RMB: Wider use expected, propelled by more opening-up
Mei Dongzhou, an associate professor at the Central University of Finance and Economics, regarded the inclusion of the yuan into the Special Drawing Right currency basket as a major reason for its greater role in global reserves. The inclusion has induced automatic yuan allocation in official reserves and buoyed worldwide acceptance of the currency, he said.
Oct 1 marked the second anniversary of the yuan being included in the SDR — a reserve currency built from a basket of important national currencies assigned by the IMF — with a weight of 10.92 percent.
A recent report from Goldman Sachs Group estimated the renminbi’s share in global reserves “should rise to around 3 to 4 percent by the end of 2022”.
Fulfillment of yuan internationalization’s great potential will rely on progress in the opening-up of China’s financial markets and the development of financial markets’ depth and breadth, which dictates the attractiveness of renminbi assets, Mei said.
Fang Xinghai, vice-chairman of the China Securities Regulatory Commission, told reporters in September that the country will keep improving both the convenience of foreign capital investing in China and fundamental market rules, including trading suspension, information disclosure and trade settlement.
Mei warned about the risk associated with further renminbi internationalization, given the potential pressure on the safety of cross-border capital flows.
Contact the writers at email@example.com