Zhou Hongli'S Interpretation Of The Internationalization Process Of RMB In 2015

Zhou Hongli told reporters recently that with the government's orderly guidance of RMB Exodus and replenish the demand for offshore RMB flows, it will help to balance China's balance of payments, and more and more central banks will use the renminbi as reserve currency.

It will continue to accelerate.

According to the central bank statistics, by the first three quarters of 2014, the amount of cross-border RMB settlement had exceeded 4 trillion and 800 billion yuan, compared with less than 3 billion 600 million yuan in 2009.

SWIFT's report shows that in July 2014, the market share of RMB in the global payment currency rose to 1.57%, and RMB ranked seventh in the most widely used global payment currency.

Zhou Hongli said that the offshore RMB market continued to flourish under the policy support. In 2014, the offshore renminbi market was excellent, and many new offshore RMB clearing centers were set up.

8 Banks in Sydney, Toronto, London, Frankfurt, Paris, Luxemburg, South Korea and Qatar were chosen as new clearing banks.

To promote market development, the Chinese government actively provides investment opportunities.

For example, the share of RMB 370 billion qualified foreign institutional investor (RQFII) is allocated to Australia, Canada, Germany, France, South Korea and Qatar.

On the micro level, regulators relaxed the cross-border guarantee system and inter company loans to promote offshore renminbi demand.

The close relationship between domestic Renminbi and offshore renminbi has greatly reduced interest rate differentials and significantly improved capital efficiency.

Zhou Hongli said that foreign investment in 2014 was steadily expanding.

"The increase of reflux channels has hindered the development of overseas RMB market to a certain extent."

In the first half of 2014, investment in RMB settlement, foreign direct investment and RMB qualified foreign investment totaled more than 1 trillion and 700 billion yuan.

To a large extent offset the outflow of 2 trillion yuan in the same period.

At the same time, Shanghai and Hong Kong officially launched in mid November last year.

"But the flow of funds is extremely uneven.

In December 9th last year, for example, Shanghai stock trading volume of 58 billion yuan, Hong Kong stock pass through only 6 billion yuan.

Zhou Hongli said.

As the growth of Renminbi deposits slows, Hongkong bank has attracted interest from high interest rates.

In the fourth quarter of 2014, Hongkong's one-year interest rate for RMB deposits reached 3.4%.

Although the relevant departments have adopted a series of liquidity measures, offshore RMB interbank offered rate (CNH)

HIBOR) surged from 2.38% in January to 3.6% in December.

In November 2014, the Hongkong monetary authority revoked the restriction that the RMB ceiling should not exceed 20 thousand yuan for residents' day.

The HKSAR government has also set up a 10 billion yuan RMB repurchase measure immediately, and appointed 7 banks to provide liquidity for Hongkong's offshore RMB market liquidity to ensure a stable offshore RMB exchange rate.

Zhou Hongli said that in the future, offshore renminbi flows will continue to be tight due to the continued expansion of investment channels.

"Cross border lending projects such as free trade accounts in the Shanghai free trade zone will make offshore renminbi more attractive."

Against this background, Zhou Hongli believes that the regulatory authorities will need to take a series of measures to encourage the flow of RMB.

For example, mainland residents buy overseas stocks and real estate.

Through the renminbi qualified domestic institutional investor (RQDII) plan, residents are allowed to invest in Renminbi capital markets in Singapore and London.

In addition, the implementation of the Asian infrastructure investment bank and the "New Silk Road" plan will also push forward RMB outward direct investment.

"With the promotion of these" going global "strategies, the volume of RMB turnover abroad will significantly increase.

The balance of payments is becoming more and more balanced. Zhou Hongli also pointed out that the balance of payments in 2014 tends to be balanced.

In addition to promoting the renminbi's outflow, many reform measures will make China's investment position more balanced.

"The surge in international investment over the past ten years is 5 times the speed of China's integration into the world economy."

However, China's overseas assets are mainly government reserves, which account for 65% of total assets, while securities investment and outward direct investment are still underdeveloped, accounting for only 4.4% and 10.3% of total assets.

Zhou Hongli said that the mainland China has been running the current account surplus for a long time, and the low accumulation of foreign assets is the "indicator" of the domestic savings surplus.

Zhou Hongli believes that excessive savings will lead to a large number of speculative capital flows into real estate and other fields.

The only way to solve the problem of excess savings is to make the private capital investment in the mainland more international.

RMB reserves have begun to take shape.

The increase of RMB capital outflow and the number of pactions will narrow the spread and reduce the cost of trade.

This will further stimulate the market to trade with renminbi, thereby increasing the flow of RMB overseas.

When the RMB outflow reaches a certain level, it will be used as reserve currency.

"At present, many countries have set the renminbi as reserve currency, and the renminbi as a reserve fund has taken shape."

Zhou Hongli said.

In October 2014, the United Kingdom issued 3 billion yuan of treasury bonds, all of which were used as RMB foreign exchange reserves instead of dollars or euros.

The European Central Bank (ECB) has used the renminbi as a foreign exchange reserve; the Australian central bank has allocated 3% of its foreign exchange reserves to the renminbi.

Zhou Hongli said that up to now, more than 50 central banks, national institutions and international organizations have invested in renminbi through the Bank of China (601988) Stock Exchange bond market (CIBM), the qualified foreign institutional investor (QFII) plan, or the offshore RMB (CNH) market.

"In 2015, the renminbi is expected to become a special drawing right currency (SDR) granted by the International Monetary Fund, and RMB investment will become more and more irresistible."

The renminbi is expected to become a SDR currency, Zhou Hongli said. The proportion of specific currencies in SDR reflects the importance of the currency in the global trade and financial system.

Today, SDR currencies include US dollar (41.9%), euro (37.4%), Sterling (11.3%) and yen (9.5%).

The basket of currencies is reviewed every five years to ensure that currencies in the basket are representative currencies used in international pactions.

The next review will take place in 2015.

According to the IMF standard, SDR currency embodies the following criteria: SDR consists of currency issued by IMF member states (or member countries' Monetary Union).

During the 5 year review period, member states need to satisfy the maximization of the value of export goods and services, and the currency for free use under the fund's regulation.

"China obviously satisfies the first condition."

Zhou Hongli said that as early as the 2005 review, IMF has noticed the rapid development of China's economy.

2005-2009 in the review, China became the third largest exporter of goods and services in the world, second only to the European Union and the United States.

As one of the largest exporters in the past few years, China has no doubt met the first requirement of joining the SDR.

"The second thing to be considered is the free use of money."

The concept of free use is stipulated in the thirtieth provision of the International Monetary Fund Agreement: the free use of money refers to the currencies of Member States under the IMF, which need to be widely used in international trade and payment and widely used in major foreign exchange markets.

Zhou Hongli said it is worth noting that the free use of money is a currency widely used and traded internationally, rather than simply a freely rising and falling currency.

In fact, when the Japanese yen entered the SDR basket, it was not a fully convertible currency, and the Japanese yen's review in 2010 was mainly attributed to the cancellation of the cross-border yen restrictions.

At the end of 2009, only 0.06% of the international bonds and bills were denominated in Renminbi.

In the 2007-2010 year, the volume of RMB trading in the global foreign exchange market accounted for only 0.1%.

But since then, the use of Renminbi has been increasing.

The proportion of RMB settled in China's trade rose from 3% in 2010 to 25%.

Domestic and foreign direct investment settled in RMB has increased by 560% and 550% respectively over the past three years.

Since 2008, the scale of offshore RMB bond market has doubled, and by the end of November 2014, the paction volume has reached 772 billion yuan.

What's more, many reserve managers show unprecedented enthusiasm for the renminbi.

"Therefore, the RMB is very likely to be the SDR currency through the next review of the IMF."

Financial reform accelerated the internationalization of RMB. Zhou Hongli said that after the RMB showed its unlimited potential to join the SDR, more and more investors chose to invest in Renminbi, which will push China to accelerate the pace of financial market reform.

Zhou Hongli believes that the bond market is the lifeblood of the effective operation of the whole capital, so it is urgent to establish a healthy, deep and free floating bond market.

Specifically, a sound bond market will enable banks to help SMEs more.

The development of China's bond market does not match the economic strength of the country.

As of 2013, the bond market accounted for only 50% of China's GDP, compared with 150% in the US.

"If foreigners account for 2% of their domestic securities holdings, the renminbi will not become a reserve currency."

In May 9, 2014, the State Council issued the "opinions on further promoting the healthy development of the capital market" (the nine new country), in which it put forward the vigorous development of the bond market.

"Looking forward to the future, more policies will focus on solving market segmentation, diversification of market information and normal operation of the market.

The corresponding liberalization of interest rates, exchange rate mechanism, capital account exchange criteria and other policies will also be issued accordingly.

Zhou Hongli said.

In short, Zhou Hongli believes that the internationalization of RMB and the overall financial reform of the country will go hand in hand.

2015 will be a year of great change. China's goal is to make the renminbi an indispensable currency in global pactions.