Hotspot Q&A: Opportunities and Progress Account for Steadily Promoting RMB Internationalization. Highly favored | RMB | opportunity

Beijing, July 1st (Xinhua) - The Central Bank of Argentina announced at the end of June that it will include the Chinese yuan in the currency allowed for deposit and withdrawal in the country's banking system, and approve financial institutions in the country to open RMB savings accounts. What significant progress has been made in the highly anticipated internationalization of the renminbi? Why is the internationalization of the RMB accelerating? What opportunities will be presented?

On June 30th, Argentine Central Bank Governor Miguel Angel Pece gave an interview to Xinhua News Agency reporters in the capital Buenos Aires.

What significant progress has been made in the internationalization of the renminbi

On June 30th, the Argentine Ministry of Economy announced that the Argentine government would use Special Drawing Rights and Chinese yuan to repay $2.7 billion in maturing foreign debt to the International Monetary Fund. This is the first time Argentina has used the Chinese yuan to pay off its external debt.

Argentina's further use of the renminbi is just a microcosm of the recent internationalization of the renminbi. With the development of China's economy and the improvement of its level of openness, the international currency functions of RMB, including cross-border payments, investment and financing, reserves, and pricing, have been comprehensively enhanced.

In March, the Export Import Bank of China announced that it had reached its first RMB loan cooperation with the National Bank of Saudi Arabia; The first cross-border supply chain RMB financing business between Bank of China and the European supply chain financing platform has successfully landed, providing financial support for enterprises to actively integrate into the global supply chain. The cross-border financing function of the RMB continues to strengthen.

In addition, CNOOC and Total Energy have completed their first cross-border RMB settlement transaction for liquefied natural gas; The Central Bank of Brazil announced that the Chinese yuan has surpassed the euro to become the country's second largest international reserve currency.

At present, the Chinese yuan is the fifth largest active currency for international payments and the fifth largest international reserve currency, ranking third in weight in the Special Drawing Rights currency basket of the International Monetary Fund. Data shows that in 2022, the scale of cross-border RMB settlement in China exceeded 42 trillion yuan, an increase of more than three times compared to 2017. The People's Bank of China has authorized 31 RMB clearing banks in 29 countries and regions, and has signed bilateral currency swap agreements with central banks or monetary authorities in 40 countries and regions, with a total amount of over 4 trillion yuan. The internationalization level of the RMB is constantly improving.

This is a photo of the Central Bank of Argentina taken on June 30th in Buenos Aires, the capital of Argentina.

Why is the internationalization of the RMB accelerating

From an economic and trade perspective, China is an important trading partner of major economies in the world. More and more countries are feeling that settling bilateral trade directly in their own currency is beneficial for reducing costs and making it more convenient.

Argentine Central Bank President Miguel Angel Pece told reporters that China is one of Argentina's most important trading partners. Directly using the local currency for settlement in bilateral trade without using a third currency can effectively reduce transaction costs. Argentina and China have established a mature trade settlement mechanism, which is an advantage and beneficial for both countries.

From the perspective of confidence in the Chinese economy, the international influence of the renminbi continues to increase, winning more votes of trust for the Chinese economy in the international community.

Argentine economist Pablo Coenbrum believes that the confidence of the international market in the Chinese economy is an important driving force for the acceleration of RMB internationalization. He said that since China joined the World Trade Organization in 2001, the renminbi has been proven to be a stable and globally liquid currency. The international market has seen that the Chinese economy has maintained good growth during a complex period of impact on the world economy, as well as China's firm attitude and good results in adhering to the policy of opening up to the outside world. These are all sources of confidence in the Chinese economy and the renminbi in the international market.

From the perspective of diversified demand, countries have an increasing demand for currency diversification. Economist and Columbia University professor Jeffrey Sachs pointed out that as the weight of the US economy decreases, the US dollar is used as a political weapon and central bank digital currency is used in settlement. The status of the US dollar will weaken, and the demand for currency diversification in developing countries will increase. In the future, the status of developing country currencies such as the renminbi will rise.

Christina Bier, editor in chief of the French newspaper "New Unity" and an expert on financial issues, believes that the international monetary system is developing rapidly, and its diversification helps ensure that every country can seek development according to its chosen system. The renminbi is expected to play a greater role in energy settlement.

This is the Chinese yuan and Argentine peso paper currency captured on April 27th in Buenos Aires, Argentina.

What opportunities will RMB internationalization bring

Industry insiders believe that with the increasing practical application of the renminbi in bilateral settlements, the renminbi will gain importance and influence in the international economic and trade field that matches China's international status in the future.

Wu Kegang, China Affairs Advisor at the British Chamber of Commerce, stated that China is the world's largest trading country. Trade with China is considered an important stabilizing factor in the global trading system. The deep participation of the renminbi in international trade contributes to the stability of the international trade system. The renminbi will also further internationalize, showcasing the power and resilience of the Chinese economy to the world.

Yan Li, Senior Lecturer at the Nanyang Business School of Nanyang Technological University in Singapore, believes that the sustainable development of the Chinese and global economies is a prerequisite for a larger scale internationalization of the renminbi in the future.

Yan Li said, "The renminbi will definitely become the main settlement currency for international trade and one of the most important reserve currencies for central banks of various countries in the future.". A more diversified international monetary system is more balanced and fair for the vast majority of countries in the world.

Marcos Pires, director of the Institute of Economics and International Studies at S ã o Paulo State University in Brazil, pointed out in an interview with Xinhua News Agency that the internationalization of the renminbi will bring significant changes to the world's trade and investment situation, and is also an important step towards establishing a fair international financial order.

Liang Guoyong, a senior economist at the United Nations Conference on Trade and Development, believes that the internationalization of the renminbi has made significant progress in the past decade, but it still does not match the size of China's economy and its position in the world economy. In the future, this process will continue to steadily advance.