Singapore to include Chinese yuan investments in foreign reserves

Singapore's central bank said Wednesday it will make its financial investments in the yuan part of its official foreign reserves from June, reflecting the Chinese currency's increasing international acceptance.

The Monetary Authority of Singapore (MAS) said its decision "recognises the steady and calibrated liberalisation of China's financial markets, and the growing acceptance of (yuan) assets in the global portfolio of institutional investors".

MAS has been making financial investments in the yuan, or renminbi, since 2012, under a scheme that allows foreign institutional investors to buy equities and bonds listed on China's domestic exchanges.

It also buys bonds in China's over-the-counter bond trading market, which was opened to foreign central banks in 2010.

While the investments were part of MAS' foreign assets, they were excluded when computing the foreign reserves because of restrictions on the repatriation of the funds, the central bank said.

But "over the past year, China has taken significant steps to liberalise access to its foreign exchange and securities markets for foreign institutional investors," it said in a statement.

"For example, access to China's interbank bond market was granted to most foreign institutional investors, and investment quotas were eliminated," it added.

"Restrictions on inbound and outbound remittances have been lifted and no prior approval is now required for the repatriation of funds invested in China's interbank bond market."

Bloomberg News said that China is moving to stabilise the yuan before it is included in the International Monetary Fund's reserve basket of currencies with effect from October 1 after an estimated $1 trillion in capital flowed out of the country in the past year.

Singapore's official foreign reserves totalled $248 billion as of end 2015, according to data from the MAS website.