Mr Peter Schiesser, Group Chief Executive Officer, Payments Network Malaysia (PayNet),

Mr Wang Hongwei, Chief Executive Officer, Bank of China Malaysia,

Datuk Alvin Tay, Deputy Chief Executive Officer, Bank of China Malaysia,

Ladies and Gentlemen,

Assalamualaikum Warahmatullahi Wabarakatuh and good morning.

1. We are here today to celebrate the official launch of the appointment of Bank of China Malaysia as settlement bank for Renminbi (RMB) in the Labuan International Business and Financial Centre (Labuan IBFC). We are indeed pleased to see such a big turnout for this occasion.

2. On behalf of Labuan FSA, I would like to convey our heartiest congratulations to the Bank of China, Malaysia for being appointed as the first settlement bank for RMB in Labuan IBFC. For this, I would like to thank Bank Negara Malaysia for its approval to extend the existing Renminbi Onshore Settlement Institution (OSI) in Kuala Lumpur to also cover the Labuan financial market. And our special mention to CIMB Bank (L) Limited and Public Bank (L) Ltd for being the first two participating banks under this RMB settlement arrangement in Labuan.

3. This is an important event for all of us and we are proud that Labuan IBFC now joins the other financial centres to becoming accepted offshore RMB clearing hub. It marks another significant milestone in our efforts to develop the Labuan IBFC’s financial infrastructure and is in line with the increasingly role of Labuan IBFC in facilitating investment and trade flows in the Asia and ASEAN region.

4. As the world economic dynamism gravitate towards the Asian region and with China’s progressive liberalisation of the its financial market, these have provided strong impetus for the growing use of RMB in international financial markets. Over the years, we have seen the use of the currency accelerating and gaining recognition from the initial primary use for trade finance to also becoming one of the currencies of choice for investment. As an indication, in 2017, it was ranked the sixth most used currency for international payments compared to its 10th position in 2013. And even though the RMB holds a small percentage in the global market share in terms of currency holdings, but it is one of the most actively traded currency in the world.

Ladies and Gentlemen,

5. We all know the impact of the Chinese economy to this region has been significant. Last year, the trade volume between China and the ASEAN countries reached USD500 billion, an increase of about 14% from the previous year. It is expected to grow bigger particularly if the trade war between the US and China continue to persist. And this will be compounded by the investments that China is making under its Belt and Road initiative. The trade and investment opportunities that will be derived from the region are vast. Significantly, Labuan IBFC is part of this vibrant region, has made good strides in facilitating regional cross-border trade and investments and assisting in the integration of the markets in the region. It is for this reason that more than 70% of the Labuan entities originated from the Asia Pacific region.

6. At the business level, across all industry sectors in Labuan IBFC such as banking and insurance, the portion of non-resident business has already overtaken that of resident business. Many Labuan institutions are conducting more regional business rather than the early focus on resident or Malaysia business. Even though at present, the amount of total RMB-denominated financial assets held by Labuan financial institutions is still small, but when compared to the amount in 2017, there was a five-fold increase in amount of the assets. With the appointment of a RMB settlement bank in Labuan, we hope to raise greater awareness among the Labuan entities and to see more players getting involved in the RMB market, including using the currency for their business transactions. As we all know, Labuan IBFC does not have exchange control, therefore Labuan institutions can freely use the RMB for its business.

7. During the industry awareness briefing conducted by the Bank of China in February this year, we heard about how Labuan players can leverage on the facility to expand their RMB related business. Today, I would like reiterate the same and urge all you to seize the business opportunities that lie ahead of us, including providing RMB denominated trade financing and settlement services and issuing RMB bond issuance.

8. For investments, the Chinese government has made available various schemes for international investors wanting to invest in their onshore capital market, including the RMB Qualified Foreign Institutional Investor (RQFII) programme. I was told that the Malaysia quota (CNY50 billion) remains largely unutilised. This itself present an opportunity for Labuan players to make use of the quota and access the Chinese market to invest in RMB denominated instruments. Ladies and Gentlemen,

9. The processing of transactions in the world financial markets requires efficiency and speed. The strategic location of Labuan, which shares the same time zone as China together with its other value propositions such as no exchange controls and good fiscal incentives will give an added edge to the operations of the RMB settlement bank in Labuan IBFC. With the settlement bank, Labuan IBFC can leverage on the banking network of Bank of China and the services of Paynet to provide fast and convenient clearing services for RMB denominated transactions. This brings me to an important point. I believe it is very timely for the Bank of China to have establish its operations in Labuan IBFC by being licensed as a Labuan bank. In fact, I will bring all these for discussion when I next meet the banking regulator of China.

10. Moving forward, we certainly would like to see more Chinese banks, including the Industrial and Commercial Bank of China (ICBC), which is already a licensed bank in Labuan and other foreign banks to be also able to play the role as settlement or agent banks to expand and grow the footprint of RMB-based business. The industry needs to expand by aggressively enhancing the offerings of their products and services to a wider client base in the region. Labuan FSA on its part will continue to put the necessary conducive legislative and regulatory framework in place, and remain committed to further enhance the intermediary roles of Labuan IBFC in bridging the economies of the region.

Ladies and Gentlemen,

11. In closing, let me once again congratulate Bank of China Malaysia on its appointment as RMB settlement bank for Labuan IBFC. It is a milestone for Labuan IBFC and we hope with this appointment, RMB-based business in and through Labuan IBFC will flourish to greater heights.

Thank you.