The international use of RMB spreads "big news" again. Recently, the monthly report on RMB released by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) shows that in November 2023, in the ranking of global payment currencies based on amount statistics, the RMB surpassed the Japanese yen and rose to the position of the fourth most active currency in the world, accounting for 11.4%. This is the highest ratio in nearly five years, surpassing the proportion at the beginning of 61.

Since the launch of RMB settlement for cross-border trade in 2009, the internationalization of RMB has been developing for more than 10 years. At present, nearly half of the total cross-border transactions carried out by China's financial institutions, enterprises and individuals are settled in RMB. Deposits in the major offshore RMB markets amounted to nearly RMB1.5 trillion, and RMB-denominated financial products became increasingly abundant. In May 2022, the International Monetary Fund (IMF) further raised the RMB's weight in the SDR to 5.2016% from 10.92% determined in 12, reflecting international recognition of the RMB's increased freedom of use.

In line with this, the institutional arrangements for the cross-border use of RMB and the construction of financial infrastructure are also constantly improving. In recent years, the financial management department has expanded the two-way opening of the financial market at a high level, creating a more favorable policy environment for domestic and foreign entities to hold and use the RMB. Overall, the renminbi has initially possessed the network effect of international use, providing a more diversified currency choice for domestic and foreign entities, which is conducive to facilitating cross-border trade, investment and financing activities, and reducing exchange rate risks and exchange costs.

At present, the pace of diversification of the international monetary system is accelerating, the endogenous demand for the use of RMB by business entities is increasing, and the international environment is complex and changeable. In this context, the internationalization of the renminbi should take advantage of the trend, continue to adhere to the principles of market-driven, mutual benefit and win-win results, pay more attention to improving quality and level, focus on trade and investment facilitation, and solidly promote the international use of renminbi. 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.

On the one hand, it is convenient for business entities to use RMB more in foreign trade and investment. We will continue to do a good job in system design, policy support and market cultivation, strengthen the coordination of domestic and foreign currencies, and improve the construction of infrastructure for the cross-border use of RMB, so that the RMB can be used and used well. Promote the pilot project of integrated capital pooling of domestic and foreign currencies in an orderly manner. Focusing on the development of the Pilot Free Trade Zone (Free Trade Port), the Guangdong-Hong Kong-Macao Greater Bay Area and the Shanghai International Financial Center, we will promote innovation in RMB cross-border investment and financing business, optimize the pilot rules of the "Cross-boundary Wealth Management Connect" in the Guangdong-Hong Kong-Macao Greater Bay Area, and build an "electronic fence" for funds in the Hainan Free Trade Port and the Guangdong-Macao In-Depth Cooperation Zone in Hengqin.

On the other hand, we will promote the comprehensive institutional opening of the financial market in a steady and orderly manner. Further improve the degree of openness and access of China's financial market, improve the liquidity of RMB financial assets, enrich risk hedging tools, improve the convenience of foreign exchange trading operations, and better meet the asset allocation and risk management needs of global RMB asset investors. Support more foreign central banks, international development institutions, multinational conglomerates, etc. to issue panda bonds in China.

In addition, the supervision of cross-border RMB business should not be relaxed. It is necessary to strengthen the capacity building of monitoring and off-site inspections during and after the event, and strengthen on-site inspections. We will further improve the assessment and early warning system for cross-border capital flows, improve the macro-prudential management framework for cross-border capital flows that integrates domestic and foreign currencies, enrich the macro-prudential management toolbox, strengthen the coordination between macro-prudential management and micro-supervision, and improve the management and risk prevention and control capabilities of cross-border capital flows under the conditions of opening up, so as to maintain the bottom line of preventing systemic financial risks.

Yao Jin (Source: Economic Daily)

Yao Jin