Renminbi internationalisation will gather pace

Abstract

Subject Renminbi internationalisation. Significance The State Administration of Foreign Exchange on May 12 announced that it will adopt the latest international accounting standards for its balance of payments data. This may strengthen China's bid this year for inclusion in the IMF's Special Drawing Rights (SDR) currency basket. Central bank governor Zhou Xiaochuan said last month that China is making the renminbi more 'freely usable' in order to qualify. Liberalisation of the renminbi has been accelerated since the global financial crisis, as China seeks to establish a more balanced economy, including a larger and open financial sector and -- with it -- a convertible currency and more open capital account. Impacts China does not want the renminbi to replace the dollar as the world's reserve currency. The renminbi bond market will grow as the division between onshore and offshore markets erodes. Larger quotas are likely for foreign financial institutions to invest in China's domestic financial markets. More Western governments are likely to issue sovereign debt in renminbi. There is still much scope for greater use of the renminbi in trade settlement.