Friday, September 27, 2013

The world’s central banks will continue to diversify into Renminbi (RMB) : Renminbi is being used for 15 percent of (Chinese) cross border trade

Carmen Ling
Said : Carmen Ling, Global Head, RMB Solutions, Origination and Client Coverage - a newly created RMB Solutions team of Standard Chartered Bank, in an email interview with Chung Joo-won of The Korea Herald which was published on September 26, 2013.

According to Carmen Ling, trading in Chinese yuan could help Korean firms. She advised Korean companies to use Renminbi, or yuan, in their trade settlements with foreign partners, in view of the rapid globalization of the Chinese currency. The WTO data show that about 20 percent of Korea’s trade is with China. The People’s Bank of China estimates that companies could save between 2―3 percent by using the RMB for trade. 

Initially, it was predicted that RMB would be used for 20 percent of (Chinese) cross border trade by 2015, but the current figures show that it has already touched 15 percent. China announced in 2009 that it would globalize the RMB by 2020 to play a role as a key global currency after the U.S. dollar. Renminbi is becoming popular in global trade settlements

Carmen Ling expects that the internationalization of the RMB will come in three stages ― first as a trade currency, then as an investment currency and finally as an international reserve currency.

New note of 100 yuan

Standard Chartered Bank has created an RMB Solutions team that is responsible for delivering advice and bespoke client solutions to help them best capture opportunities arising from the internationalisation of the RMB. According to SCB, the liberalisation of the RMB represents one of the most profound changes in the world’s financial system in generations. SCB's aim is to be the leader in providing insights, services and ideas in this area.

"In the space of less than a decade, Hong Kong has successfully launched a full spectrum of offshore Renminbi businesses, from banking, bond and equity financing to asset management. Within just a few years, we have emerged as the largest and most competitive offshore Renminbi business centre outside of the Mainland. All the time, overseas banks here in Hong Kong are fine-tuning their Renminbi expertise, offering a broader range of Renminbi services to their clients and building up their knowledge and contact list for doing business in the Mainland of China", Hong Kong's Chief Executive, Mr C Y Leung, had mentioned in his speech at a luncheon organised by the Hong Kong Association of Banks (HKAB) in July.

According to the latest BIS (Bank for International Settlements) Triennial Central Bank Survey of Foreign exchange market activity, the trading in foreign exchange markets averaged $5.3 trillion per day in April 2013. This was up from $4.0 trillion in April 2010 and $3.3 trillion in April 2007.

The US dollar remained the dominant vehicle currency; it was on one side of 87% of all trades in April 2013 with a daily trading in average of $4.65 trillion in 2013. The euro was the second most traded currency, but its share fell to 33% in April 2013 from 39% in April 2010. The turnover of the Japanese yen increased significantly between the 2010 and 2013 surveys. So too did that of several emerging market currencies, and the Mexican peso and Chinese renminbi entered the list of the top 10 most traded currencies. The BIS survey revealed that the Chinese yuan - which occupied 9th position - recorded a turnover of $120 billion a day in 2013. (More details of the survey can be found here)

Renminbi : Chinese Currency is called Renminbi (RMB or CNY) means "People's Currency" in Chinese language.

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