Hong Kong – The steady emergence of the Renminbi (RMB) as an international currency holds the prospect of a range of potential benefits for global investors and economies. But to achieve those benefits, stronger transatlantic and transpacific vigilance is required, along with deeper public and private sector cooperation, according to a white paper on RMB internationalisation.
The paper – entitled “Renminbi Ascending: How China’s Currency Impacts Global Markets, Foreign Policy and Transatlantic Financial Regulation” was developed by Atlantic Council’s C. Boyden Gray Fellow on Global Finance and Growth, Chris Brummer, and sponsored jointly by the City of London Corporation, Standard Chartered and Thomson Reuters.
The increasing role of the RMB is a constructive development for international markets as capital account liberalisation portends global economic rebalancing and sustainable growth. But for the process to reach maximum credibility and effectiveness, greater transparency, along with steady and credible institutional and regulatory reforms will be necessary in order to promote the currency’s acceptability, especially as China’s growth moderates. Continuing macroeconomic as well as macroprudential reforms will also form the foundation of a healthy RMB financial system as governments and multilateral institutions increase their use of the currency.
The currency’s internationalisation is not, however, an exclusive matter of Chinese governance and policy. Given the unique nature of the reforms, active cross-border coordination and capacity building, coupled with the institutionalisation of non-discrimination policies by both China and its transatlantic partners, is necessary to support the development of the currency. Doing so will not only bolster market liquidity and depth, but it will also help alleviate potentially significant regulatory and foreign policy irritants that threaten to undermine cooperation on one of the most important market and economic developments of the 21st century.
Mark Boleat, Policy Chairman at the City of London Corporation, said: “On a global scale the importance of RMB has continued to increase. RMB internationalisation is an unprecedented financial event that is irrevocably changing the global market, and presenting an enormous opportunity for both Chinese and the world’s business to trade and invest. The City of London, along with other key UK-based stakeholders, will continue to support this development and other financial reforms in China, which is in line with China’s plan for gradual market liberalisation and global integration.
“This report shows the significance of the RMB’s rise to transatlantic and transpacific relations, and the importance of different markets working together effectively to maximise economic benefits for all. As the international usage of the RMB grows there will be a need for the offshore RMB market to be served by a number of financial centres in different parts of the globe. We fully recognise the importance of international coordination on this, and are open to engagement with other market players to ensure a smooth internationalisation process.”
Standard Chartered’s Group Head for Transaction Banking Alex Manson said: “The RMB is on a remarkable, and critically, accelerating trajectory of internationalisation… From deposit accounts just over a decade ago, to a new currency for international Trade, the growing number of channels for physical investment, capital raising, flows of managed wealth; the RMB’s place in the world today and how it will evolve is hugely relevant to companies, investors, and governments alike. We need to think today of the RMB as the next “G4” currency, and understand the implications of that for the near future”
“Last year Thomson Reuters has witnessed a 350 percent increase in offshore RMB trading on our FX electronic trading platform, testament to the staggering growth and development of the currency over the past ten years,” says Adrian Gostick, Managing Director, Financial & Risk, China, Thomson Reuters.
“As the leading platform provider for offshore electronic CNH/Renminbi trading, the Thomson Reuters business sits at the intersection of currencies, commerce and regulation. Financial institutions and corporates globally will be impacted by changing developments and challenges surrounding the internationalization of the RMB – from changing sanctions, tax rules, legal standards as well as opportunities in Mainland China, Hong Kong and the newly created free trade zones.”