The growing global role of China's currency RMB

People's Bank of China (PBOC) governor Zhou Xiaochuan speaks on the internationalisation of the renminbi. 

This is an excerpt from

Q: What is the proper pace and timing for the globalisation of the renminbi?

A: Firstly, as renminbi internationalisation or the use of the currency in cross-border trade and investment settlement started from a very low level in a short time, the growth rate looks very high. But, in fact, the share of renminbi in global trade and investment settlement is still relatively low. There was a development opportunity for renminbi globalisation presented by the outbreak of the global financial crisis.

After the crisis, people felt unsatisfied and lacked confidence in the existing global monetary system and so began to use the renminbi. However, we still need to do a lot of ‘homework' before we can realise the globalisation of renminbi usage.

In the last few years, we have mainly focused on removing unnecessary restrictions on the use of the Chinese currency, including changing some laws and regulations. We should also eliminate discrimination against the renminbi, so it can circulate in all the areas where hard currencies are active. This work remains unfinished. 

So, overall, we are a long way from renminbi globalisation and need in particular to increase the renminbi's share in cross-border trade and investment settlement.

Q: What is the role of the PBOC?

A: The People's Bank of China will not ‘overpromote' the use of the renminbi. Instead, it will use its policies to create the conditions that support confidence in the acceptance of the renminbi in the international community.

The choice of whether or not to use renminbi will be left to market participants. Gradually, the barriers preventing its use will be eliminated for parties that want to use it. Another important issue included in our ‘homework' is to steadily promote and gradually realise the convertibility of renminbi capital accounts. 

So the convenience of the renminbi in global use and people's confidence in it will substantially increase. From this perspective, we need to finish our policy reform first. But there is no prearranged pace or timeline for promoting the use of the currency.

Q: What is Hong Kong's future role in RMB globalisation?

A: Hong Kong's renminbi business is developing soundly, and is playing a central role not only in Hong Kong but also in the world. Hong Kong's renminbi business can help to promote the use of renminbi in many countries, especially South-east Asian countries.

Many have shown an interest in promoting renminbi business, which is good and has brought Hong Kong many opportunities. Other places also aspire to be the ‘centre'.

But the real ‘centre' should be recognised by the market because of its actual advantages and good levels of service. Hong Kong has obvious advantages over other places. Hong Kong has a tradition of being a financial hub, and has a world-class financial market, in particular its advanced equity market. Therefore, Hong Kong's position will be strengthened.