Does the internationalization of the renminbi have a relationship with you?

Abstract These days, people who care about the internationalization of the renminbi are a little disappointed. The day before yesterday, whether the RMB can be included in the final assessment of the International Monetary Fund's (IMF) Special Drawing Rights (SDR) has been postponed from November 4 this year to November 30. ...
These days, people who care about the internationalization of the renminbi are a little disappointed.

The day before yesterday, whether the RMB can be included in the final assessment of the International Monetary Fund's (IMF) Special Drawing Rights (SDR) has been postponed from November 4 this year to November 30. After the assessment is completed, the IMF will officially announce whether to include the RMB in the SDR currency basket.

In the era of globalization, China is increasingly connected to the world. Although the time to evaluate the inclusion of the renminbi in the SDR has been pushed back, the appetite of the global audience has once again been lifted. But the renminbi is quietly going to the world, and it has not stopped for a moment.

The renminbi going global is not a time, but a process, and cross-border renminbi circulation is the starting point of this process. Although the current circulation of the renminbi does not mean that the renminbi has been internationalized, the expansion of the renminbi's overseas circulation will eventually promote the internationalization of the renminbi.

On October 20, as China and the UK renewed their bilateral currency swap agreements, the process of RMB “going out” went further. At present, China's central bank has signed currency swap agreements with monetary authorities in 33 countries and regions, totaling over 3.1 trillion yuan, and more than 30 central banks and monetary authorities have included the yuan in foreign exchange reserves. In August this year, the renminbi surpassed the yen for the first time to become the world's fourth largest payment currency.

On April 22 this year, the Shanghai Headquarters of the People's Bank of China announced that the relevant financial institutions in the Shanghai Free Trade Zone can provide free and trade account (FT account) financial services in both local and foreign entities. As the core content of the financial reform of the Free Trade Zone, the opening of the FT account will better provide enterprises with the convenience of exchange of local and foreign currency funds in the account, reduce financing costs and exchange costs, and better manage exchange rate risks.

Why is the renminbi gradually becoming international?
Of course, economic globalization has promoted the process of internationalization of the renminbi. At present, the Chinese economy is accelerating its integration with the world economy. The international market is gradually increasing the demand for RMB for international trade settlement, financial product pricing, or as a reserve currency.

The new round of opening up to China is accelerating the cross-border movement of the renminbi. With the gradual implementation of the “One Belt, One Road” strategy and the deepening of foreign economic exchanges, the settlement ratio of RMB will be further enhanced and become a new driving force for the cross-border movement and use of RMB.

In addition, the growing demand for financial consumers to “go global” has also spurred cross-border investment and financing. The domestic market and the foreign market are constantly merging. Consumers with an international perspective have begun to allocate assets on a global scale. The increase in cross-border investment and financing requires the use of RMB to be continuously facilitated.

So the question is, what changes will the RMB internationalization bring to financial consumers?

First, it can increase the effective purchasing power of domestic residents. In the process of internationalization, with the expansion of the renminbi pricing function, such as the realization of international trade, energy, minerals, food and other commodities related to the lives of ordinary people, the renminbi valuation, not only can avoid the impact of exchange rate fluctuations on domestic inflation, but also reduce Due to the transaction costs brought about by foreign exchange settlement and purchase of foreign exchange, the cost of living for these goods is further reduced, and the effective purchasing power of ordinary people is enhanced to bring benefits to the people.

With the relaxation of foreign exchange control, the RMB settlement area has been expanding. The exchange and use of RMB in many countries and regions is quite common. Domestic residents who travel abroad, visit relatives, study abroad, etc. do not need to exchange foreign exchange as before, saving them currency exchange. The handling fee and smooth settlement channel.

Moreover, China UnionPay's network has spread all over the world and can be used for card consumption anytime and anywhere. With the liberalization of policies, card organizations such as MasterCard and Visa will also enter the Chinese bank card clearing market, and cross-border capital flows and consumption methods are more convenient and safe.

Second, it will help broaden the channels for domestic residents to invest overseas. The examination and approval system for domestic residents to invest in overseas securities or other financial products is undergoing orderly reforms. According to reports, the first batch of Qualified Domestic Individual Investor Program (QDII2) was piloted in six cities including Shanghai, Tianjin, Chongqing, Wuhan, Shenzhen and Wenzhou. In the pilot city, domestic individuals aged 18 or above, as long as the average daily balance of personal financial net assets in the last three months is not less than 1 million yuan, passed the overseas investment and risk ability test, no major bad records and no judicial ruling. To repay the debt, you can apply for QDII2. By then, domestic investors can not only allocate domestic stocks and domestic assets, but also arrange overseas assets more conveniently, and provide new channels for asset security and value preservation.

Now, with the help of “Shanghai-Hong Kong Stock Connect”, mainland investors can directly invest in the Hong Kong stock market with RMB. Hong Kong investors can also use the RMB to invest in the mainland stock market to build a new feast for Hong Kong and mainland investors to share the feast of asset market development. bridge. The day before yesterday, the central bank released an article written by Governor Zhou Xiaochuan, saying that "Shenzhen-Hong Kong Stock Connect" will be launched this year. Although the central bank quickly clarified that the article was actually published in May this year, it is not a recent statement, but it gives us more expectations for the final release of the Shenzhen-Hong Kong Stock Connect.

For domestic overseas investors, as the internationalization of the RMB accelerates, the use of local currency in international trade and overseas investment can also reduce the risk of “currency mismatch” arising from foreign currency lending, which will help reduce investment costs to a certain extent.

In the process of RMB internationalization, commercial banks are important driving forces and service providers. Based on the global financial market and innovating offshore RMB-denominated products, commercial banks will be able to better meet the domestic and overseas financial needs of “going out” and “bringing in” customers. The internationalization of the renminbi also provides new impetus for commercial banks to implement foreign strategies and create good opportunities.

It is foreseeable that with the recognition and acceptance of the international market, the renminbi will exercise its currency function worldwide, gradually becoming a trade-denominated currency and settlement currency, financial transactions and investment currency, and an international reserve currency.

Therefore, whether the RMB can be included in the SDR and when it is included in the SDR is not the most important issue. Even if it is included, the use of the renminbi in the global financial market will not increase significantly in the short term. However, the pace of internationalization of the renminbi cannot stop.

The just-released "13th Five-Year Plan" proposal proposes to "expand the two-way opening of the financial industry", and orderly realize the convertibility of RMB capital projects and become convertible and freely usable currencies.

The international warming of the renminbi is blowing, do you want to fly together?

(The author of this article: Executive Dean of the Hengfeng Bank Research Institute and Visiting Research Fellow of the Chongyang Financial Research Institute of Renmin University of China.)

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