Zhou Xiaochuan: Roundabout Way Of RMB Going Abroad

In April 1st, the interbank foreign exchange market's central parity rate of RMB against the US dollar was 6.5527, and the re creation of foreign exchange has reached a new high since then.

In the first quarter of this year, the appreciation of the central parity of RMB against the US dollar was about 1%.

The renminbi will start trading on foreign exchange options in April 1st.

Since April 1st, the renminbi has been opened to foreign exchange options trading. It has been seen by industry experts as a measure to "cool down" the appreciation of the renminbi.

At this time, the policy also shows the policy orientation of steady appreciation.

The entry of RMB into the basket of SDR currencies helps to push SDR into a super sovereign reserve currency.

Before the outbreak of the international financial crisis in 2008, the internationalization of RMB remained in the initial stage of cross-border circulation, border trade settlement and so on.

After the outbreak of the crisis, China used the renminbi to promote cross-border trade settlement experiments, and signed bilateral currency swap agreements with several economies, so that the renminbi had more important functions of international currency, such as trade payment and official reserve.

In March 2009, President Zhou Xiaochuan of the people's Bank of China proposed the idea of a super sovereign reserve currency, which included expanding the role of SDR in the international monetary system and promoting the application of SDR in the international financial market, especially in the private sector.

RMB becomes the basket currency of SDR, which helps to enhance the international community's awareness of RMB, and further enhance the acceptance of RMB. Once SDR becomes the main asset of the international financial market, the RMB will become one of the main currencies of the international financial market.

{page_break}

Becoming the SDR basket currency helps to push forward the reform of the international monetary system.

As president Zhou Xiaochuan said, "SDR has the characteristics and potential of a super sovereign reserve currency", but it must be improved.

The currencies of emerging market countries like China enter the SDR basket, which is conducive to enhancing the discourse power of emerging market countries in the international financial field, and also helps SDR become a super sovereign reserve currency.

This will change the pattern of international monetary and financial fields monopolized by the United States and Europe, and solve the problems brought by a few sovereign currencies as international currencies.

The obstacle and resistance of RMB becoming the basket currency of SDR comes mainly from China's foreign exchange control and obstacles to foreign exchange convertibility.

On the issue of RMB convertibility, China's policy is still not relaxed, but the RMB can not be exchanged and a basket of currencies instead of the US dollar will become a new international reserve currency.

If RMB can be exchanged, it will increase the difficulty and risk of China's macroeconomic regulation and control.

The path of RMB internationalization has always been circuitous in the balance of benefits and risks.

As China expands the scope of its overseas use of Renminbi, the interbank market in Hongkong has already conducted renminbi pactions through OTC pactions, that is, direct links between banks.

Foreign currency pactions not only reduce the seigniorage income of the mainland, but also have a greater impact on the mainland's monetary policy.

When the central bank shrinks or expands the supply of RMB, the RMB will flow into or out of the mainland, thereby weakening the role of monetary policy.

Therefore, we should speed up the development of RMB securities market, such as trying to expand the scale of RMB bonds.

The regulatory authorities should relax and support the issuance of RMB shares by domestic and foreign enterprises in Hongkong, and encourage domestic enterprises to choose Hongkong overseas for IPO. It can broaden the channels for RMB asset allocation and ease the "financing difficulties" of domestic enterprises.