Hong Kong (CNS) -- The CCTV Global Financial and Economic Forum, with the theme "RMB Internationalization," was held in Hong Kong, August 30. Experts pointed out that now is the right time to speed up the internationalization of the RMB.
Perfect timing
In the opinion of Li Xiaojia, CEO of the Hong Kong Exchanges and Clearing Limited, investors are increasing RMB holdings, convinced that the RMB will continuously appreciate in the next three to five years in view of China's rapid economic growth. The over 550 billion yuan deposited in Hong Kong is a perfect example. Adding that the fragile USD system has been confronted with various challenges recently, the RMB is facing an unprecedented opportunity.
Chen Jiaqiang, director at the Hong Kong Financial Services and the Treasury Bureau, compared this potential strategy to the second Chinese financial reform, next to that of the 1978 opening-up policy.
As the only RMB offshore center authorized by the central government, Chen emphasized Hong Kong's role in communicating with the central departments and promoting the RMB to the international stage by taking advantage of its well-established international financial network and efficient settlement capabilities.
He Guangbei, vice chairman and president of the Bank of China (Hong Kong), asserted that as the medium of payment, the currency is meeting the perfect time to go out, with the deepening relationship between the Chinese economy and the international climate in the globalization process.
Managing backflows
The Ministry of Commerce announced on August 22 that China will formally issue RMB Foreign Direct Investment (FDI) this September.
Hong Kong-funded and overseas-funded capital will be offered more free access to investing in China.
The question whether to attract RMB backflows has been the center of debate since then. Like a besieged fortress, more strategies were worked on to apply domestic RMB reserves into overseas investments, while efforts have also been made to draw back RMB capital abroad.
Zuo Xiaolei, chief economist at the China Galaxy Securities, encourages the development of Hong Kong into an overseas RMB offshore market to enrich the channels for foreign investments.
Li Xiaojia stressed the transformation of the RMB from a held currency to a used currency, by exploring offshore RMB financial products. A certain amount of RMB capital will remain overseas, and another portion will pour back into China's real economy rather than banking sectors or speculative financial markets, with the gradual creation of RMB bonds, stocks, and other products related to currency in the future.
Steady internationalization
Professor Cao Heping at Peking University illustrated the huge potential of RMB internationalization with several figures: the trade amount in RMB takes up 9% of the total 22 trillion USD global circulating trade sum, while the settlements in RMB only account for 5%, a huge gap from the American 12% trade amount and 80% occupancy contrast.
He Guangbei equates the RMB internationalization to marketization. The process of internationalization will definitely be accompanied by the marketization of currency and interest rates, calling for loosening of capital control during the first phase of economic and social development.
Li Xiaojia concluded that RMB internationalization will speed up the marketization course of the three basic financial elements – currency, interest rates, and capital account transparency.
