China Banking Association Issues Renminbi Internationalisation Report, Calls for Better Cross-border E-Yuan Infrastructure

79

The peak body for the Chinese banking sector has released a report on efforts to internationalise the renminbi, calling for key measures including greater opening of domestic financial markets and improvements to cross-border digital renminbi infrastructure.

The China Banking Association (CBA) recently issued its “Renminbi Internationalisation Report (2021 – 2022)” (人民币国际化报告(2021-2022) – the sixth such report released by the association since 2016.

The Report outlined five recommendations for advancing the internationalisation of the renminbi, including:

  1. Government departments and regulatory bodies further strengthening domestic-foreign communication and cooperation; expanding the scale of bilateral currency swaps, striving to establish relevant mechanisms with more national monetary authorities, and exploring the establishment of “three-dimensional” cross-border renminbi money-laundering risk warnings and monitoring systems.
  2. Further improving renminbi cross-border usage policies, encouraging commercial banks to engage in innovation of products and services, driving the unification of polices and standards for domestic and foreign currency trade and investment, standardising the frequency of the issuance of “Cross-border Renminbi Settlement High-quality Enterprise Lists” (跨境人民币结算优质企业名单), and driving the establishment of accounts management systems combining domestic and foreign currencies.
  3. Continuing to create a global renminbi settlements system, expanding the scope of participants in China’s Cross-border Inter-bank Payments System (CIPS), continually improving CIPS functionality, and accelerating exploration of the development of digital renminbi cross-border payments infrastructure.
  4. Continuing to further increase convenience for offshore investors, expanding the openness of financial markets, exploring the expansion of existing cross-border investment product types, appropriately expanding the scope of participants in cross-border investment in China’s financial markets, further improving “Cross-border Wealth Management Connect” policies, and driving the development of cross-border commodities exchanges.
  5. Actively cultivating offshore renminbi markets, further optimising the offshore renminbi settlement system, continually enriching offshore market renminbi financial product types, encouraging Chinese-invested financial enterprises to expand abroad and establish branches and allowing Chinese-invested offshore banks to engage in OSA offshore renminbi operations.

According to the report, commercial banks will be key drivers of the internationalisation of the renminbi, with the CBA calling for the adoption of measures including:

  1. Uncovering the cross-border renminbi operations needs of key global enterprises, formulating comprehensive renminbi financial services plans and increasing the cross-border usability of the renminbi.
  2. Focused strengthening of cross-border usage of the renminbi with adjacent nations and RCEP members.
  3. Servicing Chinese enterprises that are expanding abroad into key areas including commodities and overseas outsourcing, and the establishment of a cross-border renminbi usage ecosystem.
  4. Strengthening product innovation and raising the cross-border usage of the renminbi for new operations.
  5. Using free trade zone resources and employing the unique features of free trade zones to explore innovation in cross-border renminbi operations.

Official data from China indicates that as of 2021 the renminbi was second leading currency for China’s cross-border receipts and payments, and the world’s fifth largest reserve currency.

As of the end of 2021, the Chinese central bank had facilitated the development of 27 renminbi settlement banks across 25 countries and regions outside of mainland China, including Hong Kong, Taiwan, Macau, South-east Asia, Europe, Latin America, Oceania, the Middle East and Africa.