On October 27th, authorized by the People’s Bank of China, Foreign Exchange Trade Center announced the launch of directly trading of the RMB against the Singapore dollar in the interbank foreign exchange market. This movement shows the acceleration of internationalization of RMB.
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In fact, since the financial crisis, China has accelerated the pace of promoting RMB internationalization. Since 2009, People’s Bank of China has signed bilateral currency swap agreements with more than 20 countries such as Swiss, Brazil, and South Korea. At the same time, with the acceleration of the process of internationalization of the RMB, the RMB clearing system has been initially established globally. Now, the RMB clearing system covers Asia, Europe, Australia and so forth.
In addition, the direct multi-currency transactions of the RMB have been carried out with Japanese yen, Australian dollar, New Zealand dollar, British pound, Korean won. On September 29th, after being authorized the by the central bank, China Foreign Exchange Trading Center announced the launch of direct trading of RMB against the euro in the interbank foreign exchange market. In the past few years, most developed economies were experiencing the economic recovery, which to some extent provided a good opportunity for the internationalization of the RMB.
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After years of continuous development, now the internationalization of RMB has made huge achievements, and the Chinese Yuan has also been recognized and supported by more and more countries.
Recently, the best proof of RMB internationalization is that the world’s first offshore RMB foreign sovereign grade bonds will be issued in the UK. According to the UK Treasury announcement, UK has officially launched the first program of only issuing RMB sovereign bonds, and delegating Bank of China, HSBC and Standard Chartered Bank as the lead underwriter for the offering. The market expected the issuance by Bank of England would reach about 2 billion Yuan, or about 200 million pounds.
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Moreover, in the recent annual meeting of IMF and the World Bank, Xiaochuan Zhou said that some countries had already been secretly using the Yuan as foreign exchange reserves.
In fact, as the world’s second largest economy, China’s influence in the international arena has been rising in recent years, and the RMB’s ranking in international currency is also rising. According to the data of SWIFT, RMB’s ranking in the world’s major payment currency has jumped to seventh place from fourteen over the past 2 years. Moreover, since 2005’s the exchange rate reform, the appreciation of RMB against the US dollar has reached nearly 30%.
People’s Bank of China Deputy Governor Yi Gang also said that many officials in IMF and other governments were obviously aware of increasingly needs and choices of RMB and when conditions are right, the RMB will become one of major currencies in the SDR basket.
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Of course, becoming one of the members of SDR indicates the outcome of internationalization of the RMB, but that does not mean that RMB internationalization successes. The RMB being need by more counties and the long-term recognition of RMB not only needs Chinese government to keep capital accounts open, but also depends on the steady development of Chinese economy and the improvement of the comprehensive strength.
With the continuous improvement of the supporting measures, the openness of China’s capital accounts will continue to increase. However, the development of China’s political, economic, cultural, military and other comprehensive strength is also very crucial. Conversely, if a country’s own economy cannot achieve high-speed and stable economic development, its currency status will eventually decline.