Infrastructure is key to the success of a renminbi hub

Infrastructure is key to the success of a renminbi hub

Following the opening of the first branch of a Chinese bank in Zurich at the end of 2015, the renminbi has now definitely arrived in Switzerland. A number of experts and those interested in China attended an event at SIX ConventionPoint last Friday at the invitation of the Swiss-Chinese Chamber of Commerce. Many of the discussions emphasize the importance of China in the global economy, as well as in Switzerland. Conversely, Switzerland is also playing a key role in the internationalization of the renminbi – in particular, its infrastructure.

China is currently the world’s largest exporter and second-largest importer of goods and services. Despite recent financial market turbulence, China still remains a global economic powerhouse. While last year the Chinese economy “only” grew by 6.9% (the lowest figure since 1990), this rate of growth is quite unimaginable for other economies.

The underlying message put across by the speakers at the first seminar looking at the internationalization of the renminbi (RMB) in Zurich last Friday was clear: Let's not lose sight of the big picture.
Although growth in imports and consumer spending is slowing, China is on a healthy and profitable course.

The latest development in the economic partnership between China and Switzerland underlined this aspect. A free-trade agreement has been in place between the two countries since 1 July 2014. Thomas Zeeb, CEO, SIX Securities Services, explains: “Since then, by international standards Switzerland‘s trade with China has grown more rapidly than with any other country. Liquidity and consequently a direct exchange rate between the Swiss franc and the RMB have been instrumental in this.”

Andy O’Callaghan from PWC believes that the infrastructure more than anything else has been key: “If the infrastructure works, volume increases.” The efficient and reliable infrastructure offered by Switzerland’s financial center provides a solid foundation for the latest RMB offshore center and for future investments. By establishing a renminbi hub, Switzerland will be a regional trading venue for cross-border financial transactions in the Chinese currency. Thanks to the Swiss Value Chain and its international network, SIX provides the Chinese market with access to Switzerland as well as the rest of Europe. In this regard, a number of memoranda of understanding (MoU) have been signed with the first branch of the Chinese Construction Bank in Zurich.

The majority of experts taking part in the final panel discussion were in agreement as regards the question of future investments in China. Recommendations are dominated by “consumer goods”. Urs Wieland, Head Regulatory Relations at SIX Securities Services, explains: “While the Chinese economy’s export figures may be falling, there is nevertheless huge potential in the area of consumer goods. Salaries and consumption in China's urban centers are continuing to grow strongly. For foreign companies and investors, however, it is important to recognize that Chinese consumers very much have their own different needs and requirements.”