General

From February 4th, the "Notice on Further Optimizing Cross-border RMB Policies to Support Foreign Trade and Foreign Investment" jointly issued by the People's Bank of China, the Ministry of Commerce and other six departments will be officially implemented to promote the facilitation of RMB settlement of trade and investment at a higher level. Further simplify the cross-border RMB settlement process.

In the past six months, the continuous appreciation of the RMB has brought pressure on foreign trade enterprises to exchange rate costs. Following the trend, RMB settlement is being accelerated as a fundamental strategy to reduce the exchange rate risk of enterprises. From February 4th, the "Notice on Further Optimizing Cross-border RMB Policies to Support Foreign Trade and Foreign Investment" jointly issued by the People's Bank of China, the Ministry of Commerce and other six departments will be officially implemented to promote the facilitation of RMB settlement of trade and investment at a higher level. Further simplify the cross-border RMB settlement process.

Acceleration of RMB settlement

In 2020, the RMB exchange rate has been rising all the way. Sun Guofeng, director of the Monetary Policy Department of the People's Bank of China, recently introduced that at the end of 2020, the RMB exchange rate against the US dollar appreciated by 6.9% compared with the end of the previous year, and the RMB appreciated by about 4% against a basket of currencies.

"The renminbi continues to appreciate, coupled with rising raw material prices and soaring shipping costs, constantly eroding the profits of foreign trade companies." Shi Minxue, deputy general manager of the export department of Ningbo Ruyi Co., Ltd., said in an interview with a reporter from the International Business Daily.

In the face of this situation, the pace of guiding RMB settlement at the national and local levels is accelerating.

As of the end of 2020, the cross-border RMB settlement amount was 4.12 trillion yuan, a year-on-year increase of 26.2%, accounting for 40.1% of domestic and foreign currencies... This is Guangdong's 2020 economic and financial data released by the People's Bank of China Guangzhou Branch on January 14. . Guangzhou Branch has expanded the pilot of higher-level cross-border renminbi facilitation from the Pilot Free Trade Zone to the Greater Bay Area. As of the end of 2020, 563 enterprises in Guangdong, excluding Shenzhen, have been included in the list. In 2020, RMB will become the second largest cross-border settlement currency in Guangdong, and surpass the US dollar to become the largest cross-border settlement currency in the Guangdong-Hong Kong-Macao Greater Bay Area.

As a major foreign trade province, it is of great significance for RMB to become the largest cross-border settlement currency in Guangdong. From a national perspective, since 2011, when the domestic geographical scope of cross-border trade RMB settlement was expanded to the whole country, RMB cross-border settlement has been on the fast track, which is beneficial for enterprises to avoid exchange rate risks.

Especially this year, RMB cross-border settlement is "speeding up" again on the fast lane. On January 4, the "Notice on Further Optimizing Cross-border RMB Policies to Support Foreign Trade and Foreign Investment" was released; The bureau has decided to increase the macro-prudential adjustment coefficient for overseas lending by domestic enterprises from 0.3 to 0.5, and the upper limit of overseas lending by domestic enterprises will be raised accordingly.

Industry insiders believe that at a time when China is vigorously promoting the internationalization of the renminbi, the convenient cross-border renminbi settlement policy can effectively promote the use of cross-border renminbi in more scenarios. Foreign trade enterprises have ushered in a favorable opportunity to promote the use of RMB for settlement, which will further enhance the willingness of foreign customers to use RMB for settlement.

According to the "2020 RMB Internationalization Report" released by the People's Bank of China, in 2019, the total amount of RMB cross-border receipts and payments by banks on behalf of customers totaled 19.67 trillion yuan, a year-on-year increase of 24.1%, which means that the cross-border use of RMB continued to grow rapidly against the trend. The amount received and paid hit a record high. RMB ranks 5th among major international payment currencies with a market share of 1.76%.

In addition to the favorable policy environment, there is another favorable factor for China's current promotion of RMB settlement: the global willingness to hold RMB and RMB assets continues to rise. The Bank of China’s latest Offshore RMB Index (ORI) for the first quarter of 2020 shows that, thanks to relatively stable exchange rate performance, relatively attractive asset returns and relatively stable capital markets, the intention to hold RMB assets overseas has further increased . At the end of the first quarter of 2020, the balance of RMB deposits in most offshore RMB markets increased, and the scale of RMB assets included in official reserve assets by foreign central banks was equivalent to US$221.5 billion, a record high.

New business formats attract attention

Looking at the "Notice" jointly issued by the six departments, there are many highlights, including support for cross-border RMB settlement of new trade formats.

Affected by the new crown pneumonia epidemic, new forms of business such as cross-border e-commerce have developed rapidly. The latest statistics released by the General Administration of Customs show that in 2020, new forms of foreign trade will develop vigorously. The annual cross-border e-commerce import and export is 1.69 trillion yuan, an increase of 31.1%, which has become an important force for stabilizing foreign trade. The need for related enterprises to reduce exchange costs through RMB settlement is also more urgent.

Lin Zhiyong, president of Xinguang Digital Trade Research Institute, said in an interview with a reporter from International Business Daily that at present, cross-border retail platforms mainly collect payments through credit cards on third-party payment platforms, and then conduct foreign exchange settlement and domestic payment services in China. The new policy is favorable for cross-border e-commerce platforms to carry out RMB settlement business.

At the same time, Lin Zhiyong bluntly stated that the current cross-border RMB payment mainly meets the needs of bulk trade. With the rapid development of new business formats, the RMB settlement of cross-border e-commerce should receive more attention. At present, the main difficulty in using RMB for cross-border e-commerce platforms is that it is difficult to set prices in RMB and foreign payment companies have not yet used RMB for settlement in large numbers. To solve these problems, relevant departments need to launch a package of cross-border RMB payment solutions, such as actively promoting Chinese payment tools abroad, and at the same time encouraging foreign payment platforms to open cross-border RMB payment functions.