Ren­minbi us­age ex­pands on route


The am­bi­tious China-led Belt and Road Ini­tia­tive is set to tur­bocharge the use of ren­minbi in in­ter­na­tional trade and fi­nance, pump­ing fresh oxy­gen into the cur­rency’s global out­reach, an econ­o­mist said.

The mas­sive trade and in­fra­struc­ture project, first mooted by Pres­i­dent Xi Jin­ping in 2013, echoes the world’s sec­ond-largest econ­omy’s de­ter­mi­na­tion to sharpen the cur­rency’s role as a widely-used fundrais­ing and pay­ment ve­hi­cle in over­seas fi­nan­cial cen­ters to fi­nance a con­stel­la­tion of in­fra­struc­ture con­struc­tion and boom­ing trade across 65 coun­tries and re­gions along the route.

TheP­eo­ple’s Bank ofChina re­cently said it has au­tho­rized Bank of China’s New York branch to be the first ren­minbi clear­ing bank in the United States, beef­ing up the lender’s off­shore ren­minbi clear­ing busi­ness foot­print to 11 coun­tries and re­gions on five con­ti­nents, and send­ing China’s to­tal num­ber of over­seas ren­minbi clear­ing hubs to more than 20.

The an­nounce­ment came only two weeks be­fore the cur­rency’s in­clu­sion into the In­ter­na­tional Mon­e­tary Fund’s spe­cial draw­ing rights to sit along­side the dol­lar, euro, ster­lin­gandyen. This isa mile­stone in China’s ef­forts to in­ter­na­tion­al­ize the ren­minbi.

For­eign in­vestors and com­pa­nies can is­sue SDR bonds and Panda bonds in China to fund the Belt-andRoad projects and fa­cil­i­tate ren­minbi-de­nom­i­nated trans­ac­tions over­seas, said Field­ing Chen Shiyuan, an econ­o­mist at Bloomberg In­tel­li­gence in­Hong Kong.

“Belt-and-Road com­pa­nies, find­ing no dif­fi­culty in clear­ing and set­tling trade de­nom­i­nated in ren­minbi, would be en­cour­aged to do more busi­ness in yuan over­seas,” Chen said.

Though the re­newed de­pre­ci­a­tion pres­sures are erod­ing the cur­rency’s off­shore liq­uid­ity pool and re­duc­ing its share of in­ter­na­tional trans­ac­tions, Chen said he be­lieved the cur­rency is on course to find a more rea­son­able­and­bal­anced level of ex­change rates.

“The off­shore yuan to­day lost the pivot point it has gained sup­port from for years, but will cer­tainly seek out a new one, a mar­ket­driven and rea­son­able one, un­der­pinned by the proac­tive role of ren­minbi in global real economies,” he noted.

China’s ef­forts to boost the yuan’s global us­age that ac­cel­er­ated in fits and starts since 2010, Chen pointed out, re­vived by the high-pro­file Belt and Road Ini­tia­tive, which stands as “the very first stop where ren­minbi can be used in lo­cal busi­nesses.”

In par­tic­u­lar, most mem­bers of the As­so­ci­a­tion of South­east­AsianNa­tions have China as their big­gest trad­ing part­ner and are en­thu­si­as­tic about the Belt and Road Ini­tia­tive. They are poised to al­lo­cate more ren­minbi re­serves for the re­gional devel­op­ment projects.

“Com­pared with most ASEAN cur­ren­cies, the ren­minbi is still a more sta­ble and higher-yield­ing op­tion,” Chen said. “In terms of re­gional in­te­gra­tion, it stands as an an­chor for ASEAN coun­tries, giv­ing them an­other good rea­son to be re­spon­sive ren­minbi users.”

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