Deutsche Bank AG expects the offshore yuan market to maintain rapid growth next year, but has called on the central government to inject more liquidity to ensure the continuous expansion of the yuan's global use.
In a report released on Monday, the lender said 2013 will be very much about dealing with offshore yuan liquidity supply concerns through further capital account liberalization, and said it anticipates a range of "exciting" policies and market developments ahead.
It forecast that the yuan will appreciate against the US dollar by around 2 to 3 percent next year, and yuan-denominated cross-border trade settlement will increase by around 30 percent to 4 trillion yuan ($634.9 billion), or approximately 15 percent of China's global trade value.
The offshore yuan market continued to see stable but solid growth in 2012, and yuan cross-border settlements ― including trade and investment settlements ― are expected to grow 45 percent year-on-year in 2012.
"Policymakers will concentrate on dealing with offshore liquidity supply concerns by further liberalizing capital accounts," said Linan Liu, a rates strategist at Deutsche Bank Greater China.
The bank expects the daily aggregate offshore yuan trading volume to rise to $2.5 to $3 billion, and the total offshore deposit base is forecast to reach 1.25 trillion yuan by the end of 2013.
It expects an official announcement in 2013 on increasing the yuan-denominated qualified foreign institutional investors quota from 70 billion yuan to 270 billion yuan, the establishment of yuan clearing banks in Taiwan, Singapore and possibly London, and yuan fixed-income trading and other yuan business becoming operational in Taiwan in the near future.
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