China to Promote Cross-Border Use of Renminbi, says PBOC
Source: Regulation Asia Editors, Regulation Asia
China will facilitate trade and investment using the renminbi, the PBOC said in its annual RMB Internationalization Report.
The PBOC (People’s Bank of China) has said it will further remove restrictions on the cross-border use of the renminbi and continue opening up the domestic financial markets.
In its annual RMB Internationalization Report, the PBOC said it will rely on a market-oriented method to facilitate trade and investment and further expand access to foreign investors who use the renminbi to invest in Chinese bonds and stocks.
The report highlighted the growth in the cross-border use of the renminbi last year, in spite of slowing economic growth, but said that there is still a long way to go given the currency’s small share in the global market.
The renminbi’s share of the foreign exchange market rose to 4.3 percent last year, up 0.3 percentage points from 2016. It ranked fifth globally as a payment currency, but was only used for 1.76 percent of payments, despite China accounting for more than 10 percent of global trade in goods.
The PBOC said China will further facilitate cross-border use of the renminbi to promote pilot programmes to boost trade and investment, which will make it possible for more foreign central banks and monetary authorities to hold the currency as a reserve asset.
More than 70 central banks and monetary authorities worldwide have already incorporated the renminbi into their foreign exchange reserves.
The PBOC’s comments are part of broader efforts to ensure the renminbi can better compete with other major currencies.
Separately, the FT reported that Russia and China are partnering to reduce their dependence on the US dollar. In Q1 2020, the dollar was used for just 46 percent of settlements between the two countries – the lowest on record.
The euro made up 30 percent of trade, while the rouble and renminbi accounted for 24 percent – both at new highs.
Replacing the dollar in trade settlements became a necessity for Russia in 2014 to sidestep US sanctions. For China, trade tariffs imposed on Chinese goods made de-dollarisation a priority.
Additional reporting from Caixin, China Daily.
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