Globalisation of the renminbi – a key long-term goal for Beijing – is at its lowest point in three years as offshore dealing in the Chinese currency continues to shrink.

Standard Chartered’s analysts track offshore activity involving the currency, and their measure fell in February to its weakest point since March 2014. The 6.4 per cent fall in the bank’s Renminbi Globalisation Index was also the largest monthly drop since it began compiling the index.

The fall comes as China has worked to stabilise its currency since unexpected volatility in January 2016 triggered global market turmoil. This year, both the offshore and and onshore rates have traded in relatively tight ranges, which dealers believe has been engineered by the People’s Bank of China.

Crucially for China’s stability efforts, the offshore rate has also mostly traded at a stronger level against the dollar than its onshore cousin – a signalling trick designed to discourage the outflow pressure that built when a weaker offshore rate implied the currency would depreciate further.

Kelvin Lau, strategist at Standard Chartered, said the latest drop “adds conviction to our longstanding view that renminbi stability comes at the expense of renminbi internationalisation. China achieved its first capital inflows in 34 months in February, but mainly because of less outward direct investment and stricter capital controls on outflows.”

A fall in renminbi activity in Hong Kong was the biggest single contributor to the overall drop in activity, Standard Chartered said. Hong Kong is by far the currency’s largest offshore centre and renminbi deposits in the city have fallen by two-fifths in the past two years.

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