The opening of the Monetary Authority of Singapore's first representative office in Asia in Beijing on Tuesday is being seen by the financial industry as a sign of Singapore's readiness to play a bigger role in the yuan's internationalization.
The development is also viewed by Chinese and Singaporean officials as a milestone in further strengthening bilateral financial cooperation.
The Beijing office is the authority's third overseas after London and New York.
"We look forward to taking full advantage of this milestone collaboration to deepen our financial and economic cooperation and take our bilateral relations to new heights," Tharman Shanmugaratnam, deputy prime minister of Singapore and minister for finance, said in Beijing.
Shanmugaratnam, who is also chairman of the Monetary Authority of Singapore, said financial cooperation has become an increasingly important pillar in the relationship between China and Singapore.
Zhou Xiaochuan, governor of the People's Bank of China, said the expanded footprint of the Singaporean monetary authority will not only bring better communication between the two central banks, but should also promote the business of commercial banks from both countries.
Shanmugaratnam said economic changes are taking place in China at a time when other Asian nations are "moving up the curve of development, and it will lead to growing connectivity between Asia and China, and new patterns of connectivity in goods and services."
China was Singapore's third-largest merchandise trading partner last year.
In services, China was Singapore's fifth-largest export destination, and Singapore was China's 13th-largest trading partner in 2012. Singapore was also the third-largest source of foreign direct investment into China last year, after Hong Kong and Japan.
Trade: More financial cooperation expected
Bilateral trade between the two countries was further boosted with the signing of the China-Singapore Free Trade Agreement in September 2008, the first comprehensive bilateral FTA China signed with an Asian country.
Zhou said,"We anticipate that the financial sector in Singapore can make a bigger contribution to China's ongoing financial reform."
Six of the top 10 Chinese banks have a presence in Singapore, while three Singaporean banks have a presence in 15 Chinese provinces.
Shanmugaratnam said, "There is potential to further these financial interconnections as China gradually widens and deepens its financial markets."
He said the Monetary Authority of Singapore has started holding an annual exchange of views with the China Banking Regulatory Commission on mutual cooperation and market development, and is planning to deepen engagement with China's national securities and insurance regulators.
"We hope for more such bilateral collaboration as China continues the progressive internationalization of its financial market and currency," he said.
The opening of the MAS Beijing office came a day after Standard Chartered and HSBC Holdings launched the first batch of offshore yuan-denominated bonds in Singapore, and Industrial and Commercial Bank of China's Singapore branch began yuan clearing services in the city state.
ICBC said on Tuesday in a statement that it conducted 53 yuan clearing transactions valued at more than 1.6 billion yuan ($259 million), and opened clearing accounts for 49 banks during its first clearing day.
"Key banks in Singapore are ready to actively participate in the promising new market," Shanmugaratnam said.
According to Zhou, Singapore has become the second- biggest yuan transaction center after Hong Kong since it launched the business in 2009.
China and Singapore doubled the size of their currency-swap arrangement to 300 billion yuan in March, a month after the People's Bank of China, the country's central bank, approved the Singapore branch of ICBC as its clearing bank.
As of June 2012, deposits of the currency in Singapore stood at about 60 billion yuan.
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