Good news keeps coming!, In just half a month, it's about RMB Russia | RMB | Good news

An Indian state-owned oil company has purchased Russian oil for the first time in Chinese yuan. This is one of the recent good news for the internationalization of the renminbi.

Due to Western economic sanctions, Russia and countries with a huge demand for its oil must seek currencies other than the US dollar for trading. India has recently made a choice - as the largest buyer of Russian crude oil in the country, Indian Oil Company became the first state-owned refinery in India to pay part of the purchase cost of Russian crude oil in RMB in June.

Including the above events, there are three good news for the internationalization of the renminbi in just half a month.

The internationalization of the renminbi has made its debut in multiple scenarios

According to reports, the Indian Oil Company settled its transactions with the Russian Oil Company by paying RMB to Bank of China through the Industrial Credit Investment Bank of India. Since June, the company has settled multiple batches of goods imported from Russia using RMB.

Sources also revealed that at least two of India's three private refineries are also using Chinese yuan to pay for some of Russia's imported products.

In addition to international trade, the internationalization of the renminbi has also made its debut in multiple other scenarios.

On June 19th, the Hong Kong Stock Exchange launched the "HKD RMB dual counter model" and dual counter banker mechanism in the Hong Kong stock market. The dual counter model and banker mechanism will help promote the trading and settlement of RMB denominated securities in Hong Kong.

In the initial stage of the launch of the dual counter model, a total of 24 securities were designated as dual counter securities by the exchange, including 9 institutions such as Bank of China International, CICC International, CITIC Lyon, and Guotai Junan, which obtained dual counter banker licenses. After the launch of the dual counter model, they can engage in banker activities or provide liquidity activities. From the daily transaction volume, the first batch of 24 dual counter securities with RMB counters sold a total of 162.6 million yuan.

The CEO of the Hong Kong Stock Exchange Group, Eu Guan Sheng, stated that the launch of the dual counter model is another important milestone in the development of the Hong Kong capital market. It will not only provide issuers and investors with more trading options, but also enrich their RMB product ecosystem, consolidate Hong Kong's position as the world's largest offshore RMB center, and further promote the internationalization of the RMB.

In addition, on June 30th local time, the Argentine government used special drawing rights and Chinese yuan to repay $2.7 billion in maturing foreign debt to the International Monetary Fund - marking the first time Argentina has used Chinese yuan to repay its foreign debt.

The Central Bank of Argentina has recently announced the inclusion of the Chinese yuan in the currency allowed for deposit and withdrawal in the Argentine banking system, and approved Argentine financial institutions to open RMB savings accounts.

Argentine Central Bank President Miguel Angel Pece said in an interview that transactions settled in RMB are growing in areas such as Argentina's foreign trade and capital markets. The Argentine central bank maintains close cooperation with the People's Bank of China, and both sides are working hard to create conditions to further promote the use of the renminbi in Argentina.

Internationalization of the RMB is a long and arduous task

"Although the internationalization of the RMB has made good progress, we still need to deeply recognize that the internationalization of the RMB is still in its early stages." Rui Meng, a professor of finance and accounting at China Europe International Business School and a professor at Pengrui Finance, believes that according to the development law of currency internationalization, it must go through three stages of "peripheralization, regionalization, and globalization". There are still many areas where efforts are needed to internationalize the RMB.

Rui Meng believes that the first step is to vigorously promote the pricing and settlement of the RMB in cross-border commodity transactions. Recently, Shenzhen Qianhai Joint Trading Center stated that it will seek breakthroughs in natural gas, crude oil and other commodities, striving to achieve an annual RMB settlement volume of RMB 500 billion in cross-border commodity trade within about 5 years, continuously expanding its influence in international commodity market pricing.

Secondly, we need to increase efforts to provide RMB assets to overseas investors and maintain the high attractiveness of RMB assets to global investors.

However, Rui Meng mentioned that the current openness of the RMB capital account is still relatively low, and it is possible to take the lead in developing the offshore RMB market. The central bank aims to normalize the issuance of offshore RMB central bank bills, on the one hand to meet the allocation needs of international investors for RMB assets, and on the other hand to improve the offshore RMB yield curve.

Third, we should focus on the RCEP region and countries along the "the Belt and Road" to accelerate the construction of financial infrastructure. The amount of RMB cross-border receipts and payments between China and the countries along the "the Belt and Road" is expected to grow steadily with the deepening of bilateral economic and trade exchanges. In addition, the joint construction of high-quality development of the "the Belt and Road" also creates conditions for China to promote financial infrastructure construction such as the CIPS system.

Guan Tao, Global Chief Economist of Bank of China International Securities, strongly suggests that RMB internationalization should be a tool and not a goal. RMB internationalization and financial openness should serve the development of the real economy and not put the cart before the horse. "A strong economy leads to a strong currency, otherwise the internationalization of the Japanese yen would be a warning."

At the same time, we must continue to maintain the flexibility of exchange rate policies, accelerate the development of onshore financial markets, especially solve the problem of large but weak financial markets. We must adhere to the dual drive of reform and opening up, and steadily and orderly promote institutional financial opening up.

Guan Tao also stated that as China increases its financial opening up to the outside world, its financial assets and liabilities will continue to increase. China should learn from international experience, properly respond to overseas economic and financial sanctions, and protect the security of China's overseas financial assets and liabilities. This is also the ability and growth ability that must be cultivated in the process of opening up.