Asia must be ready for the increased internationalization of Chinese currency Renminbi (RMB), Zeti Akhtar Aziz, governor of Bank Negara Malaysia (BNM), Malaysia's central bank, said on Monday.
"The increasing role of the RMB in the global financial system from a trade currency to an investment currency and now its potential role as a global reserve currency will have significant global implications," the Malaysian central bank chief told a forum.
Zeti said the Chinese economy is transitioning to a more sustainable path after decades of rapid growth, and the moderation in the Chinese economy has been in part, policy-driven, through conscious reforms to restructure the economy to become more balanced and domestic demand-centric.
"The recent one-off adjustment of the RMB reflects a conscious effort by China to align the RMB to a market-driven mechanism as a part of a crucial reform to allow the RMB to reflect financial market developments and economic fundamentals," she said, adding that the long-term growth prospects for China remain intact despite some short-term challenges, which will support the transition of the RMB as an international reserve currency.
Zeti said reflecting its expanding role in the global economy and the international financial system, the RMB will assume greater strategic importance in facilitating the development of new investment and financial linkages through strategic initiative such as the Belt and Road initiative, the Asian Infrastructure Investment Bank and the New Development Bank.
She said the rise of the RMB as an international currency would facilitate trade, investment and financial activities that are commensurate with the continued growing importance of China in the global landscape, and reinforce the trend towards greater regional financial and economic integration.
Zeti said the RMB can also be a source of stability for the global monetary system, as the increasing use and recognition of the RMB as an international reserve asset will strengthen the foundations of current global monetary system that is currently reliant on too few major currencies.
The internalization of the RMB will also present tremendous opportunities for the private sector and financial investors, she added.
