For East & Partners Asia, Vivianne Arnold interviews
President and General Manager, Asia
- Singapore will continue to be at the cutting edge
- We are very excited about Sydney becoming an RMB hub
- Hong Kong will need to debate whether it wants to retain its reference to the USD or move to the RMB
- As Singapore develops a robust SME and middle market sector, having locally-based talent to support the increasing flow of trade, capital and investment is vital to our business
You are based in Singapore and have Asia wide responsibility. What is your view on trade and banking talent in the region?
Singapore has had impressive growth in the last ten years. Right now the growth in Singapore is slowing as China works through some economic reforms. At the same time Dubai has also grown as a banking centre attracting capital and people. Singapore will continue to innovate to be at the cutting edge, remain competitive and continue to attract global capital and talent.
What can Singapore do to lift its growth rate in trade and banking?
Singapore needs to evolve a vibrant SME sector. For any economy to grow it needs a full ecosystem with SMEs and middle market commercial trade in the supply chain to the institutional sector. However, currently the cost of labour, utilities and real estate in Singapore pushes up the cost of doing business to a level that is out of reach for the SME sector. Also Singapore is making strides to be a centre of excellence for technology and biotech. These efforts need acceleration.
I’ve commented frequently that in Australia SMEs and middle market are not accessing intelligent trade finance solutions in Australia. My research shows this may be related to a shortage of young trade finance bankers in Australia.
It is a fact that bankers in the region are gravitating to the institutional segment rather than working in the SME commercial banking segment. However with the increasing number of smaller companies importing goods to Australia and New Zealand, Westpac is increasingly filling this gap and has extended trade finance solutions to this segment of the market. Likewise in Singapore, as it develops a robust SME and middle market sector, banks like Westpac are well placed with locally-based talent to support the increasing flow of trade, capital and investment.
Westpac was one of the 10 market-makers appointed to trade in AUD/CNY when direct trading was introduced in 2013. Now Westpac has received approval to open a sub branch in the Shanghai Free Trade Zone and offer derivative products onshore. Have these moves begun to show benefits for your Asia strategy?
We are now the market leader in Australian RMB trade, with about 25% of the total volume. Recently, Westpac has been appointed as the New Zealand market maker for RMB as well.
All this was possible because Westpac has been in the Chinese market for quite some time. Longevity is of vital importance to the Chinese authorities in the granting of licences. Westpac in one of only two Australian banks able to participate in this space.
Similarly, Westpac is one of only two Australian Banks and is one of the first foreign banks to set up a sub-branch in the Shanghai Free Trade Zone.
The China corridor is an extremely important market for Westpac. A large number of our corporate and commercial customers already have business dealings with China and already demand, or expect their use of CNY-related services to increase. Our presence in the Shanghai Free Trade Zone marks a significant step toward providing even deeper support for our customers.
So in summary yes; these moves have significantly expand our service offering in China across trade finance, structured commodity finance, debt capital markets, derivatives and FX which directly support our customers doing business in the region.
Does Sydney have the potential to be an RMB trading hub along with Singapore, Hong Kong and London?
Yes, we are very excited about the prospect of Sydney becoming an RMB hub as it will make it easier for Australian businesses and our customers to transact with China. Westpac expects to be a material player in this space.
Hong Kong has the historical advantage but will face competition from the new Chinese free trade zones. My own thinking is at some point of time Hong Kong will need to debate whether it wants to retain its reference to the USD or move its reference to the RMB.
Internationally, many countries are vying to be RMB partners. The UK and Germany are trying very hard and Singapore is already enlisted. As Australia and China are significant trading partners it is impossible to ignore Sydney as a natural counterparty to the RMB. The other advantage for Sydney in this space is the quality of its capital markets. Australian capital markets are well established and well regarded world class capital markets with impressive liquidity and almost $2 trillion of superannuation funds to be invested. We are keen to see how Australia and China carve out the free trade agreement, as we see this has the potential to increase demand from Australian businesses to deal directly with the renminbi.