Business / Economy

China's currency to essentially become world's great currency

(Xinhua) Updated: 2015-10-19 16:11

LONDON - China's renminbi, or Chinese yuan, is to become the world's third great currency, after the US dollars and euro, said Douglas Flint, group chairman of HSBC Holdings plc, in an interview with Xinhua.

However, Flint also pointed out that it will probably take a few decades for the renminbi to gain the share as a world reserve currency as the dollar and euro currently have.

Rise of chinese currency

Flint said he is excited to see the rapid growth of renminbi business globally, saying the inclusion of the renminbi into SDR's basket currencies would be symbol of maturity of the Chinese currency.

"The SDR is usually a symbol of maturity of the currency. I think more importantly as growing share of China's trade that is being denominated and settled in renminbi, that the comfort of the world is beginning to have in the renminbi as the investment currency," Flint said.

He also noted that more central banks have swap lines the People's Bank of China -- the Chinese central bank, and more reserve managers include renminbi in their reserve management plans.

"And all of that shows the maturity and confidence in the currency, so I think it is terribly important that the renminbi progresses toward full internationalization, and essentially become the world's third great currency, after the dollar and euro," he said.

The International Monetary Fund (IMF) executive board plans to discuss and decide in November whether to include the renminbi into its special drawing right (SDR) currency basket.

But he stressed that it would take some time to reach the full internationalization of the renminbi, as the market needs to acquire confidence in a yield curve of the currency's assets with more bonds issued in longer maturity, before it gains a greater part of foreign reserves managers' plans.

"I think it will take a few decades before Chinese currency rank alongside the dollar and euro in terms of the proportion of reserves. I think one of the most significant areas for the renminbi would be the expansion of the bond market within China, so there will be a much broader and deeper yield curve for Chinese bond issued domestically and then internationally," he said.

He believed that London is playing a pivotal role in promoting renminbi's internationalization process, as it is one of the most important markets for renminbi outside of Asia as well as the world's largest foreign exchange market, because of history, because of expertise, expertise and liquidity.

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