RMB Internationalization Needs Deep Analysis

HSBC Global Research released a report earlier, saying, "if the birth of a world reserve currency that can rival the US dollar in twenty-first Century, it must be RMB."

After two years of rapid progress, the path of RMB internationalization has been clearer. But along with this process, some deep-seated problems are gradually exposed. The channels for overseas RMB investment to return to the domestic market are still limited, and the domestic RMB can not be exported to the offshore market through capital projects.

In "

Route

The degree of internationalization is deepening.

"From the perspective of the non US dollar major international currencies, it is indeed a favorable opportunity for the internationalization of RMB, because the current international position of the US dollar is widely questioned. China, as the second largest economic power in the world, has the largest foreign exchange reserves, while in the top 10 economies, only the internationalization of RMB is the lowest.

Russia's ruble, India rupees, Brazil, Real and other internationalized degrees are higher than the renminbi.

China Construction Bank (601939, stock bar) senior researcher Zhao Qingming told reporters.

Looking back nearly a year, the layout began from the very beginning.

With the deepening of internationalization, RMB has accumulated rapidly in the offshore market of Hongkong.

At present, RMB deposits in Hongkong's offshore RMB market account for about 10% of all bank deposits in Hongkong, becoming the third largest currency apart from the Hong Kong dollar and the US dollar.

More than 80 institutions have issued RMB 106 billion yuan in Hong Kong.

At the same time, the renminbi has also been incorporated into more countries into its reserve currency basket. Many countries including Nigeria, Malaysia, Korea, Kampuchea, Belarus, Russia and Philippines have already planned or already made Renminbi as part of their foreign exchange reserves.

According to Japanese media, Japan plans to buy $10 billion of China's treasury bonds to further diversify its foreign exchange reserves.

"The status of RMB assets in the official foreign exchange reserve is an important measure of the degree of internationalization of the RMB. If it can occupy a certain share in the official foreign exchange reserves, it will be more conducive to promoting the use of RMB in international trade settlement."

Zhao Qingming pointed out.

Rhythm

Opening up capital account needs to grasp "speed and relaxation".

Li Daokui, director of the Finance Department of the national economic and Trade College of Tsinghua University, pointed out that the internationalization of RMB is a process, and the next 5 years will be a critical period.

In fact, the progress of internationalization has been gradually infiltrated from "current account" to "capital project". But what kind of rhythm should be adopted in the next step of capital account liberalization?

The warming of this topic is triggered by an article published recently by the research group of the people's Bank of China's investigation and Statistics Department entitled "China's accelerated capital account liberalization".

The article points out that our country is in the strategic opportunity of opening capital account.

The risk of China's capital account liberalization is not large. We should not overemphasize the liberalization of interest rate liberalization, or the full maturity of RMB internationalization, and then open capital account.

In the process of opening up, we can carry out the reform with the largest expected revenue first, and then implement the most risky reform. First, we should push forward incremental reform and gradually push forward the stock reform.

In the long run, it can be prudent to open real estate stocks and bonds trading in 5 to 10 years.

"At present, the relative scale of RMB settlement under capital account is still very small. In 2011, it accounted for only about 5% of the total cross-border settlement of RMB.

The opening of capital account still has stricter control over the scale of investment and financing and the flow of funds in the qualification examination and approval process of participating agencies.

The domestic Renminbi can not flow to the offshore market through capital account, and the channels for overseas RMB investment to return to the domestic market are also restricted, which may further affect the degree of acceptance of RMB as an international currency.

Ba Shu song, deputy director of the Finance Research Institute of the State Council Development Research Center, pointed out.

Huang Zemin, a doctoral supervisor of East China Normal University, a member of the CPPCC National Committee, seems to be in a position to let go of some unnecessary capital account control.

He told the economic reference daily that at present, the renminbi is in a state of "semi free convertibility", that is to say, under some items, there is no regulation under certain items.

He likened that it was like a room, closed the front door, but opened the back door, and the fly would still fly in.

"If you can't control it, simply leave it alone."

He said frankly that the opening of capital account will open wider space for the internationalization of RMB.

CPPCC member State Council

Ba Shu song also pointed out that the opening of capital account can not be accomplished overnight, and it is impossible for the internationalization of RMB to start after the full liberalization of capital account.

The opening of future capital account should be combined with the development of all RMB cross-border businesses.

The specific measures include expanding the scale of the "Panda Bonds" issued by foreign institutions in China, and allowing overseas enterprises to issue Renminbi denominated shares in the Chinese stock market.

The chairman of the CPPCC National Committee, Beijing Bank (601169, stock bar), Yan Bing Zhu, also pointed out in the proposal that the way of qualification and quota control can be adopted. Under the premise of controllable risks, foreign currency renminbi can be allowed to participate in venture capital investment in China in the form of private equity fund.

Zhao Qingming said that there should be some mutual promotion between the two elements of currency internationalization and capital account convertibility, but it is not a causal or sequential relationship "from the history of major international currencies such as the US dollar: to some extent, capital account control is not a big obstacle to the internationalization of currency."

Specific to the internationalization of RMB and capital account liberalization, they may go hand in hand, sometimes RMB internationalization needs to promote capital account convertibility, sometimes it will be reversed.

In addition, even if the renminbi becomes a major international currency, there may still be some capital controls. "

Zhao Qingming said.

Power

Establishing a more stable currency expectation

A more important question is that the premise of currency internationalization should be currency stability.

"At present, the degree of acceptance of RMB trade settlement in areas other than Hong Kong and Macao is still very low. There may be several reasons for this. First, foreign enterprises are unwilling to use RMB settlement, the main reason is not as convenient as the US dollar; the two is relative lack of confidence in the RMB value."

Zhao Qingming pointed out.

At the end of last year, offshore renminbi was oversold due to a wave of overseas China and the RMB boom.

In the offshore spot and forward markets, there has been a hang up between price and domestic median price.

This not only triggered a statement about the expectation of devaluation of the renminbi, but also led to concerns among the industry about the prospects for offshore market development in Hongkong, because appreciation expectations are one of the important motives for the offshore market to hold Renminbi.

The world economic and Political Research Institute issued by the Chinese Academy of Social Sciences at the end of 2011, the world economic yellow book, pointed out that in fact, the internationalization of RMB promoted by the expectation of appreciation has exposed many contradictions, which is reflected in the strong unilateral "cross-border" settlement of cross-border trade as a breakthrough for RMB internationalization.

The arbitrage arbitrage space formed by the segmentation of the RMB market between the mainland and Hongkong has become one of the main motives for importers to handle RMB settlement business.

The world economic yellow book says that the establishment of offshore RMB reflux mechanism will significantly enlarge the impact of offshore market prices on the onshore market, and the possibility of speculative capital returning to the mainland through the reflux mechanism. Therefore, the RMB interest rate and exchange rate market pformation should precede RMB internationalization.

In March 5th, Premier Wen Jiabao of the State Council pointed out in the government's work report that we should improve the RMB exchange rate formation mechanism, enhance the two-way floating elasticity of the RMB exchange rate, and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.

We should vigorously develop the foreign exchange market and enrich foreign exchange products.

To provide more exchange rate hedging tools for the market participants, and manage well the foreign exchange reserves.

Shen Jianguang, managing director of Mizuho Securities Asia Ltd, pointed out that, according to the lesson from Japan, the RMB should not move rapidly to the floating exchange rate. It is advisable to gradually relax the range of exchange rate fluctuation. In terms of exchange rate, the fluctuation range of RMB pactions will be expanded at a small scale and pegged to a wider basket of currencies, and on this basis, a wider range of exchange rate will be realized.

The fluctuation rate of RMB (US dollar) exchange rate is now 5/1000, and the next step can be extended to 7/1000 and seven point five.

Li Daokui pointed out.

"The state should differentiate the market from the renminbi.