A new report indicates that China’s Belt and Road Initiative is driving the use of the renminbi abroad.
The report produced by China Construction Bank in conjunction with financial publication The Asian Banker surveyed 398 Chinese and foreign enterprises and financial institutions, covering areas including the rate of internationalisation, initiatives affecting internationalisation and industry sentiment.
According to the report internationalisation of the renminbi accelerated last year on the back of enthusiasm for the Belt and Road Initiative.
As of the end of 2017 total RMB-denominated financial assets held by foreign institutions and individuals reached 4.28 trillion yuan (approx. USD$630 Billion), for a year-on-year increase of 41.3%.
Foreign institutions expanded their RMB-denominated bond holdings by 347.7 billion yuan, with total outstanding RMB bonds held by foreign institutions rising to an unprecedented high of 1.15 trillion yuan by the end of 2017.
72% of all respondents, as well as 80% of Chinese companies, said that Belt and Road has had the biggest impact on RMB internationalisation.
“The world’s largest economic corridor is expected to expedite the use of RMB for trade, financing and investment,” said the report.
“Development of RMB hubs across the world along with long-term enablers such as the Belt and Road Initiative and clearer policy directions could further strengthen the RMB’s position in international financial markets in the foreseeable future.”
Survey respondents also highlighted the inclusion of the Chinese yuan in the IMF’s Special Drawing Rights currency basket and efforts by Beijing to further open the domestic economic as key factors driving further internationalisation of the RMB.
63% of Chinese companies, 47% of foreign corporations and 57% of financial institutions indicated that they would increase RMB cross-border engagement in 2018.