Renminbi powers ahead with its strong global expansion

Bank of China predicts dynamic spread of currency's use abroad to continue apace

The positive long-term trend for the internationalization of the Chinese currency appears certain, as the renminbi continued to be the nation's second-most-used currency for cross-border payments in 2017, according to Bank of China.

The renminbi also maintained the fifth spot last year as a world payments currency, and served as the sixth-largest global reserve currency and the eighth-most-traded on foreign exchange markets.

BOC has promoted the internationalization of the renminbi over the past eight years in order to facilitate cross-border trade and investment.

The bank said it will continue those efforts by taking advantage of opportunities in currency clearing channels, expanding the yuan's client base, financial products, professional services and promoting the currency's internationalization.

It plans to launch comprehensive financial solutions for cross-border trade to meet the various different needs of its clients. These include trading companies, investment firms, engineering groups, multinational corporations and individual customers. Products related to the renminbi's internationalization cover a full range of services including settlement, financing, bonds, investment, credit loans and wealth management.

In 2017, BOC's cross-border renminbi settlement volume reached 3.83 trillion yuan ($607.93 billion) and its cross-border renminbi clearing volume reached 350 trillion yuan. In the Chinese mainland, about 25 percent of total cross-border renminbi trade settlements were done at the bank.

The State-owned commercial bank has established strategic partnerships with more than 30 major stock exchanges around the world. It also cooperates with hundreds of multinational companies to deal with their two-way cross-border renminbi fund pool business, maintaining first place among its peers in the sector.

BOC has a wide-ranging global service network, having set up overseas branches in 53 countries and regions. It has been authorized by the People's Bank of China, the central bank, to be the renminbi clearing bank in 11 countries and regions.

Overall, the PBOC has so far authorized renminbi clearing banks in 24 countries and regions worldwide.

BOC is also among the first batch of 19 banks approved by the central bank to directly participate in renminbi transactions using the Cross-Border Interbank Payment System. The system was launched in October 2015 to be a global clearing platform for real-time settlements in the currency.

In addition to promoting renminbi internationalization, BOC continues to encourage the use of the renminbi in emerging regions.

The bank has acted as an underwriter of panda bonds for companies, financial institutions, government agencies and multilateral development agencies. A panda bond, which is sold onshore in China, is renminbi-denominated debt from a non-Chinese issuer.

Another related financial product is the so-called dim sum bond, which is offshore renminbi-dominated debt. BOC last month issued 4 billion yuan of such bonds in Macao, which were the first of their kind in the special administrative region.

The bank started to issue a Cross-Border RMB Index in 2013 and Offshore RMB Index in 2014, to help different market players better monitor and understand the process of renminbi internationalization.

It has also conducted market research for five consecutive years into the use of the currency and its spreading use abroad by market entities.

On Jan 31, after having conducted a survey of more than 3,000 companies and 100 financial institutions in 25 countries and regions, the bank issued a white paper on the renminbi's internationalization over the course of 2017.

It found that their customers had positive expectations for the process and that the role of renminbi as a global currency had further expanded.

According to BOC, with the continuous development of China's economy and the deepening reform of its financial markets, the process of renminbi internationalization will be accelerated and market participants will encounter more opportunities and challenges.

haonan@chinadaily.com.cn

(China Daily 03/19/2018 page12)