Belt and Road, SDR Inclusion to Drive Renminbi Internationalisation in 2019: China Construction Bank

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A research report from one of China’s big six state-owned banks anticipates further internationalisation of the renminbi in 2019.

China Construction Bank’s “New Trends, New Outlooks – 2019 Renminbi Internationalisation Report” (新动向、新前景——2019人民币国际化报告) says that internationalisation of the renminbi is steadily advancing, and anticipates further growth in use of the Chinese currency for trade, finance and investment.

CCB’s report said that despite trade frictions with the US and exchange rate volatility, the market remained optimistic in general about the prospects for renminbi internationalisation in 2019.

Opening of the Chinese financial sector is set to continue alongside further improvements to industry infrastructure and fintech advances, which will set a firm path for renminbi internationalisation this year.

The report indicates that 54% of Chinese enterprises and 57% of overseas enterprises surveyed increased their use of the renminbi for cross-border trade settlement in 2019, a trend that CCB expects to further continue in 2019.

The expansion of the Belt and Road initiative and inclusion of the renminbi in the Special Drawing Rights (SDR) basket of currencies is expected to further drive cross-border usage of the renminbi in future.

80% of Chinese enterprises and 69% of foreign enterprises surveyed indicated that Belt and Road would drive usage of cross-border renminbi products and services.

52% of financial institutions, 66% of Chinese enterprises and 63% of overseas enterprises said that the inclusion of the renminbi in the SDR basket would prompt them to make greater use of the renminbi.

The interbank bond market is expected by CCB’s report to become the most popular direct investment channel for foreign institutions, with 47% of financial institutions surveyed indicating that it would be their preferred method for entering the Chinese domestic bond market.

27% of institutions said that they would use the Bond Connect scheme or QFII’s to enter the Chinese bond market.

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