What are the future prospects for RMB internationalization? The number of optimistic voices from all walks of life continues to increase

In the first nine months, the amount of cross-border receipts and payments of RMB increased by more than 9%, and the proportion of global trade finance rose to second place in September.

Feel the "international style" of RMB from the new changes

Reporter Qiu Haifeng

There have been new changes in the internationalization of the renminbi

The growth rate accelerated, and the year-on-year growth rate of cross-border RMB receipts and payments by banks on behalf of customers rose from 15.1% last year to more than 9% in the first nine months of this year.

In September, the renminbi accounted for 9.5% of global trade finance, ranking second.

In the past three years, the share of RMB foreign exchange trading in the global market has increased from 3.4% to 3%...

Since the end of October, the People's Bank of China has successively released information on the latest progress and trend outlook of RMB internationalization. A series of data shows that the function of the renminbi as a payment currency, investment and financing currency, and reserve currency has been continuously enhanced, and it is becoming more and more popular in the international market. The People's Bank of China said that the next step is to follow the trend, coordinate development and security, and steadily and solidly promote the internationalization of the RMB.

Talk about the new progress of RMB internationalization

● From January to August this year, 1 panda bonds were issued in the interbank bond market and the exchange market, with a total issuance scale of 8 billion yuan, a year-on-year increase of 58.1060%, and the number and amount of issuance have exceeded that of last year

● In the past three years, the share of RMB foreign exchange transactions in the global market has increased from 3.4% to 3%, and its ranking has risen from eighth to fifth, becoming the currency with the fastest growing market share, indicating that offshore entities are increasingly using RMB for exchange and risk management

● As of the end of September, a total of 9,1110 overseas institutions had entered China's bond market, and overseas institutions held 3.3 trillion yuan of Chinese bonds, an increase of nearly 5% from five years ago; The total scale of RMB financial assets held by foreign institutions such as domestic stocks and bonds reached 200.9 trillion yuan

● In 2022, about 82.8% of the surveyed domestic and foreign industrial and commercial enterprises considered using RMB in cross-border transactions or increased the proportion of RMB use, the highest proportion in recent years

● Up to now, the People's Bank of China has authorized 29 RMB clearing banks in 31 countries and regions, covering major international financial centers around the world

● In 2022, 71.8% of the surveyed overseas industrial and commercial enterprises indicated that they would give priority to using RMB as the currency for trade financing with China, and the intention of overseas enterprises to use RMB for trade financing with China was the highest in the past three years

Panda bonds are popular

-- The investment and financing function of RMB has been enhanced, and as of the end of September, the total scale of RMB financial assets held by foreign institutions such as domestic stocks and bonds reached 9.9 trillion yuan

Panda bonds, i.e., RMB bonds issued by foreign institutions in China, welcomed the "first order" in a row.

At the end of October, the National Bank of Canada successfully priced the issuance of RMB 10 billion panda bonds in China's interbank market, with a maturity of 10 years and a coupon rate of 3.3%. This transaction is the first panda bond in North America this year, and also marks the return of National Bank of Canada to China's interbank bond market after seven years.

Previously, on October 10, the Egyptian government successfully issued a 16.35 billion yuan sustainable panda bond in China's interbank market. The issuance achieved a "zero breakthrough" in panda bonds in Africa, and it was also the first sovereign panda bond for sustainable development and the first sovereign panda bond with a guarantee structure.

According to reports, according to international practice, when issuing local currency bonds in a country's domestic market, they are generally named after the country's most characteristic mascot. Since the beginning of this year, the popularity of panda bonds has continued to rise, and the emergence of more "first orders" highlights the international recognition of RMB bonds and the improvement of the function of RMB financing currency.

Echoing the increase in the "first order", the scale of panda bond issuance has expanded significantly. According to the "2023 RMB Internationalization Report" released by the People's Bank of China a few days ago, from January to August this year, 1 panda bonds were issued in the interbank bond market and the exchange market, with a total issuance scale of 8 billion yuan, a year-on-year increase of 58.1060%, and the number and amount of issuance have exceeded that of last year. According to the latest data from Wind, as of October 58, the scale of panda bond issuance has exceeded 2 billion yuan since the beginning of this year.

Why are panda bonds so popular? Experts believe that the relatively low financing cost of RMB and the improvement of financing convenience are important reasons.

"From the perspective of issuance costs, the spread between offshore and onshore interest rates has narrowed, the average issuance rate of panda bonds has remained stable, the financing cost of the domestic bond market has continued to decline, and panda bonds with favorable pricing advantages have been more recognized among overseas entities." In addition, the People's Bank of China and the State Administration of Foreign Exchange jointly issued the Notice on Matters Related to the Management of Funds for Domestic Bond Issuance by Overseas Institutions in December last year, which unified the rules for the management of "panda bond" funds in the interbank bond market and the exchange bond market, promoted the integrated management of domestic and foreign currencies, and further enhanced the convenience of financing for foreign entities in the domestic bond market.

In fact, as China's economic growth momentum recovers and the financial market further opens up, the RMB's investment and financing and hedging functions have gradually strengthened, and it is not only panda bonds that are popular. The Macroprudential Administration of the People's Bank of China issued a document on November 11, saying that the Shanghai-Shenzhen-Hong Kong Stock Connect, mutual recognition of funds, bond connect, Shanghai-London Stock Connect, cross-border wealth management connect and other interconnection channels have been opened and optimized, the management policy framework for qualified investors has been continuously improved, the issuance of panda bonds by overseas entities has become more convenient, China's stocks and bonds have been included in major international indexes, and the RMB investment and financing environment has continued to improve. As of the end of September, a total of 9,9 foreign institutions had entered China's bond market, and overseas institutions held 1110.3 trillion yuan of Chinese bonds, an increase of nearly 3% over five years ago. The total scale of RMB financial assets held by foreign institutions such as domestic stocks and bonds reached 5.200 trillion yuan.

Offshore RMB trading is active

-- In the past three years, the share of RMB foreign exchange transactions in the global market has increased from 3.4% to 3%, and its ranking has risen from eighth to fifth, becoming the currency with the fastest growing market share

While overseas institutions are actively deploying in the domestic bond market, offshore RMB trading is also becoming more active.

-- Expansion of RMB clearing banks. In late October, two RMB clearing banks opened one after another: the opening ceremony of Pakistan RMB Clearing Bank was held in Islamabad, the capital of Pakistan, marking the official launch of Pakistan's RMB Clearing Bank business; Industrial and Commercial Bank of China Vientiane Branch held a ceremony in Vientiane, the capital of Laos, to officially launch RMB clearing bank services, and China has now set up five RMB clearing banks in Southeast Asia.

"The renminbi is playing an increasingly important role in the world economy and global financial markets." The Governor of the Central Bank of Pakistan, Jamil Ahmed, said that the establishment of the RMB clearing bank will help reduce the cost of the local banking system and help Pakistani enterprises open up new markets, which will benefit the long-term development of Pakistan's economy and banking system.

According to experts, since 2022, China has successively set up new RMB clearing banks in Laos, Kazakhstan, Pakistan and Brazil, and the overseas RMB clearing network has been continuously optimized, further facilitating cross-border transactions in the field of trade and investment. Up to now, the People's Bank of China has authorized 29 RMB clearing banks in 31 countries and regions, covering major international financial centers around the world.

-- The scale of RMB central bank bills reached a new high. According to the previous announcement of the People's Bank of China, on November 11, it will tender for the issuance of 21 billion yuan of central bank bills through the Hong Kong Monetary Authority's Central Moneymarkets Unit (CMU) bond bidding platform.

Wu Dan, a researcher at the Bank of China Research Institute, said that the People's Bank of China issued another 11 billion yuan of three-month central bank bills in November, an increase of 3 billion yuan from the previous time; At the same time, 300 billion yuan of one-year central bank bills were issued, further enriching the RMB investment product series and liquidity management tools in the Hong Kong market.

Since last year, the People's Bank of China has regularly issued RMB central bank bills in Hong Kong in a market-oriented manner, which has been widely welcomed by offshore investors. According to the data of the People's Bank of China, a total of 12 issues were issued last year, with an issuance scale of 1200 billion yuan, of which the subscription multiple of each central bank bill issuance was more than 1.9 times, and the highest was 4.6 times. The main investors include international financial organizations, central bank institutions, commercial banks, funds, insurance companies and other overseas investors, and their geographical distribution covers Hong Kong, Macao, Taiwan, Asia-Pacific, Europe and Africa. Since the beginning of this year, the scale of issuance has been further expanded, and 11 issues have been issued so far with a total of 1550 billion yuan, far exceeding that of last year.

"Overall, since last year, the interconnection and cooperation of domestic and foreign financial markets have continued to deepen, offshore RMB products have become more abundant, and the level of cross-border investment facilitation and liberalization has been continuously improved." The relevant person in charge of the People's Bank of China said that the Bank for International Settlements (BIS) survey showed that in the past three years, the share of RMB foreign exchange transactions in the global market has increased from 3.4% to 3%, and the ranking has risen from eighth to fifth, becoming the currency with the fastest rising market share, indicating that offshore entities use RMB more for exchange and risk management. Next, the People's Bank of China will continue to improve the RMB liquidity supply mechanism in the offshore market, enrich the product system of offshore RMB markets such as Hong Kong, promote the formation of a virtuous cycle of RMB onshore and offshore markets, and support the healthy development of the offshore RMB market.

Optimistic about the internationalization of the RMB

-- About 82.8% of the surveyed domestic and foreign industrial and commercial enterprises are considering using RMB in cross-border transactions or increasing the proportion of RMB use, the highest proportion in recent years

What are the future prospects for RMB internationalization? The number of optimistic voices from all walks of life continues to increase.

Argentina recently made it clear that it will use the equivalent renminbi under the currency swap agreement between China and Argentina to repay the IMF's maturing foreign debt and interest in the near future, which is the second choice of this method after Argentina used the renminbi to repay the maturing foreign debt at the end of June this year.

"Like many countries in the world, Argentina has always been optimistic about the internationalization of the renminbi." The governor of the Central Bank of Argentina, Miguel Ángel Pesse, said not long ago that the central banks of Argentina and China signed the first local currency swap agreement in 2009 and has since renewed it. In November last year, Argentina officially launched the RMB clearing bank service, and then the Argentine National Securities Commission approved the issuance of securities products settled in RMB, which are all manifestations of Argentina's welcome to the internationalization of the RMB.

In Bolivia, the local government announced in July that the Bolivian state-owned Union Bank was launching a renminbi trading business. Bolivia's Minister of Economy and Public Finance, Marcelo Montenegro, said that the country's RMB trading business is off to a good start, and it is expected that the RMB will be better used under the framework of the "Belt and Road" cooperation. "More and more countries have launched RMB business, RMB internationalization is developing rapidly, and it is expected that RMB will be more involved in future international trade activities." Marcelo Montenegro said.

More companies have also expressed confidence in the renminbi. A few days ago, the People's Bank of China released the 2022 annual market survey on the international use of RMB. According to the survey of more than 3600,82 domestic and foreign industrial and commercial enterprises, about 8.71% of the surveyed domestic and foreign industrial and commercial enterprises are considering using RMB in cross-border transactions or increasing the proportion of RMB use, the highest proportion in recent years. 8.2021% of the surveyed overseas industrial and commercial enterprises will give priority to using RMB as the currency for trade finance with China, an increase of 3.5 percentage points from the survey results in 3, and the intention of foreign enterprises to use RMB for trade finance with China is the highest in the past three years.

"At present, the pace of diversification of the international monetary system is accelerating, the endogenous demand of business entities for the use of RMB is increasing, and the international environment is also complex and changeable." The relevant person in charge of the Macro-prudential Administration of the People's Bank of China said that the internationalization of RMB should follow the trend, continue to adhere to the principle of market-driven, mutual benefit and win-win, pay more attention to improving quality and level, focus on trade and investment facilitation, continuously optimize basic institutional arrangements such as cross-border RMB investment and financing, transaction settlement, etc., enhance the ability of cross-border RMB business to serve the real economy and promote high-quality development, provide diversified currency choices for economic entities, and solidly promote the international use of RMB. At the same time, we will continue to seek progress while maintaining stability, continuously improve regulatory capabilities and risk prevention under open conditions, build a solid "breakwater", and ensure that the internationalization of the RMB is steadily advancing on the premise of maintaining the bottom line of safety. (People's Daily Overseas Edition)