A timeline on the yuans ascent to global reserve status. Rmb, also known as yuan, is the official currency of peoples republic of china. In recent years it has implemented programs to attract more inflows. Beijing, 28 july 2017 latest data and insights from swift highlight five prominent factors that support a positive outlook for the internationalisation of the renminbi rmb, despite a decline in usage of the chinese currency in international payments with the swift business forum china taking place on 28 july 2017, a special edition of the rmb tracker has been published. May 11, 2017 china continues on the road to rmb internationalization, even though the pace of progress remains slow. Historical precedents for internationalization of the rmb. The working paper series is a continuation of the formerly named discussion paper series. The presentation will put a spotlight on the recently established pancanada rmb trading hubs, the first in north america. The rmb internationalization and the reform of the. In the next few years, policy support for a recovery in external economic activity will be biased in favour of belt and road initiative bri countries, driving demand for crossborder renminbi. It is driven by an increasing importance of china in the global economy, as well as by its efforts to reform the international monetary system.
Jeffrey frankel, harvard university august 2012 the author would like to thank menzie chinn, sebastian mallaby, and cynthia mei balloch. Chinas growing economic weight in the world economy is the fundamental driver for rmb internationalisation. Since joining the imfs special drawing rights sdr basket in october. Its rationales, state of play, prospects and implications hyosung park june 30, 2016 the author is currently ambassador at large at the ministry of foreign affairs mofa, seoul, korea, and an associate at the harvard kennedy schools mossavarrahmani center for. The gradual internationalisation of the rmb east asia forum. Rmb internationalization reduce exchangerate risks for chinese firms g t f di ffi i f chi fi i l i tit ti reasons to promote rmb internationalization and offshore bond market in hong kong, china greater funding efficiency for chinese financial institutions boost. The rmb s long road to internationalization nargiza salidjanova, policy analyst china is by all measures a global economic power. The twotrack road to rmb internationalization subtitle. Internationalization of the rmb and historical precedents. The geographic distribution of international currencies and. Rmb internationalization in the past, rmb could only be held inside china and all of chinas internal trade was settled in rmb. Renminbi internationalisation timeline infographic by globalcapital. Rmb internationalization has received strong support from central banks with more than rmb 3 trillion of bilateral currency swap agreements in place to promote rmb business in local markets. Apr 27, 2017 renminbi internationalisation timeline infographic by globalcapital.
After proceeding in fits and starts, the internationalization of chinas currency, the renminbi rmb, seems to be resurgent. In 20, the rmb was the 8th most traded currency in. Since joining the imfs special drawing rights sdr basket in october 2015, central banks have also begun to add rmb to their foreign exchange holdings. The paper investigates the determinants of geographical distribution of international currencies in global financial market transactions. Beijing chinas yuan, or the rmb, was admitted by the. The imi is a nonprofit academic institution and think tank focusing on research on monetary finance theory, policy, and strategy. The rationale behind this includes the drawbacks of the current international monetary system, the benefits for chinese enterprises and financial institutions, and the intention of inviting foreign pressure for domestic reform. Rmb internationalization china money network china money network.
By the end of 2014, rmb has ranked 5th as the most traded currency. Rmb internationalization accelerated in 2009 when china established the dim sum bond market and expanded crossborder trade rmb settlement pilot project, which helps establish pools of offshore rmb liquidity. This is how we define the internationalization of the renminbi. Chinas rmb internationalization strategy and capital account. Cny is the official iso currency code for chinas currency. Rqfii programs, the rapidly growing offshore rmb bond3 markets and the rise of offshore rmb. The rmb became the first emerging market currency to be. Its ten years since china development bank sold the first dim sum bond and since then there have been many.
Rmb internationalization makes remarkable progress. These included the rmb qualified foreign institutional investor program and direct. In the next few years, policy support for a recovery in external economic activity will be biased in favour of belt and road initiative bri countries, driving demand for crossborder renminbi services. Bloomberg terminal software updates stay connected. We implement a gravity model, in which international currency distribution depends on the characteristics of the source and destination countries.
Rmb internationalization continues to evolve on a number of fronts. China publicly acknowledges its plans to internationalise the rmb but the. Following the internationalization of the renminbi, on 30 november 2015, the imf voted to designate the renminbi as one of several main world currencies, thus including it in the basket of special drawing rights. The experimentation in renminbi rmb internationalization is about to take a new turn. Now it has reason to loosen the grip on the renminbi, which means the peoples currency. The three best precedents in the twentieth century were the rise of the dollar from 19 to 1945, the rise of the deutsche mark from 1973 to 1990, and the rise of the yen from. On july 6, 2012, china and singapore signed an enhanced free trade agreement chinasingapore free trade agreement that includes a promise to designate a chinese bank to clear rmb deals in singapore. Track rmb internationalization on the bloomberg terminal. To facilitate trade, rmb swap lines are available in many countries, but the total line amounts are not high.
On october 1, 2016, the rmb became the fifth currency in the international monetary fund s imf special drawing rights sdr basket, joining the ranks of official reserve currencies. The internationalization of the rmb will not only reduce chinas welfare losses due to seigniorage payments and capital losses, but also reduce exchange rate risk for chinese firms, raise the. From the perspectives of theoretical exploration, historical experience, and empirical research, this book. Rmb internationalization singapore style centre for. The geographic distribution of international currencies. Chronology of rmb going global state council of the. Challenger banks and rmb to shape year ahead january 2015 the continued internationalization of chinas currency and the emergence of challenger banks is set to define transaction banking in 2015. With a new renminbi clearing center, beijing takes an important step forward. Although fully liberalizing the capital account will bring new investors and inflows into china thus promoting economic development undertaking the process too quickly can result in large capital outflows and exposure to exchange rate shocks. Beijing, 28 july 2017 latest data and insights from swift highlight five prominent factors that support a positive outlook for the internationalisation of the renminbi rmb, despite a decline in usage of the chinese currency in international payments.
Renminbi internationalisation timeline infographic. Rmb internationalization belfer center for science and. Internationalization of the rmb csop asset management. Among chinabased corporates participating in the survey, 55% respond that either imports or. Chinas internationalization of rmb aims to facilitate the reduction of transaction costs of international trade, reduce exchange rate risks, and increase the number of financial transactions. Jul 18, 2012 the experimentation in renminbi rmb internationalization is about to take a new turn. Apr 28, 2014 the chinese governments active promotion of the internationalization of the renminbi rmb raises questions related to motivation, financial reform, credibility and international financial stability.
A timeline of the yuans internationalisation, south china morning post. Table 2 reports summary statistics on country characteristics of both source and destination countries. The paper examines to what extent the rmb is used internationally and outlines the major steps taken from the. To learn more about the situation in these and other areas, cigi senior fellow hongying wang speaks with cigiinet grantee barry eichengreen, professor of economics and political science at the. The rmbs long road to internationalization nargiza salidjanova, policy analyst china is by all measures a global economic power. In 20, the rmb was the 8th most traded currency in the world and the 7th most traded in early 2014. China continues on the road to rmb internationalization, even though the pace of progress remains slow.
Formal inclusion of the rmb in the special drawing right sdr basket of the international monetary fund imf oct 16. International monetary institute of the ruc imi was established on december 20, 2009. Bloomberg professional services connect decision makers to a dynamic network of. A more open capital account may also be transformative for chinas own financial markets. The rmb is viewed as an asset class, with market participants using the currency as an investment vehicle both onshore and offshore. Chinas rmb internationalization strategy and capital account liberalization this project explores how chinas renminbi rmb offshore market and offshore rmb centres have evolved since mid20, when the peoples bank of china pboc signed the first bilateral currency swap line with g7 countries. This paper explores policy alternatives for china to push further internationalization of the rmb, which will require changes to chinese financial and capital markets on both domestic and. Feb 12, 2017 download celents white paper, commissioned by dtcc, on rmb internationalization integrating the great wall with global capital markets here. Foreigners currently own about 2 per cent of the total amount outstanding in chinese securities markets, despite mainland chinese securities accounting for around 10 per cent of the global amount outstanding making them the third largest capital market in the world graph 3. From the perspectives of theoretical exploration, historical experience, and empirical research, this book discusses how the two strategies interact with each other. Historical precedents for internationalization of the rmb jeffrey frankel november 2011 this publication has been made possible by the generous support of the robina foundation. The internationalization of the renminbi, to first give it a definition, means taking the renminbi outside of china and allowing nonresidents to hold the renminbi extensively overseas and use it as a currency for routine payments, settlements, investments, and reserves. Trade can be carried out and invoiced in the rmb, although the percentage of exports denominated in rmb as a share of trade invoices is relatively low, accounting for about onefifth of total trading volume. Foreign banks face uphill battle in underwriting chinese domestic bonds.
Jan 01, 2018 for the rmb to eventually reign supreme, not only would the chinese leadership, particularly the countrys monetary authority, need the political will to prioritize the internationalization of its currency over concerns with domestic stability, it would also have to gain the support of the financial markets and other economic and political. China, the worlds second largest economy as well as the largest trading nation, is continuing to internationalize the chinese yuan or renminbi rmb with its global trade and economic reform activities. But they underestimate the importance of the third criterion, the depth of financial markets. Tighter capital controls in 2017 slowed the progress of renminbi internationalisation, as chinas outward investment dipped. The possibility that the renminbi may soon join the ranks of international currencies has generated much excitement. At the end of 2015, the th fiveyear plan proposed to steadily promote internationalization of the rmb. Download celents white paper, commissioned by dtcc, on rmb internationalization integrating the great wall with global capital markets here.
Appendix 4 timeline of rmb internationalization 2014. This inclusion marks an important milestone in chinas efforts to incentivize global central banks to buy rmb assets. Renminbi rmb internationalization and the one belt one road initiative are two important development strategies launched by china. Internationalization of the rmb and historical precedents for journal of economic integration, 2012, vol.
Note that the renminbi rmb is the name of chinas currency, while the yuan cny is the unit of currency. The new view is that, once these three factors are in place, internationalization of the currency can proceed quite rapidly. The project involved research workshops in london and beijing, which focused respectively on the opportunities and potential risks from the experiment of the shanghai ftz and on the latest dynamics of the offshore rmb centres as well as on the macroeconomic effects of chinas rmb internationalization and capital account liberalization. Rmb can now be held and invested offshore in various rmb centers, such as hong kong, singapore, london and frankfurt. Star market comes down to earth with a bang in china. The latest currencyswap deal between china and turkey is the latest in a series of agreements that will make the renminbi one of the top global trading currencies in the next few years.
The benefits and costs of renminbi internationalization liqing zhang and kunyu tao. The rmb internationalization is one of the major chinese financial strategies in the aftermath of the global financial crisis. The milestones on the path to rmb internationalisation. Despite the strict rules around its use, market players are punting on strong rmb growth in 2015, euromoneys trade finance survey reveals. Internationalization of the rmb and historical precedents article in journal of economic integration 273. Rmb internationalization nathan chow senior economist senior vice president disclaimer. The variable trade i is the ratio of bilateral trade between country i and country j to the total trade volume of. Wendy guo, cfa, recently sat down with tse yung hoi to discuss the basic concepts, background, and key milestones of renminbi rmb internationalization, as well as lessons to be learned from the internationalization of the japanese yen.
For the rmb to internationalize, the best practices in rmb processing need to be in place. In june 2015, the peoples bank of china issued the first rmb internationalization report. From the perspectives of theoretical exploration, historical experience, and empirical research, this book discusses how the two strategies interact with each ot. Thus some observers have recently forecast that the rmb may even challenge the dollar within a decade. Chinas rmb internationalization strategy and capital. The background and trend on the internationalization of rmb. Institute of world economics and politics iwep chinese academy of social sciences cass. Reviewing the current state, the paper finds that much progress has been made on rmb settlements for trade involving the peoples republic of china prc and on rmb denominated bond issuance in hong kong, china, but that rmb internationalization is still limited due to capital account controls. Since the late2000s, the peoples republic of china has sought to internationalize its official currency, the renminbi.
Its rationales, state of play, prospects and implications hyosung park june 30, 2016 the author is currently ambassador at large at the ministry of foreign affairs mofa, seoul, korea, and an associate at the harvard kennedy schools mossavarrahmani center for business. Scaling up rmb internationalization findings of the 2015 global rmb survey chart 1 and 2 breakdown by industry and annual revenue, chinabased respondents. Ultimately, internationalization of the rmb brings both risks and rewards. China appears to be content to slow the timeline for internationalisation and. The rqfii program allows rmb investment funds to be set up in hong kong and invest in mainland. At the same time, the yuans internationalization has a long way to go. Rmb internationalization nathan chow senior economist senior vice president key reasons progress so far implications to china and the world rmb internationalization 1 the importance of rmb internationalization to china 2 china is the second largest economy and the largest trading nation in the world reduce exposure to usd exchange rate. Why the internationalization of the rmb is set to slow.
Guan tao, china finance 40 forum cf40, former member of senior management china state administration of foreign exchange rmb internationalization road to 2020 is an event of the swisschinese chamber of commerce. Track rmb internationalization on the bloomberg terminal 7 central bank support rmb internationalization has received strong support from central banks with more than rmb 3 trillion of bilateral currency swap agreements in place to promote rmb business in local markets. China, qatar, and rmb internationalization the diplomat. We noted in our earlier report that one way to increase the international use of a currency is to encourage exporters and importers to demand. Internationalization of the rmb and historical precedents jei 333 the 1960s and 1970s, the japanese and german governments were particularly worried about the possibility that if assets were made available to foreign residents, an inflow of capital would cause the currency to appreciate and render exporters less competitive on world markets. Since the late2000s, the peoples republic of china prc has sought to internationalize its official currency, the renminbi rmb.
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