A renminbi flood reshaping the global landscape

Renminbi Watch

A renminbi flood reshaping the global landscape

Stephen Bartholomeusz 14 Mar, 6:13 PM

One of the most interesting, and potentially far-reaching, developments since the financial crisis has been the internationalisation of China’s currency, the renminbi, which is now regarded as the fastest growing currency in the world.

Until 2009, when China created a modest trial for the use of the renminbi in cross-border trade, Beijing had maintained very tight controls over the currency with very limited exchangeability to maintain control of its value as well as the regime’s control of its domestic financial settings.

What’s happened since then has been remarkable. An HSBC report on the ‘’rise of the redback’’ this month said there are now 10,000 financial institutions doing business in renminbi, the pool of offshore renminbi is now around $US143 billion and the proportion of China’s exports and imports settled in the currency is now almost 12 per cent.

Renminbi cross-border capital flows are surging, with renminbi foreign direct investment tripling last year and outward renminbi investment rising about 50 per cent as China adds an investment dimension to the currency’s growing use in trade settlement.

HSBC has projected that a third of China’s total trade will be settled in renminbi by 2015, making it one of the top three global trade settlement currencies by volume. It is predicting, with some qualifications, that the renminbi will be fully convertible within five years.

China has established offshore renminbi centres in Hong Kong, London, Singapore and Taiwan, has currency swap arrangements with about 20 foreign central banks, and has been progressively, albeit cautiously, opening up its capital account to investment flows.

As HSBC noted, that would have profound implications for the world’s financial system and the global economy – much as China’s rise as an economic power already has. It might also have some impact on geopolitics. It would certainly mean quite fundamental and liberating changes for China’s domestic economy and its political and social frameworks, which is why the authorities are hastening slowly. Read more: http://www.businessspectator.com.au/article/2013/3/14/china/renminbi-flood-reshaping-global-landscape#ixzz2O8d5XixS

THIS JUST IN:

South Africa signs deals with Russia, China

By: Associated Press

DURBAN, South Africa — South Africa signed a raft of agreements with Russia and China on Tuesday, from maintenance for Russian helicopters in Africa to exchanges of solar and nuclear technology, as leaders of the five-nation BRICS forum of emerging market powers prepared to strengthen cooperation and reduce dependence on the West.

Leaders of Brazil, Russia, India, China and South Africa — the five countries that the World Bank says are driving global economic growth — arrived in South Africa’s coastal resort of Durban for a two-day summit to start Tuesday evening.

Brazil and China signed an agreement Tuesday to do up to $30 billion of trade in their local currencies, a step toward cutting dependence on the U.S. dollar and euro. Brazil Finance Minister Guido Mantega said that would account for nearly half his country’s annual $75 billion trade with Beijing. He said Brazil hopes to promote such arrangements with other countries.



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