CAPITAL CONTROLS SEEN HURTING YUAN
Fitch warns Beijing’s measures may affect internationalisation of currency
BEIJING with Alibaba Group Holding Ltd to Indonesia, a country of 260 million that’s experiencing a surge in smartphone usage and middle-class affluence.
It will also be buying into a local ally ahead of a potential push into the region by Amazon.com Inc.
China’s two biggest e-commerce
“Policies to contain capital outflows and ongoing concerns over currency depreciation are likely to hold back internationalisation in the short term,” said Fitch.
“Progress towards the Chinese yuan becoming a more important global currency has lost momentum over the last two years, notwithstanding its landmark inclusion in the International Monetary Fund’s (IMF) Special Drawing Rights currency basket late last year,” it said.
But a gradual increase in holdings of yuan by reserve managers could still support China’s rating profile over time, Fitch added.
The proportion of international currency payments denominated in yuan fell to 1.8 per cent in March from two per cent last year, it said, citing SWIFT data.
Still, highlighting data from the China Central Depository & Clearing Co, Fitch said the share of external holdings of Chinese government bonds during the same period rose to 3.9 per cent players have both poured major sums into Southeast Asia, capped by Alibaba’s acquisition of a controlling stake in Lazada Group SA last year.
Indonesia alone as an e-commerce market is expected to climb to US$65 billion by 2020 from just US$8 billion now, according to a recent report by from three per cent.
About 17 per cent of China’s trade deals were settled in the yuan last year, off a peak of 26 per cent in 2015 and 22 per cent in 2014, according to Reuters calculations based on official data.
Yuan settlements were close to zero in 2009, when internationlisation was seen as a way for firms to reduce currency risks and also to challenge the US dollar’s role as the world’s major reserve currency.
The yuan could be used as a reserve currency in the long term, given the global importance and inter-connectedness of China’s economy, said Fitch.
Data released by the IMF in March showed China’s share of allocated currency reserves totalled just over one per cent, or US$84.51 billion (RM365.93 billion).
The yuan has stabilised this year due to curbs on capital outflows and a reversal of the US dollar rally, following a fall of 6.5 per cent last year. Reuters Macquarie Research.
Tokopedia was co-founded by William Tanuwijaya, the son of a factory worker, in 2009.
The business model is similar to that of Alibaba’s online emporium, matching customers with merchants instead of selling products from its own shelves. Bloomberg