China, Europe and the Netherlands: Opportunity Is Knocking at Our Doors

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Finance 
048 
  Apr. 2015
Asian growth and integration
The economic rise of Asia during the last 
five decades is one of the biggest growth 
stories in history. In 1950, China, India and 
the ASEAN economies accounted for 15 
percent of global GDP. By 2000, that share 
had doubled to 30 percent. Asia will con-
tinue to be the most buoyant region in the 
world in the decades ahead. By 2030, the 
Asian Development Bank has projected that 
China, India and the ASEAN economies will 
together make up nearly 40 percent of global 
GDP and their combined economic weight in 
purchasing power parity terms could exceed 
that of the U.S. plus Europe. 
A key driver as well as consequence of 
Asia’s economic growth is the rise of the mid-
dle class. The Asian middle class is projected 
to surge six fold from 500 million in 2010, 
to 3 billion by 2030. The rapid expansion 
of the middle class, coupled with ongoing 
urbanization, will drive consumption and 
investment throughout the region. It will 
transform Asian societies and accelerate the 
accumulation of wealth.
Rising affluence will increase the demand 
for financial services. As household income 
increases and wealth accumulates in Asia, 
the demand for financial services – such 
as insurance and asset management – will 
grow significantly. By 2020, assets under 
management in Asia is expected to expand 
by 60 percent to reach US$176 trillion. The 
region is also projected to account for almost 
40 percent of the global insurance market.
ASEAN’s economic importance will grow. 
With a population of over 600 million and 
0417
By Ravi Menon
Asian Integration, 
Offshore Renminbi, 
and Infrastructure 
Finance
The increasing integration between China and 
ASEAN coupled with the growing importance 
of financial services in Asia has underpinned two 
important trends in Singapore’s financial center: 
the growth of the offshore Renminbi  market and 
the development of infrastructure financing.
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combined GDP of US$2.4 trillion, ASEAN is 
a market of enormous potential. With rising 
affluence, consumer demand is projected 
to grow strongly, expanding regional and 
international linkages and spurring market 
reforms. Over the years, ASEAN member 
states have been progressively integrating 
their markets by eliminating trade barri-
ers for goods and services and increasing 
capital mobility. This year, in 2015, ASEAN 
member states will be making a significant 
advance towards the realization of a single 
market with the establishment of the ASE-
AN Economic Community (AEC). 
ASEAN is also set to become China’s 
largest trading partner. The launch of the 
ASEAN-China free trade area in 2010 has 
catalyzed bilateral trade by more than 50 
percent, from US$293 billion in 2010 to 
US$444 billion in 2013. As a trusted and 
dynamic business and financial centre, Sin-
gapore is an efficient conduit to facilitate 
these trade and investment flows as well as 
a natural gateway for international investors 
to access ASEAN.
The increasing integration between China 
and ASEAN coupled with the growing im-
portance of financial services in Asia has in 
turn underpinned two important trends in 
Singapore’s financial center: the growth of 
the offshore Renminbi (RMB) market and 
the development of infrastructure financing.
Singapore as an offshore RMB center
Reflecting China’s growing economic and 
trading heft, the RMB is poised to become 
an increasingly important currency in Asia. 
The RMB is already the fifth largest global 
payments currency and it will take on a 
larger international role as more multi-
national companies and Asian corporates 
use the RMB for their trade with Chinese 
enterprises.  
Singapore can play a catalytic role to 
broaden the international use of the RMB. 
As the largest foreign exchange market and 
a leading trade and commodity trading hub 
in Asia, Singapore serves to facilitate the 
use of the RMB for trade, hedging and cash 
management amongst corporates in the re-
gion. Singapore’s liquid and vibrant capital 
markets as well as strong asset and wealth 
management capabilities can spur the de-
velopment of innovative RMB-denominated 
products. Singapore’s exchanges can also 
promote greater trading liquidity of Chinese 
securities and derivatives to international 
investors through cross-listings.  
Today, Singapore is the largest offshore 
RMB hub after Hong Kong and offers an 
expanded range of RMB-denominated 
products. RMB deposits grew more than 40 
percent year-on-year to RMB 277 billion in 
Dec 2014, while average daily RMB foreign 
exchange turnover grew more than two 
times to US$76 billion in the same period. 
Outstanding RMB-denominated bonds 
issued, also known as “Lion-City” bonds, 
exceeded RMB 35 billion in 2014. The Singa-
pore Exchange also launched RMB foreign 
exchange futures contracts in October 2014, 
providing a wider selection of hedging in-
struments and broadening the suite of pan-
Asian exchange-traded products available in 
Singapore. Given the strong growth of RMB 
Ravi Menon
Managing Director, Monetary Authority of 
Singapore
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