Rmb Non-deliverable Forward Market Development

Different degrees of foreign exchange control policies are applied in emerging markets and developing countries. That makes the opportunities of existing and developing for a special foreign exchange forward transaction—Non-Deliverable Forwards, NDF. The same markets for Chinese renminbi NDF also exist. Renminbi NDF is a kind of offshore forwards transactions. It doesn't need to deliver the Chinese renminbi, but by making a net payment in a convertible currency (typically the US dollar) proportional to the difference between the agreed forward exchange rate and the subsequently realized spot fixing to hedge the risk of Chinese renminbi exchange rate. Nowadays the turnover of renminbi NDF is already 10 times larger than onshore Chinese renminbi forward. Renminbi NDF transactions also occupied an important place in the whole renminbi forward market, has already influenced Chinese renminbi exchange rate and the development of China' s foreign exchange market. It' s important to investigate all the aspects of renminbi NDF market for improving Chinese forward foreign exchange market.The paper provides an overview of the development and the main characteristics of NDF market and introduces the situation and problems of the forward foreign exchange sale and purchase. Afterwards, the writer elaborates the main part of the paper-offshore renminbi NDF market and compares the forward foreign exchange sale and purchase with renminbi NDF. After analyzing the onshore and offshore foreign exchange forward markets, affiliating the characteristics of China' s foreign exchange market, the paper makes strategies about the offshore Chinese renminbi NDF market and suggestions about how to improve the onshore Chinese renminbi forward market by learning from the advanced experiences of renminbi NDF market.