Renminbi Derivatives: Recent Development and Issues

17 Pages Posted: 10 Oct 2007

See all articles by Wensheng Peng

Wensheng Peng

Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR)

Chang Shu

Hong Kong Monetary Authority

Raymond Yip

Hong Kong Monetary Authority

Abstract

This study reviews the developments in the onshore and offshore renminbi derivatives markets. The onshore market has seen a rapid build-up in the market infrastructure and price discovery mechanism in the past year, with empirical evidence suggesting that its pricing is increasingly determined by financial fundamentals, such as the covered interest rate parity. However, the growth of the market has been restrained by restrictions on the participant base, limited variations in the RMB/US$ exchange rate, market participants' lack of technical capacity and experience, and inadequate supporting financial market infrastructure. The non-deliverable forward (NDF) market, concentrated in Hong Kong and Singapore, is more developed, but has the drawback that its pricing is not tied to financial fundamentals. The comparison between onshore and offshore markets suggests that two issues are of particular importance for future derivatives market development in China: the balance between regulation and development, and the relationship between onshore and offshore markets.

Suggested Citation

Peng, Wensheng and Shu, Chang and Yip, Raymond, Renminbi Derivatives: Recent Development and Issues. China & World Economy, Vol. 15, No. 5, pp. 1-17, September-October 2007. Available at SSRN: https://ssrn.com/abstract=1019101 or http://dx.doi.org/10.1111/j.1749-124X.2007.00082.x

Wensheng Peng (Contact Author)

Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR) ( email )

3 Garden Road, 8th Floor
Hong Kong
China

Chang Shu

Hong Kong Monetary Authority ( email )

Hong Kong
China

Raymond Yip

Hong Kong Monetary Authority ( email )

Hong Kong
China

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