RMB deposits in HK have grown tenfold.
According to Bank of America Merrill Lynch, ever since the launch of the RMB trade settlement in July 2009, RMB deposits in HK have grown tenfold. After reaching a high of RMB 627bn in November 2011, the CNH deposits declined slowly in early to mid 2012.
BAML added that growth resumed toward late 2012, and CNH deposits recently rebounded to a record high of RMB 652bn in February. This swift development raises a number of questions, not the least being, how will its future evolve? And, what determines the growth of CNH deposits?
According to the chart from BAML, prior to the global financial crisis, real GDP growth, accompanied by the expectations of RMB appreciation (NDF and RMB spread), accounted for most of the growth. Interest rate differential was mostly a drag on the growth during 2004-2007.
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