Commissioned Report

Renminbi Internationalisation Report 2018: Optimism Towards Belt and Road Raises Cross-Border Use of RMB

By The Asian Banker

The Asian Banker and China Construction Bank, launched the global Renminbi (RMB) Internationalisation Report 2018, which is based on a survey of 346 companies (230 in China and 116 overseas) and 52 financial institutions to evaluate the progress in RMB usage and development of cross-border RMB denominated products and businesses.

  • The report revealed growing optimism in RMB internationalisation, especially with the Belt and Road initiative
  • There was notable increase in RMB engagement among respondents in 2017, with a greater push towards the use of RMB in cross-border settlement by Chinese companies
  • The report also revealed strong interest in China onshore bond market among financial institutions and the China Interbank Bond Market emerged as the favourite channel

The global survey revealed improvement among companies' overall sentiment towards the pace of RMB internationalisation, the use of the currency for cross-border or international transactions. Around 65% of companies stated that the pace has increased, while 25% of overseas firms reported it 'increased significantly'. The Belt and Road initiative emerged as the most significant driver of RMB internationalisation as cited by 72% of the respondents. This is followed by the "inclusion of RMB in the IMF SDR", which was mentioned by 60% of surveyed respondents.

A notable increase in RMB engagement among respondents in 2017, with a greater push towards the use of RMB in cross-border settlement by Chinese companies

There is a growing level of activity in RMB cross-border settlement; where about half of the respondents, comprised of 56% of Chinese companies, 50% of overseas companies and 42% of FIs, indicated an increase in engagement last year.

Notably, 76% of the Chinese companies and 36% of the overseas corporate described themselves as “proactive” towards RMB usage in cross border settlement. Among overseas companies that were “reactive” in terms of approach, using RMB when required by counterparties, they believe that Chinese corporates could emerge as a key driver in enabling greater use of RMB in international settlement.

The impact of a more stable RMB is visible as 46% of Chinese companies, 43% of overseas companies and 48% of FIs increased their engagement in forex transactions in 2017.

Strong interest in China onshore bond market among financial institutions and the China Interbank Bond Market emerged as the favourite channel

Meanwhile, 63% of the FIs were interested in China onshore bond market. Out of the channels used by FIs to access China onshore bond market, 52% of FI respondents preferred the China Interbank Bond Market, followed by the RMB Qualified Foreign Institutional Investor (RQFII) Scheme.

Greater engagement is expected in RMB cross-border settlement in 2018

Looking forward, the survey showed that the increased level of RMB engagement will continue in 2018. A relatively higher 63% of Chinese companies, 47% of overseas corporates and 57% of FIs indicated that they will increase their activities in RMB cross border settlement in 2018.

Moreover, 40% of overseas companies and 54% of FIs indicated that they will increase RMB deposits in 2018, while 60% of Chinese companies and FIs plan to increase their engagement in RMB-based payments.

In addition, a notable growth is expected in forex transactions as 47% of Chinese companies and 40% of overseas companies plan to increase activity in 2018. 38% of overseas companies and 42% of FIs mentioned that they will increase engagement in offshore financing.

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Keywords: Transaction Banking, Renminbi Internationalisation Report 2018
Institution: China Construction Bank
Country: China
Region: Asia Pacific
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