China's renminbi (RMB), or Chinese yuan, is to become the world's third great currency, after the U.S. dollars and euro, said Douglas Flint, group chairman of HSBC Holdings plc, in an interview with Xinhua.
However, Flint also pointed out that it will probably take a few decades for the RMB to gain the share as a world reserve currency as the dollar and euro currently have.
RISE OF CHINESE CURRENCY
Flint said he is excited to see the rapid growth of RMB business globally, saying the inclusion of the RMB into SDR's basket currencies would be symbol of maturity of the Chinese currency.
"The SDR is usually a symbol of maturity of the currency. I think more importantly as growing share of China's trade that is being denominated and settled in RMB, that the comfort of the world is beginning to have in the RMB as the investment currency," Flint said.
He also noted that more central banks have swap lines the People's Bank of China -- the Chinese central bank, and more reserve managers include RMB in their reserve management plans.
"And all of that shows the maturity and confidence in the currency, so I think it is terribly important that the RMB progresses toward full internationalization, and essentially become the world's third great currency, after the dollar and euro," he said.
The International Monetary Fund (IMF) executive board plans to discuss and decide in November whether to include the RMB into its special drawing right (SDR) currency basket.
But he stressed that it would take some time to reach the full internationalization of the RMB, as the market needs to acquire confidence in a yield curve of the currency's assets with more bonds issued in longer maturity, before it gains a greater part of foreign reserves managers' plans.
"I think it will take a few decades before Chinese currency rank alongside the dollar and euro in terms of the proportion of reserves. I think one of the most significant areas for the RMB would be the expansion of the bond market within China, so there will be a much broader and deeper yield curve for Chinese bond issued domestically and then internationally," he said.
He believed that London is playing a pivotal role in promoting RMB's internationalization process, as it is one of the most important markets for RMB outside of Asia as well as the world's largest foreign exchange market, because of history, because of expertise, expertise and liquidity.
FROM STRENGTH TO STRENGTH
In the interview, the group chairman conveys his expectation on Chinese President Xi Jinping's visit in Britain from Monday to Friday.
Flint said:" I think the relationship between China and UK has been going from strength to strength. The evident warmth and degree of cooperation between both countries in terms of shared vision of opportunities available is quite impressive, and both sides and both countries are talking about the golden year, which is certainly a situation that we would welcome and indeed can see it being formed."
"I think the president's visit is very important. I think it would be an enormous symbol of the good relationship of the two countries, and it would be a good opportunity for both sides to talk about how they can support each other in the areas of mutual opportunities and advantages. And it would be also an opportunity to open areas of discussions that would expand trade and investment flows between both countries," he said.
He highlighted several areas that HSBC is keenly watching on President Xi's visit, saying "the going internationalization of the RMB is of huge importance to the world, to London and to financial institutions."
