BIGGER ROLE OF RENMINBI
Economists also believe the expansion of China in regional trades and economic ties will encourage the usage of Renminbi (RMB), the Chinese yuan, in Malaysia.
"Greater foreign direct investment inflows from China and initiatives such as the DFTZ are likely to promote more two-way trade and investment flows between Malaysia and China," CIMB Investment Bank economic research head Michelle Chia told Xinhua.
Ultimately, the willingness of businesses in Malaysia to integrate the usage of Renminbi for cross-border should improve, she said.
She sees the continuation of Renminbi's liberalization, expansion of China's domestic Renminbi products and services and greater global Renminbi liquidity that lower the costs and risks of Renminbi settlement, as three key drivers to promote Renminbi usage.
Chia also highlighted the internationalization of Renminbi is likely to increase over the long term, in line with the growing weight of China's economy in global commerce and financial markets.
As the Belt and Road Initiative gains traction, she believed the expansion of trade and investment links between China and its neighboring regions, including Malaysia, will encourage further adoption of the Renminbi.
Proposed in 2013, the Belt and Road Initiative aims to build trade and infrastructure networks connecting nations on and beyond the ancient Silk Road routes.
It comprises the Silk Road Economic Belt and the 21st Century Maritime Silk Road. Malaysia is one of the first countries that supported the initiative.
Chia opined that Chinese policymakers are also progressively building the financial infrastructure such as offshore Renminbi clearing centers, deeper Renminbi bond markets, and the push for inclusion of the Renminbi in the special drawing right basket, as companies in China look outwards for growth.
"As China expands in trade and deepens economic ties in the region, this will promote further Renminbi usage," United Overseas Bank (Malaysia)'s economist Julia Goh told Xinhua.
Concurred with Chia, she said, the Belt and Road Initiative will promote wide use of the Renminbi and increase other local currency-denominated funding, as the Chinese government has committed to help fund overseas businesses under the initiative.
However, it may still need time to see more usage of Renminbi as U.S. dollar remain dominated world payments currency.
