Waking up to progression of the renminbi
David Sear, chief operating officer for Western Union Business Solutions, looks at the internationalisation of the renminbi and its implications for global SMEs who trade with China. February 03, 2012 | David SearOn January 16th 2012, British Chancellor George Osborne signed a deal in Hong Kong aimed at turning London into an offshore trading hub for the renminbi, the latest in a string of signs that the renminbi’s internationalisation is continuing to gather steam. Roughly 10% ofChina’s global trade in 2011 was settled in renminbi, which represents good growth compared to a negligible amount only two years ago. Add to that the recent permission the Chinese Government gave to 10 banks to issue Rmb 25 billion ($3.97 billion) worth of “dim sum bonds” in Hong Kong and you have a significant indication that the renminbi is moving towards the ranks of the euro and yen, and is positioning itself as an eventual challenger to the U.S. dollar as a global reserve currency. The number of MDEs (mainland designated enterprises, who are authorized by the Chinese government to send and receive renminbi payments) inChinais also increasing, with over 67,000 compared to 365 in 2009. As exciting as these developments are, it is worth bearing in mind that the Chinese Government is negotiating new territory without much historical reference when it comes to internationalising a currency for a country of China’s size and sheer economic power. The decisions taken so far indicate that policy-makers will continue to take care in introducing a process of internationalisation that will allow global businesses to utilize the renminbi in trade without losing control of the currency itself by allowing it to float unchecked and thereby subjecting it to the whims of investors. (A quick look at the headaches investor flight into the yen and franc has caused their counterparts inTokyo and Bern and one can understand their caution.) Still, SMEs around the world are slowly waking up to the fact that processing payments in and out of China in the renminbi as opposed to the U.S. dollar may be a more effective and profitable way of conducting trade wi... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: China, Hong Kong, Payments, Rmb, Trade Finance, Transaction BankingChina,HK,Payments,Rmb,Trade Finance,Transaction Banking, China,Hong Kong,Payments,Rmb,Trade Finance,Transaction Banking, Keywords:Offshore Trading Hub, Chinese Government, George Osborne, London, Bank Of China Hong Kong Offshore Trading Hub, Chinese Government, George Osborne, London, Bank of China Hong Kong
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