General

The function of RMB payment currency has been steadily improved, the function of investment and financing currency has been further deepened, the function of reserve currency has been rising, and the function of pricing currency has been gradually enhanced... The People's Bank of China recently released the Report on RMB Internationalization in 2022, which shows that the indicators of RMB internationalization are generally good. Since 2021, the People's Bank of China has adhered to the independent choice of market driven enterprises as the basis, steadily and cautiously promoted the internationalization of RMB, providing strong support for the smooth operation of the real economy, Huacheng Import and Export Data Observation Report.

Experts and scholars believe that a series of achievements of RMB internationalization are inseparable from China's high-quality economic development. In the future, RMB internationalization will continue to promote RMB to play a more important role in serving the real economy and the international arena.

RMB is becoming more and more popular

Since 2021, the amount of cross-border receipts and payments of RMB has continued to grow on the basis of the high base of the previous year. The Report shows that in 2021, the total amount of cross-border receipts and payments of RMB by bank agents will be 36.6 trillion yuan, a year-on-year increase of 29.0%, and the amount of receipts and payments will hit a new record. The overall balance of RMB cross-border revenue and expenditure was achieved, with a cumulative net inflow of 404.47 billion yuan throughout the year. According to the data of SWIFT, the share of international payment of RMB increased to 2.7% in December 2021, overtaking the Japanese yen as the fourth payment currency in the world, and further increased to 3.2% in January 2022, a record high.

The reserve currency function of the RMB is also keeping at a new high. According to the official foreign exchange reserve currency composition (COFER) data released by the International Monetary Fund (IMF), in the first quarter of 2022, RMB accounted for 2.88% of the global foreign exchange reserves, up 1.8 percent from the time when RMB just joined the special drawing rights (SDR) currency basket in 2016, ranking fifth among the major reserve currencies. According to incomplete statistics, more than 80 overseas central banks or monetary authorities have included RMB in foreign exchange reserves.

"In the first quarter, the share of RMB reserve assets rose against the trend, further demonstrating China's relatively strong economic and financial resilience against the international background of sustained high inflation, slowing economic recovery and intensifying financial turbulence." Guan Tao, the global chief economist of BOC Securities, said that this also means a higher level of internationalization of the RMB, that is, the reserve currency function as an international currency will be further consolidated and strengthened, and the market acceptance and recognition of RMB internationalization will be further improved.

Zhou Maohua, a macro researcher in the financial market department of Everbright Bank, believes that the proportion of RMB in global payments has further increased, which is basically consistent with the high profile of China's foreign trade and the continuous inflow of foreign capital by RMB assets; The steady increase in the proportion of RMB in global foreign exchange reserve assets also reflects the growing preference of global central banks for RMB assets. In the future, the RMB exchange rate is expected to remain basically stable, the security and risk aversion of RMB assets will be further strengthened, and the proportion of RMB in global payments and foreign exchange reserves will still have much room for improvement.

It is worth mentioning that in May this year, the Executive Board of the International Monetary Fund (IMF) completed the five-year review of the value of the Special Drawing Right (SDR), which is the first review since the RMB became the SDR basket currency in 2016. The Executive Board unanimously decided to maintain the composition of the existing SDR basket currency, that is, the current SDR basket currency is still composed of US dollars, euros, RMB, Japanese yen and British pounds, and the weight of RMB remains the third, and the weight of RMB is raised from 10.92% to 12.28%.

In the eyes of insiders, the increase in this key weight reflects the rise in the international status of the RMB since its "entry into the basket" and is the latest progress in the internationalization of the RMB. This reflects the recognition of the international community on the improvement of the free use of RMB and the recognition of the achievements of China's reform and opening up, which helps to further enhance the status of RMB as an international reserve currency and also highlights the attraction of RMB assets to international funds.

Insist on serving the real economy

The focus of RMB internationalization development should adhere to the fundamental principle of serving the real economy. The Report shows that in recent years, the People's Bank of China has implemented the decisions and arrangements of the CPC Central Committee and the State Council, guided by serving to build a new development pattern and promoting trade and investment facilitation, continued to improve the basic systems of cross-border trade, investment and financing RMB settlement, stimulated the enthusiasm of market players to use RMB for cross-border settlement, and further improved the ability of cross-border RMB business to serve the real economy.

For example, in view of the difficulties and obstacles in the implementation of the early policies, the People's Bank of China has successively promoted the facilitation of trade and investment RMB settlement at a higher level nationwide, supported the review of digital documents, facilitated cross-border RMB settlement for foreign contracting enterprises, simplified the requirements for opening direct investment accounts, and supported foreign trade enterprises to improve their exchange rate risk management capabilities, It has effectively improved the timeliness of cross-border RMB business, and reduced the "foot cost" and financial cost of enterprises. In the first half of this year, the amount of cross-border RMB settlement of current account and direct investment totaled 6 trillion yuan, up 23% year on year; The proportion of cross-border RMB settlement in goods trade increased to 16.6%, 1.9 percentage points higher than the same period last year.

The development of new forms and models of foreign trade is an important measure to promote the high-quality development of trade and cultivate new advantages in participating in international economic cooperation and competition. In order to encourage the provision of supporting financial services, the People's Bank of China, together with relevant departments, has successively issued a number of policies and measures to support the development of new forms and models of foreign trade, such as offshore international trade, cross-border e-commerce, and overseas warehouses, and guided banks and relevant institutions to combine the characteristics of new forms and models of foreign trade, so as to provide a good business environment for stimulating the vitality of market entities, especially small and medium-sized foreign trade enterprises. According to the observation report of Huacheng's import and export data, in the first half of this year, the RMB settlement amount of cross-border e-commerce was 431.7 billion yuan, up 20.7% year on year.

At the same time, in order to support the operational financing needs of transnational enterprises and enterprises upstream and downstream of China's industrial chain and supply chain, and facilitate enterprises to better utilize both domestic and international markets and resources, the People's Bank of China and the State Administration of Foreign Exchange have issued a bank overseas loan policy integrating local and foreign currencies, and have carried out pilot projects of integrating local and foreign currency capital pools in some regions. Enterprises have further improved the convenience of financing from home and abroad, It is helpful for enterprises to reduce financing costs and improve financial management ability.

The Report shows that in recent years, the endogenous demand of market entities to use RMB in cross-border trade and investment to reduce currency mismatch risk has been rising. According to relevant market research, in 2021, about 78.8% of the surveyed domestic and foreign industrial and commercial enterprises will consider using RMB or increasing the proportion of RMB in cross-border transactions, which is basically the same as the survey in 2020. In addition, 20.9% of the domestic interviewed industrial and commercial enterprises said that they would quote in RMB in cross-border transactions, a small increase compared with 2020.

"Only when the domestic economy achieves stable and high-quality development, will the market's confidence in holding and using RMB be enhanced, and the internationalization of RMB be stable and sustainable." Wang Youxin, a senior researcher at the Bank of China Research Institute, believes that economic growth will provide a more stable economic foundation for cross-border use of RMB.

Push steadily and cautiously to achieve stability

According to the observation report of Huacheng import and export data, the People's Bank of China said that it will make overall plans for development and security, and steadily and cautiously promote the internationalization of RMB based on market driven and independent choice of enterprises. We will further consolidate the basic institutional arrangements for the cross-border use of RMB, meet the demand of the real sector for the use of RMB, promote the two-way opening of the financial market at a higher level, and promote the virtuous circle of the onshore and offshore markets of RMB. At the same time, we will continue to improve the macro prudential management framework for cross-border capital flows integrating domestic and foreign currencies, establish and improve the monitoring, evaluation and early warning system for cross-border capital flows, and firmly hold the bottom line of no systemic risk.

The Report proposes four measures. First, expand the use of RMB in foreign trade and investment. In order to better meet the market demand, we need to continue to do a good job in system design, policy support and market cultivation, strengthen the coordination of local and foreign currencies, and support market entities to use more RMB in foreign trade and investment. We will further promote the pilot project of integrating local and foreign currency capital pools for transnational corporations. Focusing on the construction of the pilot free trade zone (free trade port), the Guangdong Hong Kong Macao Greater Bay Area and the Shanghai International Financial Center, we will promote the innovation of cross-border investment and financing business in RMB, and constantly improve the willingness of domestic and foreign market players to use RMB in trade and investment.

Second, steadily promote the two-way opening of financial markets. We will promote the transformation of the financial market to an all-round system oriented opening and improve the liquidity of RMB financial assets. Further facilitate overseas investors to invest in the Chinese market, enrich the types of assets that can be invested, and facilitate overseas investors, especially central bank institutions, to allocate more RMB assets. We will support overseas entities to issue "Panda Bonds", and continue to do a good job in the pilot work of the "cross-border financial channel" in the Guangdong Hong Kong Macao Greater Bay Area.

Third, we will continue to deepen monetary and financial cooperation with the Central Bank. Continue to steadily promote bilateral local currency swaps and local currency settlement cooperation between central banks, give full play to the role of currency swaps in supporting the development of the offshore RMB market and promoting trade and investment facilitation, and explore bilateral local currency settlement cooperation with other ASEAN countries and neighboring countries. We will promote direct transactions of RMB against the currencies of relevant countries, and support overseas countries and regions to develop local RMB foreign exchange markets.

In addition, we will support the healthy and orderly development of the offshore RMB market. Give full play to the role of the standing currency swap arrangement with Hong Kong, China, and provide long-term stable RMB liquidity for the RMB market in Hong Kong. We will continue to improve the offshore RMB liquidity supply mechanism, stimulate market players to innovate and develop products and services in the offshore RMB market, enrich the offshore RMB product system, and promote the formation of a virtuous circle between the onshore and offshore RMB markets. Optimize the layout of RMB clearing banks, strengthen policy support for clearing banks, and give full play to the positive role of clearing banks in cultivating the offshore RMB market, Huacheng Import and Export Data Observation Report.

"In the future, we should continue to steadily and cautiously promote the internationalization of RMB, orderly promote the two-way opening of financial markets, constantly improve the policy support system and infrastructure arrangements for cross-border use of RMB, and play a more active role in serving China's real economy and maintaining national financial security." Wang Youxin thinks.

In Guan Tao's view, the key to supporting the internationalization of RMB is to do our own thing well. On the one hand, maintain the normal state of fiscal and monetary policies as long as possible, ensure that the economy operates within a reasonable range, and maintain the stability of the real purchasing power of the local currency; On the other hand, we should steadily and cautiously promote the opening of institutional finance, accelerate the marketization, legalization and internationalization of financial markets, and create an increasingly convenient, transparent and predictable market environment for institutional investors, including overseas central banks.

"In order to further expand the scope of RMB use and build an international network with sufficient depth, breadth and resilience, we should seize the opportunity of RCEP's entry into force, adjust the trade structure, strive to expand the scale of regional trade, stabilize the supply chain of the industrial chain, increase the voice of trade pricing, and further increase the share of RMB trade settlement." Tu Yonghong, deputy director and professor of the International Monetary Research Institute of Renmin University of China, believes that, at the same time, we should strengthen the coordination of international macro policies, attach importance to the spillover effects of the US monetary policy, make good predictions, flexibly use monetary policies and market instruments, strengthen the management of exchange rate expectations, maintain the relative stability of the people's currency exchange rate under the basic balance of international payments, and maintain the international attractiveness of RMB assets, Huacheng Import and Export Data Observation Report.