China's RMB internationalization efforts deliver concrete results: report
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E-mail Xinhua, June 24, 2016
As more countries have included the RMB into their official foreign reserves, the Chinese currency is becoming truly global and this is set to continue, a leading Chinese investment bank said in a report.
The Monetary Authority of Singapore (MAS) announced on June 22 that it will include RMB investments as part of its official foreign reserves from June.
"The move by MAS shows that the RMB's SDR inclusion is not just symbolic," China International Capital Corp. Ltd. said in a report.
As of May 2016, MAS held 244.5 billion U.S. dollars in foreign exchange reserves, the 11th largest reserve holder globally. If it were to raise the RMB's share to five percent, it will reallocate 12.2 billion U.S. dollars to RMB assets, the report observed.
Data released by the International Monetary Fund (IMF) showed that 94 billion U.S. dollars of official assets were already held in RMB at the end of 2014, accounting for 1.1 percent of global foreign exchange reserves.
"The increase of RMB holdings is likely to continue as more central banks set official targets for the RMB in their reserve pools, especially after the new SDR basket comes into effect," the report noted.
As it plays an increasingly important role, the report estimated that the foreign demand for the RMB and RMB assets tends to grow, and the RMB has the potential to rise to 3.7 percent in global foreign exchange reserves, translating to an inflow of 2.7 trillion yuan (410 billion U.S. dollars) to China.
China has been pushing for yuan's global use, as the world's largest trading nation looks to lower transaction cost in international trade, which is mostly settled in U.S. dollars at present.
The IMF last year decided to add RMB into its Special Drawing Rights (SDR) currency basket, making it one of the five reserve currencies fully endorsed by the 188-member multilateral organization.
Experts have warned the global reserve currency status will not automatically turn the yuan into a major global reserve currency, which is a choice of the market.
If yuan wants to gain the trust and confidence of the market, China needs to become an economy and a financial system that can accept large and free movement of inflows and outflows and has depth and breadth with a variety of financial instruments, experts have said. Endi
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