RMB Internationalisation will Benefit from Stronger Transatlantic, Transpacific Coordination
The steady emergence of the Renminbi (RMB) as an international currency holds the prospect of a range of potential benefits for global investors and economies. But to achieve those benefits, stronger transatlantic and transpacific vigilance is required, along with deeper public and private sector cooperation, according to a white paper on RMB internationalisation.
The paper - entitled “Renminbi Ascending: How China’s Currency Impacts Global Markets, Foreign Policy and Transatlantic Financial Regulation” was developed by Atlantic Council’s C. Boyden Gray Fellow on Global Finance and Growth, Chris Brummer, and sponsored jointly by the City of London Corporation, Standard Chartered and Thomson Reuters.
The increasing role of the RMB is a constructive development for international markets as capital account liberalisation portends global economic rebalancing and sustainable growth. But for the process to reach maximum credibility and effectiveness, greater transparency, along with steady and credible institutional and regulatory reforms will be necessary in order to promote the currency’s acceptability, especially as China’s growth moderates. Continuing macroeconomic as well as macroprudential reforms will also form the foundation of a healthy RMB financial system as governments and multilateral institutions increase their use of the currency.
The currency’s internationalisation is not, however, an exclusive matter of Chinese governance and policy. Given the unique nature of the reforms, active cross-border coordination and capacity building, coupled with the institutionalisation of non-discrimination policies by both China and its transatlantic partners, is necessary to support the development of the currency. Doing so will not only bolster market liquidity and depth, but it will also help alleviate potentially significant regulatory and foreign policy irritants that threaten to undermine cooperation on one of the most important market and economic developments of the 21st century.
Mark Boleat, Policy Chairman at the City of London Corporation, notes: “On a global scale the importance of RMB has continued to increase. RMB internationalisation is an unprecedented financial event that is irrevocably changing the global market, and presenting an enormous opportunity for both Chinese and the world’s business to trade and invest. The City of London, along with other key UK-based stakeholders, will continue to support this development and other financial reforms in China, which is in line with China’s plan for gradual market liberalisation and global integration.
“This report shows the significance of the RMB’s rise to transatlantic and transpacific relations, and the importance of different markets working together effectively to maximise economic benefits for all. As the international usage of the RMB grows there will be a need for the offshore RMB market to be served by a number of financial centres in different parts of the globe. We fully recognise the importance of international coordination on this, and are open to engagement with other market players to ensure a smooth internationalisation process.”
Standard Chartered’s Group Head for Transaction Banking Alex Manson explains: “The RMB is on a remarkable, and critically, accelerating trajectory of internationalisation… From deposit accounts just over a decade ago, to a new currency for international Trade, the growing number of channels for physical investment, capital raising, flows of managed wealth; the RMB’s place in the world today and how it will evolve is hugely relevant to companies, investors, and governments alike. We need to think today of the RMB as the next “G4” currency, and understand the implications of that for the near future”
David Craig, President of Financial & Risk, Thomson Reuters, comments:
“China is growing – and internationalizing - with exhilarating speed. Last year alone, Thomson Reuters saw a 350 percent increase in renminbi trading across our foreign exchange platforms. From our vantage point, at the intersection of currencies, commerce and regulation, it is clear the success of China’s currency brings great opportunities for everyone in international commerce. The challenge for China now is to build confidence in its regulatory system in partnership with global policymakers and industry. Only by working together will the global economy benefit fully from the re-emergence of China, and the ascent of the renminbi as a major world currency.”
For a copy of the white paper, click here or go to http://www.atlanticcouncil.org/images/publications/RMB_Ascending.pdf.
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For further information, please contact:
Madeleine Levey Lambert
City of London Corporation
Tel: 020 7332 3451/+44 7912041124
Standard Chartered Bank
Tel: +44 20 7885 5934
Thomson ReutersTel: +44 (0)20 7542 2215Email: firstname.lastname@example.org
Note to editors:
About the City of London Corporation and the City of London’s renminbi (RMB) initiative
The City of London Corporation is a uniquely diverse organisation. It supports and promotes the City as the world leader in international finance and business services and provides local services and policing for those working in, living in and visiting the Square Mile. It also provides valued services to London and the nation.
The City of London RMB initiative was launched on 18 April 2012. It aims to develop London’s position as the leading western hub for international RMB business - and boost the RMB’s wider international use for trade and investment. The initiative is facilitated by the City of London Corporation, and the current members are Agricultural Bank of China (UK), Australia and New Zealand Banking Group Limited (ANZ), Bank of China (UK), Bank of Communications (UK), Barclays, China Construction Bank (UK), Citi, Deutsche Bank, HSBC, Industrial and Commercial Bank of China (UK), Standard Chartered, JPMorgan and Royal Bank of Scotland, with observers from HM Treasury, the Bank of England, and the Prudential Regulation Authority. The initiative seeks to provide leadership to the wider financial markets on technical, infrastructure and regulatory issues relating to the RMB product and services in London. It also advises HM Treasury on maximising London’s capacity to trade, clear and settle RMB and articulates practical next steps and long-term aims for the further development of the RMB market in London. Additionally, the group advises HM Treasury and other UK authorities on any financial stability concerns members may perceive. More information is at www.cityoflondon.gov.uk/renminbi
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