Offshore Market Research Articles

Analysis of the Process of RMB Internationalization with Special Emphasis on the Offshore Bond Markets

With rapid economic growth in recent years, China has become the world's second largest economy. In the context of economic globalization, the process of RMB internationalization is gradually accelerating, and remarkable achievements have been made in cross-border settlement and offshore market. This paper first reviews the relevant theories of currency internationalization and analyzes the historical conditions of the development of RMB internationalization. It reveals the internal and external driving forces of RMB internationalization and sorts out its development context. Taking the offshore bond market as the research object, the currency structure in the international bond market is selected as an index reflecting the degree of currency internationalization, and the determining model of international bond proportion is established. Using the data of 28 countries from 2005 to 2019, the regression analysis shows that a country's economic size and domestic macroeconomic stability are positively correlated with the level of currency internationalization, while foreign exchange reserves are negatively correlated. According to the model, the difference between the theoretical demand and the actual issuance of RMB international bonds is nearly 10 times. Therefore, it can be inferred that the offshore RMB bond market has great development potential.

Application of causal analysis based on systems theory (CAST) to regulatory decision-making: A case study of the Sikorsky S92A

Ensuring aviation safety requires maintaining the integrity of product design and operations. The Federal Aviation Administration (FAA) regulates Transport Category rotorcraft design through 14 CFR Part 29, establishing Categories A and B of certification for multiengine rotorcraft, and requires aircraft to be operated according to the certified procedures in flight manuals. This paper presents a case study of the Sikorsky S92A, a Transport Category rotorcraft that is not certified for elevated helideck operations according to Part 29, but operates primarily in the offshore market through FAA-authorized exemptions from applicable regulation. To understand how this discrepancy between the aircraft's certification and operation came to be, a relatively new accident analysis methodology called Casual Analysis based on Systems Theory (CAST) is applied to a hypothetical accident involving an S92A, strongly based on a real incident described in a service difficulty report. The CAST results identify unsafe decisions on the part of flight crews, air operators, the aircraft manufacturer, and the FAA that contribute to the accident. We explain these contributions by identifying several systemic factors generalizable to the entire offshore rotorcraft industry that underlie unsafe decisions, and we propose a set of recommendations to address them.

Offshore Market Design in Integrated Energy systems: A Case Study on the North Sea Region towards 2050

Offshore grids, with multiple interacting transmission and generation units connecting to the shores of several countries, are expected to have an important role in the cost-effective energy transition. Such massive new infrastructure expanding into a new physical space will require new offshore energy market designs. Decisions on these designs today will influence the overall value potential of offshore grids in the future. This paper investigates different possible market configurations and their impacts on operational costs and required congestion management, as well as prices and emissions. We use advanced integrated energy system optimisation, applied to a study case on the North Sea region towards 2050. Our analysis confirms the well-known concept of nodal pricing as the most preferable market configuration. Nodal pricing minimises costs (0.2–1.6 b€/year lower) and CO2 emissions (0.6–5.6 Mton/year lower) with respect to alternative market designs investigated. The performance of the different market designs is highly influenced by the overall architecture of the offshore grid, and the rest of the energy system. E.g., flexibility options help reducing the spread between the designs. But the results are robust: nodal pricing in offshore grids emerges as the preferable market configuration for a cost-effective energy transition to carbon neutrality.

Offshore Market Design in Integrated Energy systems: A Case Study on the North Sea Region towards 2050

Offshore grids, with multiple interacting transmission and generation units connecting to the shores of several countries, are expected to have an important role in the cost-effective energy transition. Such massive new infrastructure expanding into a new physical space will require new offshore energy market designs. Decisions on these designs today will influence the overall value potential of offshore grids in the future. This paper investigates different possible market configurations and their impacts on operational costs and required congestion management, as well as prices and emissions. We use advanced integrated energy system optimisation, applied to a study case on the North Sea region towards 2050. Our analysis confirms the well-known concept of nodal pricing as the most preferable market configuration. Nodal pricing minimises costs (0.2–1.6 b€/year lower) and CO2 emissions (0.6–5.6 Mton/year lower) with respect to alternative market designs investigated. The performance of the different market designs is highly influenced by the overall architecture of the offshore grid, and the rest of the energy system. E.g., flexibility options help reducing the spread between the designs. But the results are robust: nodal pricing in offshore grids emerges as the preferable market configuration for a cost-effective energy transition to carbon neutrality.

Optimization Model for Selection of the Offshore Fleet Structure

Over the past century, with an accelerated increase in world energy demand, oil remained the most intriguing energy source, while oil exploration and production evolved from an onshore to an offshore exploration and production facility. In logistic and operational planning, the supply of offshore installations is the primary dependent of offshore supply vessels (OSVs). OSVs are classified into two main specialized groups, Anchor Handling Tug Supply (AHTS) and Platform Supply Vessels (PSVs). The establishment and maintenance of offshore oil installations require considerable financial resources for the hire of OSVs, which increases the oil exploration and production operator’s overall budget. Planning the offshore fleet structure aims to reduce expenses and increase the utilization of OSVs. This work will analyze the actual data of the southwestern African offshore market based on 24/7 working time and the use analysis of marine activities to define the parameters of the offshore fleet structure. The research results will be used to develop a methodology for modeling the optimal infrastructure of the offshore fleet. With statistical data of all support vessels’ activities and the use of linear programming (LP), it is possible to determine the vessel’s employment pattern and the optimal fleet structure by type and number of OSVs.

A virtuous debtor: South Korea in the Eurocurrency market, 1969 – 1984

This article examines the case of South Korea, in which the external private debt management leveraged the symbiosis of the authoritarian regime and the neoliberal policies in a less-developed country. In the pursuit of post-war growthamship, against the meddling of allies with official loans, the military government turned to the Eurocurrency market, an offshore market for major currencies to meet the triple goal of diversifying foreign reserve sources, financing the heavy-chemical industrialization, and underpinning the diplomatic struggle against North Korea. The dependence on the Euro-capital empowered technocrats at the Economic Planning Board to manage the sovereign borrower’s external indebtedness. Against the neo-mercantilist policy, they introduced price stability measures and maintained low debt-service-ratio so as to appease international banks and international financial organizations. Their success enabled the military government to eschew the debt crisis of 1982 and bolstered the legitimacy of the military government. In return, the technocrats resorted to the authoritarian rule to implement market-oriented policies against the labor the neo-mercantilist interests. Drawing on multi-archival sources, this article engages to the burgeoning scholarship on the relations between international banks and authoritarian regimes by analyzing the external debt-driven neoliberal turn in the developing world.

Estimating the effect of international crude oil prices on RMB exchange rate with two-way fluctuation spillover.

International crude oil prices has become one of the important factors that affect exchange rate fluctuation. By combining TVP-VAR model and DY time-varying spillover index, this paper measures the two-way fluctuation spillover effect between international crude oil prices and RMB exchange rate from 2011 to 2022. The research results show that: (1) There are obvious time-varying characteristics among international crude oil prices, onshore RMB exchange rate and offshore RMB exchange rate, and they are strengthened when major events occur at home and abroad; (2) The spillover and absorption level among international crude oil prices, onshore RMB exchange rate and offshore RMB exchange rate is relatively limited; (3) After the "exchange rate reform on August 11", the market participation of RMB exchange rate has increased year by year, and the offshore RMB is mainly net spillover, while the onshore RMB is mainly reflected as a recipient; (4) The offshore RMB exchange rate has a driving effect on the onshore RMB exchange rate. Based on this, it is necessary to orderly promote the development and utilization of new energy, actively promote the market-oriented reform of RMB exchange rate, play the leading role of offshore market, and accelerate the construction of crude oil-RMB settlement system.

Time-frequency volatility spillovers between Chinese renminbi onshore and offshore markets during the COVID-19 crisis

This article investigates the time-frequency volatility spillovers between Chinese renminbi onshore and offshore markets during the COVID-19 crisis. By employing wavelet analysis, we find that: (i) As the timescale increases, the volatility spillovers between renminbi onshore and offshore markets are gradually significant and bidirectional, and they have increased significantly after the COVID-19 outbreak. (ii) The significant volatility spillovers of the two markets are decomposed into many sub-spillovers on different timescales, most possibly precipitated by heterogeneous behaviors across various investment horizons. (iii) During the COVID-19 crisis, the onshore market has the dominant position on price discovery and leads the offshore market.

China's trilemma: Exchange rate marketization, RMB internationalization, and exchange rate pricing power

We employ a threshold vector error correction model approach to investigate the impact of China's exchange rate marketization reform in August 2015 on the linkage between renminbi (RMB) onshore (CNY) and offshore (CNH) exchange rates and the impact of post-reform policy interventions by the People's Bank of China (PBoC) on CNY–CNH linkage. We find that, after the reform, price power over the RMB exchange rate changed from the onshore to the offshore market, in which the CNH significantly leads the CNY, and the CNY ceased to lead the CNH. Since the reform, the PBoC has faced a trilemma of exchange rate marketization, RMB internationalization, and maintenance of the onshore market's pricing power over the RMB exchange rate. The PBoC regained its RMB pricing power by reinforcing control over the onshore exchange rate and tightening offshore RMB liquidity, at the expense of setbacks in both exchange rate marketization and RMB internationalization.

Financial and Logistical Service Strategy of Third-Party Logistics Enterprises in Cross-Border E-Commerce Environment

As competition in the cross-border logistics-service market intensifies and demand rises, enterprises with third-party logistics (3PL) combine logistical and financial services to provide comprehensive services. This study considers a secondary supply chain consisting of a cross-border e-commerce enterprise and a 3PL enterprise. When cross-border e-commerce enterprises lack funds, 3PL enterprises can provide them with inventory pledge loans. Thus, we establish a Stackelberg game model between the abovementioned parties. We consider the stochastic fluctuation of exchange rate and demand, establish a combined decision model of the logistics-service level and financial service pledge rate of the 3PL enterprise when logistics services affect offshore market demand, and prove the existence of an optimal solution. Studies have shown that the optimal logistics-service level and pledge rate increase with an increase in import tariffs and logistics sensitivity coefficients in offshore markets. Meanwhile, they decrease with an increase in the capability coefficient of 3PL enterprises, exchange rate fluctuation, default rate, and price sensitivity factor in offshore markets. In addition, the more capable 3PL enterprises are, the greater the expected profitability of the entire supply chain. We also utilize authentic data to verify the abovementioned inference and establish its validity.

Offshoring software development: india/china choice a transaction costs perspective

The purpose of this paper is to interpret the decision to choose a country to entrust its service providers with the software development activity. Based on transaction cost theory, the cost measurement waxes derived from this theory are used to compare two competing countries in the Offshore market: India and China. Salary, ICT, language, trust and economic and institutional stability are the points of differentiation on which this study is based. By using an exploratory and a comparative study based on secondary data from different statistical sources, the study confirms that according to the TCT, India remains a more appropriate choice than China for client firms seeking to outsource software development activity. This paper is completely original and proposes a new research component that links TCT predictions with the country chosen as a part of Offshore’s strategy.

Status and prospects of HKG offshore market based on RMB internationalization: A non-linear regression model using Granger-causality test

Over the past eighteen years, Hong Kong has developed the simple deposit business of the local RMB market into the world’s largest offshore RMB hub by virtue of its advantages as an international financial center. Firstly, this paper introduces the specific situation of cross-border use of RMB, collects historical data on the offshore RMB market in Hong Kong through a desktop research approach, and reviews the development of the offshore RMB market in Hong Kong using the process of RMB internationalization as a clue. Secondly, the current opportunities and challenges facing the Hong Kong offshore RMB market are elucidated from three dimensions: demand, supply and exchange rate movements of RMB in the Hong Kong offshore market, respectively. To further illustrate the potential development of Hong Kong’s offshore market, this paper takes the development of offshore financial markets and RMB internationalization as a specific entry point, constructs a quantitative model, and obtains the conclusion that offshore financial markets have a positive impact on the internationalization process of RMB. On this basis, the paper illustrates the development potential of Hong Kong’s offshore market in the context of its specific situation. Finally, synthesizing the reflections in the whole paper, this paper makes certain analysis on the development direction of Hong Kong’s offshore market in the light of the blueprint of the national 14th Five-Year Plan.

RMB Internationalization Promotes the Transformation Analysis of Import and Export Enterprises

In 2009, the pilot project of RMB settlement for cross-border trade was started, which started the process of RMB internationalization. Later, China has made a series of progress in cross-border trade and investment settlement, RMB offshore market, and monetary government cooperation. In 2016, China joined the Special Drawing Rights currency basket, and great progress was made in the internationalization of the RMB. However, in 2014, RMB’s exchange rate entered into two-way fluctuation channel, increasing the uncertainty; In 2015, the share of RMB internationalization because of the depreciation of RMB decreased significantly, and the RMB balance in Hong Kong decreased by nearly 40% in 2018 compared with 2015. The outbreak of COVID-19 in 2019 and the global economic recession have made it increasingly difficult for China’s foreign trade enterprises. But with the in-depth implementation of the strategy of “Belt and Road”, and the outbreak gradually normalized, and economic recovery, the foreign trade enterprises will usher in a new step of development opportunities, how to seize the opportunity under the new situation, with the deepening of RMB internationalization, open their market, stimulate enterprise vitality, improve profits, at the same time promote the country’s economic growth. Becaming a question which worths discussing.

Analysis of Hong Kong’s financial market advantages and its new development as a global RMB offshore financial market

The establishment and development of an offshore RMB financial market has far-reaching implications. As an important component of China’s offshore financial market, Hong Kong’s RMB offshore financial market is an objective prerequisite for China’s long-term financial liberalization and the establishment of a new “double-loop” development model. Although Hong Kong’s offshore RMB financial market has made great progress in the past decade, there are still some shortcomings. This paper analyzes the development trend of Hong Kong’s offshore RMB from the perspective of the characteristics and advantages of Hong Kong’s RMB offshore market, and identifies the problems, and then discusses the development direction and focus of Hong Kong’s offshore RMB.

What determines the long-term volatility of the offshore RMB exchange rate?

ABSTRACT China has been promoting the internationalisation of the RMB for two decades. As a result, its offshore foreign exchange market has been substantially revitalised, despite that China’s capital market remains partially open. The movements of offshore exchange rates can provide crucial clues to understanding the offshore market structure and the effects of interventions by Chinese monetary authorities. Using the GARCH-MIDAS model, this paper examines how the degree of openness and economic fundamentals – both observed and unobserved – affect the long-term volatility of offshore exchange rates. We find that, first, trade openness attenuates the long-term volatility, while financial openness has no effect. Specifically, the use of bilateral currency swap agreements and the relaxation of capital control are associated with lower volatility, while stock market connect programs tend to increase the volatility. Second, observed fundamentals, including relative measures for growth, interest rate, and money supply, have significant negative effects on offshore volatility. Third, although economic policy uncertainty and market risk affect long-term volatility, liquidity does not appear to be a culprit of volatility. In terms of FX interventions, direct intervention decreases the volatility, while oral intervention increases volatility.

Technology Focus: Subsea Systems (August 2022)

As goes the offshore market in general, so follows the subsea arena, and both are experiencing an upturn because of an increase in commodity prices and the potential that offers to operators focused on optimizing existing assets. In current offshore operations—with an emphasis on environmental, social, and governance performance—subsea has an increasingly important role to play. Subsea tiebacks in particular offer opportunities to increase asset productivity while minimizing environmental impact on an incremental production-per-barrel basis. With that in mind, the papers selected provide an overview of interest and immediate relevance to SPE members and JPT readers, regardless of where those operations are taking place. Some of the longstanding issues currently of greatest concern are the jumping-off point for a review intended to focus on optimizing subsea developments. Speed of asset delivery, system reliability, data and information management, and project repeatability are the general wish list for subsea engineers looking to improve efficiency, and all are covered in the papers presented. Within the industry, the push for a standard approach—not so much with hardware and components but more so with overall subsea project management—is a high priority. Additionally, building on the learnings from mature subsea areas pushes development with a focus on subsea reliability, increasing the global nature of these challenges yet maintaining a specific focus on local issues. Finally, with a nod to the future, the electrification and automation of subsea assets is presented, the intention being that the industry is ready to combine state-of-the-art system and project management with cutting-edge technology to fully deliver on the potential of subsea. Recommended additional reading at OnePetro: www.onepetro.org. OTC 32010 - Novel Concept Approval and Technology Qualification of Systems and Vessels for Deep‑Sea Extraction of Polymetallic Nodules by Tyson Breedlove, American Bureau of Shipping, et al. OTC 32028 - Key Technology Qualification of a Full‑Scale Subsea Chemical Storage and Injection System by Art J. Schroeder, Subsea Shuttle, et al. OTC 32100 - Unlocking Resident Underwater Inspection Drones or Autonomous Underwater Vehicles for Subsea Autonomous Inspection: Value Creation Between Technical Requirements and Technological Development by Matteo Mattioli, Saipem, et al.

Does the offshore market matter to China’s exchange rate policy?

ABSTRACT The central parity rate (CPR) is a key instrument for the People’s Bank of China (PBC) to manage the Renminbi (RMB) exchange rate. The current method of CPR formation rests on a gauge of the ‘demand and supply conditions’ in the foreign exchange market. But there are two markets for RMB, the onshore market for CNY and the offshore market for CNH. In this article, we study the role of the offshore market in the CPR formation mechanism and find that changes in CNH have statistically significant predictive power on CPR, especially after the ‘8.11’ reform of 2015. This suggests that PBC does consider the conditions in the offshore market as well as those in the onshore market.

Does Shanghai International Financial Center Promote RMB Internationalization?

The construction of the Shanghai International Financial Center was completed in 2020, which signaled the new age of financial reforms in China. The Shanghai International Financial Center plays a significant part in the progress of RMB internationalization. However, empirical proof of the impacts remains few. So, we conducted an empirical analysis to determine if the Shanghai International Financial Center promoted RMB internationalization effectively. To obtain robust results, we conducted regressions with Newey–West standard errors, Cochrane–Orcutt estimation, and Prais–Winsten estimation. We observed that the Shanghai International Financial Center has significant positive effects on RMB internationalization by expanding financial scale and activity. The findings give adequate evidence to support the theories advanced in prior research, and the methodology and indicators used in the study may serve as a guide for future research. We made several policy discussions of the findings regarding the continued expansion of the offshore market and capital liberalization within Shanghai.

Original sin in corporate finance: New evidence from Asian bond issuers in onshore and offshore markets

on the surprising phenomenon in which firms face difficulty issuing in domestic currency even in the home market, especially in emerging markets. Could this be due to “original sin” which has been familiar to sovereign bond issuance? In its new incarnation, original sin refers to the difficulty firms in many emerging markets have in borrowing domestically long-term, even in the local currency. We infer the nature of original sin from 5,901 financing decisions by firms in seven Asian emerging markets over a period of 20 years. Our sample period covers an episode when bond issuers had a choice between a less developed but growing onshore market, which varied across countries in the level of development, and a deep and liquid offshore market. We find that even in countries with onshore markets, it is often easier for unseasoned firms to issue offshore (in foreign currency) than to issue onshore, but changes in market development reverses this effect. In addition, once such a firm becomes a seasoned issuer, it is absolved from domestic original sin and is then able to act opportunistically and go to the market favored by interest differentials.

Return and volatility connectedness of Chinese onshore, offshore, and forward exchange rate

AbstractWe analyze the return and volatility connectedness between the three Chinese exchange rate markets, namely, the onshore market, the offshore market, and the nondeliverable forward offshore market. Our results show that connectedness exhibits an increasing trend with fluctuations during periods of internal reforms and external shocks. For example, the connectedness increased with China's exchange rate reform on August 11, 2015 but dropped after that. Furthermore, we document that the offshore spot and a forward market dominated the other rates in return spillovers. In contrast, both the offshore and onshore forward rates dominated the other rates in volatility spillovers.