It is clear that China’s goal of becoming the world’s largest economy by 2020 and the internationalisation of the RMB are two initiatives that are symbiotic in nature. With the recent IMF decision to include the currency in the SDR currency basket, what does the future hold for the RMB?
January 06, 2016 | Sam AhmedChina’s economy and the renminbi (RMB)
The emergence of China as a global economic powerhouse has been the result of consistently strong growth over the past three decades combined with a booming export industry that today is the world’s largest. While the domestic economy is yet to open its current account and allow for free capital flows, there have been significant efforts by the authorities to internationalise and promote the use of the RMB outside China. It is clear that China’s goal of becoming the world’s largest economy by 2020 and the internationalisation of the RMB are two initiatives that are symbiotic in nature. At the recent Asian Banker RenminbiWorld 2015 conference in Beijing, much of China’s strategy to internationalise the RMB by building offshore centres and linking these to development projects outside China such as One Belt One Road, was discussed by speakers and amongst panel members that included the likes of Hans Eichel, former finance minister of Germany, Sherry Madera, Minister-Counsellor & Director, China - Financial Services and Technology at UK Trade & Investment (UKTI) and Tay Hwee Ling, chief representative of the Monetary Authority of Singapore in Beijing.
A three-prong approach
Since 2009, the Chinese government has implemented a host of policies to internationalise the RMB. These have included three specific measures; promoting trade finance in RMB, encouraging the use of RMB as an investment currency and persuading central banks to include the RMB in the basket of reserve currencies.
The first initiative of encouraging cross border trade settlement and payments to take place in RMB has already been paying dividends, with the RMB leapfrogging from 35th place in 2010 to fourth place in 2015, by value of payments according to SWIFT. The RMB currently ranks behind the US dollar, the euro and the British pound and is the fastest growing currency globally. Ac...
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Market Developments, Markets & Exchanges, Rmb, Transaction BankingKeywords:China, RMB, IMF, SWIFT, ADB, HKMA, RTGS, CIPS, Special Drawing Rights
