The global status of the RMB has steadily increased
The global status of the RMB has reached a new level.The renminbi’s share of international payments rose to 2.70 percent in December 2021 from 2.14 percent in November, rising to fourth in December, according to a report released by SWIFT.This is the first time that the renminbi has surpassed the Yen in the global ranking of international payments since the pboc’s “exchange rate reform” in August 2015.The strong performance of the yuan and its assets is inseparable from the high-quality development of China’s economy, experts and scholars said.In the future, the internationalization of the RMB will promote the RMB to play a more important role on the international stage.According to the SWIFT report, in December 2021, usd, euro and Sterling ranked the top three currencies in terms of payment amount, accounting for 40.51%, 36.65% and 5.89%, respectively.The yen fell to 2.58 per cent, slipping one place from fourth to become the world’s fifth most active currency.In terms of proportion, global payments in renminbi rose to 2.70 per cent in December from 2.14 per cent in November;In terms of value, yuan payments rose 34.6 percent from November, while global payments in all currencies rose 6.44 percent over the same period.Zhou Maohua, macro researcher of financial market department of Everbright Bank, believes that the proportion of RMB in global payment is further increased, which is basically consistent with the high prosperity of China’s foreign trade and the continuous inflow of foreign capital attracted by RMB assets.”The domestic epidemic prevention situation is improving, the overall economy is operating within a reasonable range, the internationalization of the RMB is making steady progress, the overall operation of the RMB exchange rate is stable, and overseas trading parties are increasingly willing to use the RMB as a settlement and payment tool.”Zhou maohua said.The renminbi’s share of global foreign exchange reserves rose again in the third quarter of 2021, the highest since the fourth quarter of 2016, according to the latest OFFICIAL currency composition of foreign Exchange reserves (COFER) data released by the International Monetary Fund.Renminbi reserves are also rising.Total foreign exchange reserves rose to $318.99 billion in the third quarter of 2021, marking 11 consecutive quarters of growth, data showed.”The renminbi’s share of global foreign exchange reserve assets has steadily increased in recent years, reflecting the global central banks’ preference for renminbi assets.”Zhou said that in the future, the RMB exchange rate is expected to remain basically stable, the safety and risk aversion of RMB assets will be further strengthened, and the proportion of RMB in global foreign exchange reserves will still have a large space to increase.The strong performance of high-quality development supporting the RENMINBI and RENMINBI assets is inseparable from the high-quality development of the Chinese economy.Wang Chunying, deputy director and spokesperson of the State Administration of Foreign Exchange (SAFE), said that in 2021, foreign investors will increase their holdings of domestic bonds by us $166.6 billion, and RMB assets have become an important asset for foreign capital allocation.Real economic activities such as trade and investment have become the main driving force for cross-border capital inflows.Data from the Ministry of Commerce showed that actual utilization of foreign investment in China reached us $173.5 billion in 2021, up 20 percent year on year and at a historical high, reflecting the attractiveness of China’s sound economic development prospects for long-term foreign capital.”The increase in RMB’s international payment share is related to the increase in China’s import and export trade share in the world.”Wang Youxin, a senior researcher at the Bank of China Research Institute, believes that under the bottleneck of global supply chain, overseas import and export trade and logistics are not smooth, and orders are pouring into China. Driven by the growth of China’s import and export trade, RMB settlement has increased its share in international trade.In addition, the RMB exchange rate has remained relatively stable against the backdrop of a rebound in the FLUCTUATIONS of the US dollar, which has boosted international investors’ confidence in using the RMB in cross-border trade, investment and financing.Wang chunying summed up several characteristics of the increase in RMB asset allocation by foreign capital. First, the growth rate is fast. From 2018 to 2021, foreign capital net increased its holdings of domestic bonds and stocks by more than 700 billion US dollars, with an average annual growth rate of 34%.At present, foreign investment in China’s stock market and bond market accounts for 3%-5%, which is relatively low compared with developed and emerging economies such as Japan, South Korea and Brazil, and has great potential for future growth.Third, the investment value is high. The correlation between RMB assets and asset prices and returns in developed and emerging economies is relatively low, making it a good choice for international investment portfolio to diversify risks.”Driven by the opening of the financial market, overseas entities have actively increased the allocation of RMB assets. The RMB bond index has been included in the international mainstream index, bringing a lot of incremental capital, and the cross-border use of RMB for securities investment has increased substantially.”Mr Wang said use of the renminbi by international central banks and sovereign wealth funds was also on the rise as the renminbi’s share of global foreign exchange reserves grew.In the future, China’s industrial chain and import and export trade will continue to maintain steady growth, the economy will become more resilient, the RMB exchange rate will become more flexible, the two-way opening and connectivity mechanism of the financial market will be improved, and the RMB’s share in international payments and foreign exchange reserves will continue to rise steadily.International investors’ demand for RMB asset allocation will promote the RMB to play a more important role on the international stage.Industry insiders believe that the RMB bond market will remain a favorable choice for global investors to diversify their investments, despite a lot of uncertainties in the current global market.As the spread of 10-year Treasury bonds between China and the US remains high for a long time, global investors hold a relatively low proportion of RMB assets, and China’s financial market continues to open up, global investors will continue to increase RMB assets.”In terms of the trend, the global payment ratio of RMB is still not enough to match the size of China’s economy and trade volume, and there is still a great space for the development of the payment ratio relative to the US dollar and the euro.The long-term development prospects of the domestic economy are good, the RMB is steadily advancing internationalization, and the domestic economy is accelerating the construction of a dual-cycle development pattern. In the future, the role of THE RMB in international payment, investment and reserve will continue to increase.”Zhou maohua said.In the opinion of Guan Tao, global chief economist of Bank of China Securities, the increase in the global RESERVE share of RMB means a higher level of internationalization of 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 enhanced.In recent years, the driving force of RMB internationalization has changed from trade settlement to “trade settlement + financial transaction”.”Despite the impact of the epidemic, the internationalization of the RMB has reached a new level, supported by the rapid growth of China’s economy and trade, the relatively stable RMB exchange rate and the RMB’s function as a safe haven currency.”Tu Yonghong, deputy director and professor of the International Monetary Research Institute at Renmin University of China, said that how to further expand the use of the yuan and build a deep, broad and resilient international network in the future will be the key to steadily promote the internationalization of the yuan.”Strong economy, strong currency.The internationalization of the RMB is a natural process. The key is to accelerate the establishment of a new development pattern and achieve high-quality development and high-level opening-up, so as to continuously enhance the trust and recognition of the RMB in the international market.”Mr Guan said.