The Outlook for the Cross Border Use of the Renminbi

来源: CHINA FOREX 2016 Issue 4 作者:Li Mang

The renminbi formally joined the International Monetary Fund's Special Drawing Rights,a basket of reserve currencies,in October,and the move is likely to have major significance on the role of the Chinese currency on the global stage. The renminbi still takes a back seat to the US dollar as far as China's own cross-border payments are concerned. But it is now the fifth largest currency for global payments and the eighth largest as far as global foreign exchange transactions are concerned. The path ahead,however,may present a number of complications,among them the recent US presidential election and the possibility of more interest rate hikes by the US Federal Reserve. Brexit,the British referendum on leaving the European Union,also complicates the outlook for global currencies,including the renminbi. But new opportunities are also expected to arise,and the government has made it clear that it will work hard to create a favorable environment for the internationalization of the currency.

Over the last few years,the cross-border use of the renminbi has generally been growing. The Bank of China's Cross-border Renminbi Index (CRI),which reflects the level of renminbi cross-border transactions by tracking fund outflows,circulation of the currency offshore and cross-border renminbi returning from offshore,reached 253 points in September,2.5 times the level of 2011 (the base year at 100 points). This shows that the internationalization of the renminbi has made considerable progress over this period.

The more recent trend has been less favorable,however,as there has been a decline in the use of the renminbi in cross-border transactions,partly because of the decline in the currency's value.

From January to September,cross-border renminbi settlements reached 5.91 trillion yuan,down 16% from the same period of last year. It was the first year-on-year drop since 2009. Current account cross-border renminbi settlements reached 4.03 trillion yuan in the same period,down 26% compared with last year. The proportion of renminbi used in merchandise trade also was lower than the figure for 2015.

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