share in Brazil's FX reserves reached 5.37 percent, making it Brazil's second-largest reserve currency. Furthermore, Argentina announced RMB to be used to settle imports from China. The expanding of RMB holdings and usage by more countries further improved the off-shore RMB market.
RMB financing and usage continued to expand. In the second quarter of 2023, the US Federal Reserve maintained its monetary tightening causing US Treasury yields to rise and the interest rate differential between the US dollar and the RMB to widen. Both direct and indirect RMB financing grew in the off-shore market. The outstanding amount of bonds in the RMB bond market grew by 18 percent quarter-on-quarter, and the bond issuances during the quarter remained high for recent years. The off-shore RMB loans in Hong Kong increased by 20 percent quarter-on-quarter, a growth rate that is relatively high for recent years.
The balance of RMB deposits in the off-shore market increased. During the second quarter of 2023, cross-border RMB customer remittances from the Chinese mainland grew by 24 percent quarter-on-quarter, while cross-border RMB customer remittances in the off-shore market grew by 12 percent quarter-on-quarter. The active cross-border use of RMB contributed to the expansion of RMB fund deposits in the off-shore market. The rapid growth in indirect financing in the off-shore market enhanced the derivative effect on deposits, further driving the growth of off-shore RMB deposits. Off-shore markets such as Hong Kong, Singapore, the United Kingdom and Australia saw varying growth in RMB deposits. Among them, Hong Kong saw its RMB deposits grow by 14 percent quarter-on-quarter, with the balance exceeding 900 billion yuan.
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