China’s proactive promotion of the RMB’s international usage is in line with the economic transformation toward a more open development model, aiming to reduce foreign exchange volatility and contain external shocks, according to officials and experts.
The evolution of the country’s economic growth model and opening-up is accompanied by its currency’s internationalization, which is historically a rare experience for any country, according to Zhou Chengjun, director of the People’s Bank of China’s Financial Research Institute.
The RMB’s internationalization process is also accompanied by the global reallocation of supply and production chains, he said at the 87th International Forum on China Reform on Saturday.
“When the local currency has become a national means of payment, it can effectively reduce the dependence on other major currencies, such as the US dollar, in international investment and trade,” Zhou said.
The latest “RMB Tracker” monthly report on RMB progress toward becoming an international currency-put out by the Society for Worldwide Interbank Financial Telecommunication, or SWIFT-showed that by September, the yuan had retained its position as the fifth most active currency for global payments by value, with a 2.19 percent share, compared with 1.95 percent a year earlier. Overall, RMB payments value increased by 6.67 percent compared with August.
Zhang Ping, deputy director of the National Institution for Finance and Development, a financial think tank of the Chinese Academy of Social Sciences, said on Saturday that reforming the money issuance mechanism in China could promote the country’s status in the global financial system.
Including treasury bonds in the central bank’s balance sheet is an option, which requires better coordination of fiscal and monetary policies. So far, the government’s issuance of RMB-denominated treasury bonds as “safe-heaven assets” for foreign investors has not yet been sufficient, and its volume should be expanded, Zhang said.
A PBOC paper issued in April showed that after China’s exchange rate reform on August 11, 2015, “the global pricing mechanism of RMB has gradually matured”, along with a strengthened linkage between the exchange rates of onshore and offshore RMB. As the Chinese mainland has opened more channels to connect the offshore stock and bond markets, the “two-way “floating mechanism of RMB-denominated assets has improved.
“The internationalization of the RMB has never sought to challenge or replace the US dollar,” said Zhou from the PBOC, adding that the world may need more price signals determined by other currencies to achieve the restructuring of global supply chains.
China’s move to promote RMB usage aims to form an…
Read More: Experts: Promotion of RMB aims to reduce foreign exchange volatility