Shang­hai growth to push ren­minbi

The Dominion Post - - Business - JEREMY REES

New Zealand busi­nesses in­ter­ested in the lib­er­al­i­sa­tion of China’s cur­rency should watch devel­op­ments in Shang­hai, says a vis­it­ing ex­pert on the Chi­nese econ­omy.

Pro­fes­sor Xu Mingqi told a con­fer­ence on the Fi­nan­cial Lib­er­al­i­sa­tion and the ren­minbi, or­gan­ised by the New Zealand Con­tem­po­rary China Re­search Cen­tre and Vic­to­ria Uni­ver­sity, that free­ing up the ren­minbi was in­ex­pli­ca­bly in­ter­twined with the growth of Shang­hai as a fi­nan­cial power.

Xu is a se­nior ad­viser to the Shang­hai Acad­emy of So­cial Sciences and sec­re­tary-gen­eral of the Shang­hai Co­or­di­na­tion Cen­tre for

Free Trade Zone Stud­ies.

‘‘Shang­hai is the most im­por­tant fi­nan­cial cen­tre in

China but is aim­ing to be­come an in­ter­na­tional fi­nan­cial cen­tre by 2020.’’

The ren­minbi, pro­moted by the Chi­nese govern­ment for in­ter­na­tional trade in a key de­ci­sion in July 2009, rose to be­come the fourth-largest cur­rency in the world by 2015 but fell to sixth last year due to de­pre­ci­a­tion.

Xu told the con­fer­ence at the Uni­ver­sity of Auck­land that the ren­minbi was half­way through a three-stage move to­wards lib­er­al­i­sa­tion, hav­ing com­pleted a pre­lim­i­nary stage of be­ing free to be used in in­ter­na­tional trade and en­tered a se­cond stage of aim­ing to be widely used by third par­ties in in­ter­na­tional trans­ac­tions.

But it had yet to tran­si­tion into the fi­nal stage of be­ing widely used by other gov­ern­ments as of­fi­cial as­sets.

To be­come fully lib­er­alised, the ren­minbi would need to be fully con­vert­ible and China would have to open its cap­i­tal ac­counts.

Shang­hai, which han­dles around a third of China’s ex­ports through its port, had been es­tab­lished as a Free Trade Zone partly to lead the in­ter­na­tion­al­i­sa­tion of the ren­minbi. A se­ries of steps opened the Shang­hai mar­ket from 2000 to to­day but it was still not com­plete, es­pe­cially with re­stric­tions on the Shang­hai stock ex­change.

Xu said new ren­minbi cross­bor­der trans­ac­tions would be tested first in Shang­hai. ‘‘The aim is to pro­mote Shang­hai as an Ren­minbi as­set trans­ac­tion cen­tre.’’

Some 67,000 ac­counts had been es­tab­lished in the Shang­hai free trade zone al­low­ing them to freely move funds be­tween the zone and over­seas ac­counts. Mea­sures were also be­ing es­tab­lished to open up mar­kets like the health in­sur­ance mar­ket.

Pro­fes­sor Kathy Walsh, a pro­fes­sor of Fi­nance at the Uni­ver­sity of Tech­nol­ogy, Syd­ney, said there was no doubt in the eyes of Bei­jing and the world that the ren­minbi should be an in­ter­na­tional cur­rency but progress ap­peared to have slowed.

Her re­search into Aus­tralian and Chi­nese firms’ use of ren­minbi in trade in­voic­ing found a range of dif­fer­ent ben­e­fits.

Aus­tralian firms iden­ti­fied ben­e­fits in more favourable pric­ing and the abil­ity to ac­com­mo­date their Chi­nese busi­ness part­ners. Chi­nese com­pa­nies iden­ti­fied im­proved trade terms as one ben­e­fit. But a num­ber of firms in Aus­tralia and China were wait­ing for the other to ‘‘cross the thresh­old’’ first.

She be­lieved that it was in­evitable ren­minbi would take a more prom­i­nent place on the world stage.

‘‘This is a slow road in­evitable one.’’

"This is a slow road but an in­evitable one."

Pro­fes­sor Kathy Walsh, pro­fes­sor of Fi­nance at the Uni­ver­sity of Tech­nol­ogy, Syd­ney

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