A senior official from the People’s Bank of China (PBOC) has highlighted the necessity of greater liberalisation of the Chinese capital account if further internationalisation of the renminbi is to take place.
Zhu Jun (朱隽), head of PBOC’s internationalisation department, said that further internationalisation of the renminbi will entail both the greater development of offshore markets and further opening of the capital account.
“Renminbi internationalisation must continue to employ the role of offshore markets,” said Zhou on 9 December at the Hong Kong International Financial Centre Status and Outlook Forum. “Hong Kong’s offshore market will play a key support role during the process of renminbi internationalisation.
“Renminbi internationalisation also requires further opening of the capital account…to a significant extent capital account liberalisation is one of the necessary conditions of currency internationalisation.
“The higher the level of currency internationalisation, the greater the need for capital account liberalisation. If we want to further raise the level of renminbi internationalisation, we cannot avoid opening of the capital account.”
According to Zhu efforts to internationalise the renminbi can be divided into three periods – a preliminary period of regional usage prior to the Great Financial Crisis, followed by a significant acceleration of usage during the period from 2009 to 2015, during which the renminbi was included in the special drawing rights (SDR) basket of currencies.
The period since 2015 has seen the focus shift towards great connection of capital markets, as well as improvements to cross-border payments infrastructure.
Zhu’s remarks arrive during trials to drive the use of China’s central bank digital currency (CBDC), also referred to as the digital renminbi, which observers say will facilitate cross-border transactions denominated in the Chinese currency.