Renminbi gains ground as global reserve currency

Editor’s note: The Philippine Renminbi Trade Dealer Association was established in Manila on Tuesday. This is another important step in the renminbi’s internationalization after China and Japan signed a currency swap agreement last week. Zhong Sheng, a columnist for People’s Daily, comments:

The steady progress of the renminbi’s internationalization will strengthen the stability of the international financial system.

An increasing number of countries have given their vote of confidence to the renminbi. The central bank of France said it has already included renminbi in its foreign exchange reserve, the central banks of Belgium and Slovakia have said they possess renminbi assets, and the central banks of Germany, Spain and Switzerland have expressed their interest in investing in the renminbi. The European Central Bank has recently increased its foreign exchange reserve in renminbi.

The renminbi has shown an increasingly stronger influence in the international financial system, which also reflects the world’s confidence in the prospects of the Chinese economy.

Trade, investment and financing, and reserve currency are the three channels for the renminbi’s internationalization. And it has covered almost all current accounts now, becoming the world’s fifth-largest payment currency, third-largest trade financing currency and the fifth-largest foreign exchange transaction currency.

By the end of June, more than 60 countries and regions had made the renminbi their foreign exchange reserve currency.

The renminbi’s rise as a global foreign exchange reserve currency has provided more reliable options for countries to diversify their foreign exchange reserves.

The improvement in Chinese economy’s quality and its robust growth are strong pillars supporting, and driving forces of the renminbi’s internationalization.

China’s economy accounts for 15 percent of the world economy, and China’s trade 12 percent. Which means the renminbi, whose share in international payment is less than 2 percent now, has great potential and room for its internationalization.