The Chinese central bank points out that there is still huge room for RMB transaction to expand amongst participants in Xi Jinping’s much vaunted One Belt One Road initiative.
Speaking at the “China Investment Forum” held by the China Association for Public Companies in conjunction with China’s sovereign wealth fund, Yin Yong (殷勇), vice-governor of the People’s Bank of China, pointed out that while RMB cross-border payments comprise 25% of all Chinese trade, the figure was only 14% for One Belt One Road countries.
This low level provides ample room for usage of the RMB for international transaction to expand.
Yin notes that RMB acceptance levels amongst One Belt One Road nations are already expanding rapidly, with some countries already striving to establish themselves as offshore Chinese yuan financial centres.
He touted the advantages of the expanded use of the RMB on the Silk Road, which include abetting the ability of China to export capital to those countries with a strong demand for funds, improving the ability of countries with strong demand for Chinese goods and services to pay for them, and enabling China to avoid the risk created by shifts in liquidity for international capital.
“The RMB is the most natural choice for advocates of One Belt One Road participation,” said Yin.
“Compared to other currencies, the RMB funds pool is the largest and most richly layered,” pointing net overseas investment of USD$1.8 billion, as well as a Chinese M2 money supply of over 100 trillion yuan.
In order to expand the use of the RMB for cross-border payment purposes, Yin Yong notes that China has already established currency swap agreements with 21 One Belt One Road countries, with a total value of 982.2 billion yuan (approx. USD 144.55 billion).
China has also established RMB settlement arrangements with 6 countries, and launched RMB qualified financial institutional investor (RQFII) trials worth 330 billion RMB, and established trade and investment RMB settlement agreements with 8 One Road and One Belt countries.