Transcript RMB Budapest

RMB Internationalization:
Backgrounds, Developments and
Prospects
Mingyou BAO
Chief Representative
People’s Bank of China Representative Office
for Europe
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RMB Internationalization:
Backgrounds
 Market-driven and response to the outbreak of the
financial crisis;
 Restore fair treatment of the RMB in economic
transactions;
 Reduce dollar reserves accumulation and enable the
authorities to manage the domestic economy more
effectively .
Promote domestic economic reform
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RMB Internationalization:
Policy Framework
 Two principles: serve the real economy, risk controllable
Administrative Measures on Pilot RMB Cross-border Trade
Settlement ( July, 2009 ): enabling enterprises in four cities of
Guangdong Province, including Guangzhou, Shenzhen,
Zhuhai and Dongguan to settle cross-border trade
transactions in RMB as a pilot program.
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RMB Internationalization:
Policy Framework
 Notice on Relevant Issues Concerning the Expansion of Pilot Crossborder RMB Trade Settlement ( June, 2010 ): allowing another
twenty provinces, autonomous regions and municipalities to
be included in the pilot program and at the same time, lifting
restrictions on the use of RMB settlement in certain outward
investment destinations. In August 2011, the pilot program
has extended to the whole country.
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RMB Internationalization:
Policy Framework
 Administrative Measures on Pilot RMB Settlement of Overseas Direct
Investment ( January, 2011 ) : facilitating domestic institutions'
outward direct investment in RMB.
 Administrative Measures on the RMB Settlement of Foreign Direct
Investment ( October, 2012 ): establishing legal framework for
foreign direct investment in RMB in China.
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RMB Internationalisation:
Policy Framework
 Provisional Rules on Cross-Border RMB Lending in Qianhai
(December 2012), to expand international use of RMB in
cross-border lending and equity financing;
Pilot Program of Securities Investment in China by
RQFIIs(March 2013 ), a revision of the RQFII on including
more institutions in the program and removing restrictions
on investments;
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RMB Internationalization:
Policy Framework
 Circular Concerning the Simplification of Cross-Border Use of RMB and
Improvement of Relevant Policies ( July, 2013 ): provide a series of new
measures to help simplify cross-border RMB transactions and to improve
the efficiency of the implementation of relevant policies.;
 Financial Support for Development of the Pilot Shanghai Free Trade Zone
(December 2013), outlining concrete opening and reform measures to
support cross-border financial transactions.
Joint Announcement of Pilot Stock Market Linkage between mainland China and
Hong Kong （April 2014），Paying the way for cross border securities
investment by retail investors
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RMB Internationalization:
Developments ( Outflow）
Net outflow of RMB under trade account has increased from less than
2 billion in 2009 to more than 1083 billion yuan ($174 billion ) in 2014;
RMB ODI increased by 113% in 2014 to 183.6 billion yuan
($29.5billion) ;
Balance of external financing in RMB, mainly by China Development
Bank and China Import & Export Bank, totaled more than 150 billion
yuan by the end of 2014;
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RMB Internationalisation:
Developments
 To further expand overseas RMB liquidity supply, the
People's Bank of China has signed bilateral currency swap
agreements with 31 central banks and/or monetary authorities
by the end of February 2015, totaling 3.2 trillion yuan
($519billion).
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RMB Internationalisation:
Developments (Reflow)
 By the end of 2014, the People’s Bank of China has
permitted 211 overseas institutions, including central banks,
sovereign wealth funds, international financial organizations
as well as RMB clearing and participating banks to invest
about $100 billion in China’s domestic interbank bond
market .
The RMB settlement for foreign direct investment(FDI)
and overseas direct investment(ODI) amounted to 875 billion
and 183 billion respectively in 2014.
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RMB Internationalisation:
Developments
RQFII Quota increased dramatically in 2014, 103 institutions were
approved to invest 311.5 billion yuan under the scheme (Feb 2015);
Total RQFII quota reached 800 billion yuan.
In 2014, a total of more than 300 billion yuan reflowed to mainland
China through FDI, investment in interbank bond market , RQFII and
bond issue in offshore centres
RQFII Investments
Hong kong
Singapore
UK
France
Korea
Licensed Institutions
79
18
7
2
6
Approved
Investment
2700
123
122
60
110
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RMB Internationalization:
Developments
 Off-shore pool of RMB liquidity now reaches over 2 trillion yuan,
but still tiny compared with more than 120 trillion of bank deposits and
about 200 trillion yuan financial assets in mainland China.
SWIFT statistics indicate the use of RMB in international payment
has risen to 2.06% and RMB has become the fifth most frequently used
currency. And RMB has already overtaken EURO as the second most
used currency for trade finance.
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RMB Internationalisation:
Developments
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RMB Internationalization:
Developments
BOC CRI INDEX: the level of usage and activity of RMB in cross
border transaction.
Source: Bank of China
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RMB Internationalisation:
Developments
 In general, more channels have been created to
facilitate RMB outflow and reflow. Outflows mainly
concentrated in trade and other current account payments,
ODI and external financing in RMB while reflow of RMB
was mainly facilitated through the RQFII program,
investment in interbank bond market and bond issuance in
offshore centres .
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RMB Internationalization: Prospects
Micro level: Increase Liquidity Supply and Streamline Reflow process
Cut red tapes on approval process for cross-border use of
RMB;
Expand RMB payment in tourism, shopping and study in
foreign countries;
 Explore measures to enable overseas public listed company
to pay interests and dividend in RMB;
 Encourage policy banks and other financial institutions to
expand RMB external financing and facilitate overseas
development aid in RMB;
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RMB Internationalization: Prospects
Micro level: Increase Liquidity Supply and Streamline Reflow
 Promote RMB bond issue in domestic and international
market;
 Encourage use of RMB as a denominated currency in
global outsourcing and commodity transactions;
 Encourage use of swap lines and expand financing
channels for clearing banks and RMB participating banks in
domestic market;
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RMB Internationalization: Prospects
Macro level: Reform, Growth, Infrastructure and Soft Power
Expand economic and financial opening up and reform :
capital account, interest rate and exchange rate;
Sustain strong and stable economic growth;
 Upgrade market infrastructure for cross border use of
RMB: CIPS, bond market development, regulation clean-up;
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RMB Internationalization: Prospects
Macro level: Reform, Growth, Infrastructure and Soft Power
 Improve institutions and international coordination.
 “One Belt and One Road” strategy .
 IMF SDR review later this year
 History may provide a guidance
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RMB Internationalization: Prospects
Macro level: “One Belt and One Road” strategy
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