RMB internationalization is striding forward

Recently, the People's Bank of China and the Swiss National Bank (Swiss Central Bank) signed a memorandum of cooperation to reach an agreement on the establishment of a RMB clearing arrangement in Switzerland, and agreed to expand the RMB Qualified Foreign Institutional Investor (RQFII) pilot area to Switzerland with an investment quota of 50 billion yuan. This is another layout for China to establish RMB clearing arrangements overseas. Although the internationalization of the renminbi is a long-term process, with the implementation of step-by-step concrete measures, the pace of the renminbi integration into the world will be more solid and more stable.

With the continuous expansion of China's foreign trade and the acceleration of Chinese enterprises' going global, especially the “Belt and Road” construction promotion and foreign investment, the RMB is playing an increasingly important role in the international arena, and it is highly regarded by central banks and businesses. Banks and companies favor. Taking stock of the trajectory of RMB internationalization last year, we can find that China has signed or renewed bilateral currency swap agreements with Switzerland, Sri Lanka, Russia, Kazakhstan, Qatar, Canada, Thailand and other countries, making bilateral bilateral currency swap agreements with China. The country has reached 28, with a total amount of more than 3 trillion yuan. Last year, the yuan also realized direct transactions with the won, Singapore dollar, euro, pound and New Zealand dollar, plus the previous yen, Australian dollar, Malaysian ringgit and Russia. Rubles, there are as many as nine non-US dollar currencies that can be directly traded with the renminbi.

What is remarkable is that the development of the offshore trading center of the renminbi is particularly rapid. In the past year, China and the central banks of the United Kingdom, Germany, France, South Korea, Canada, Australia, Luxembourg, Qatar, Malaysia, Thailand and other countries signed a settlement agreement for RMB business. This allows the RMB to be settled in Asia, Europe, North America, Oceania, and the Middle East. Major banks such as Bank of China, Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank, and Bank of Communications have become the major clearing banks of the renminbi. These banks are able to directly handle renminbi business under licenses around the world, helping to reduce renminbi overseas payments. The risks have prompted more international trade to be settled in RMB. According to statistics, the amount of cross-border RMB settlement was 3.58 billion yuan in 2009, and now it has exceeded 16 trillion yuan. It has grown more than 4,000 times in five years. It is a leaps and bounds, and the momentum is gratifying.

At present, the RMB has become China's second largest cross-border payment currency. According to statistics from the Global Banking Financial Telecommunications Association (SWIFT), the volume of trade settled in RMB is second only to the US dollar. Nearly 20% of China's import and export trade has been settled in RMB. HSBC expects that one-third of China's foreign trade will be settled in RMB this year, and half of China's trade with emerging markets will be settled in RMB. In New Zealand, the renminbi has been officially included in the country's local currency trade-weighted index, with the renminbi accounting for more than 20%, accounting for the second or even higher than the US dollar. In terms of financial settlement, the value of RMB payment has jumped from the 14th place in the world ranking two years ago to the current seventh place. It is worth mentioning that the Shanghai-Hong Kong Stock Connect, which is widely expected from all walks of life, has officially opened its trading in November last year, opening a new door for the repatriation of the renminbi deposited overseas. Shanghai-Hong Kong Stock Connect allows overseas funds to invest in stocks listed on the Shanghai Stock Exchange with a total amount of RMB 300 billion. Mainland investors can buy Hong Kong stocks through Shanghai-Hong Kong Stock Connect with a quota of RMB 250 billion. The implementation of Shanghai-Hong Kong Stock Connect has not only increased the investment channels of overseas RMB, but also improved the liquidity of offshore RMB in Hong Kong and supported the long-term competitiveness of the RMB as an international currency. It is a landmark event in the process of RMB internationalization.

At the same time, with the acceleration of the internationalization process, the renminbi is expanding its investment and reserve currency functions. The renminbi is no longer limited to the single function of trade settlement currency. Relevant institutions in the UK, Australia and Canada have issued offshore renminbi bonds, and France has indicated that it is preparing to issue renminbi-denominated government bonds. In October last year, the British Treasury announced the appointment of three banks to issue RMB government bonds, becoming the first foreign government to issue RMB government bonds. As of November last year, the balance of overseas RMB “dim sum bond” bonds has exceeded 500 billion yuan, an increase of more than 180 billion yuan from the beginning of the year. The UK also included the renminbi for the first time in the UK foreign exchange reserves. According to statistics, more than 30 central banks and monetary authorities have so far included RMB in foreign exchange reserves. The renminbi is used as a reserve currency, indicating that the renminbi has been recognized internationally. At present, many market participants and economists expect that the RMB will soon be included in the IMF's Special Drawing Rights (SDR) basket of currencies, thus becoming a more widely accepted reserve currency.

Looking forward to the future, with the rapid development of cross-border RMB business, the internationalization of the RMB has made solid progress and achieved remarkable achievements. However, compared with other major international currencies, RMB internationalization is still at a preliminary stage of development. The level of internationalization in the financial sector is still low. For example, the size of the RMB as a cross-border lending currency is very small. The RMB has just started as an international investment currency and its scale is relatively small. The RMB is used in international bond and derivative transactions. The actual proportion of foreign exchange transactions is not high. To develop into an international currency that is comparable to the US dollar and the euro, the renminbi will intensify its efforts in the four aspects of borrowing currency, trading currency, investment currency and reserve currency, and make new breakthroughs in the financial sector.

As China becomes a net exporter of direct investment, the expansion of China's capital output will continue to bring demand for foreign investment in the renminbi, becoming a new important engine for the internationalization of the renminbi. Some experts believe that the internationalization of the renminbi should achieve breakthroughs in the cross-border financial sector. It is necessary to seriously study the opening of capital and financial accounts, and pay attention to the marketization of interest rates and exchange rates, the monetary policy and the monetary environment at home and abroad. Relevant parties should conduct risk control research, make plans, and proactively arrange response measures to help the renminbi move more stable and faster on the international road.

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