Jump to content

Internationalization of the renminbi

From Wikipedia, the free encyclopedia

Internationalization of the renminbi
Traditional Chinese人民幣國際化
Simplified Chinese人民币国际化
Transcriptions
Standard Mandarin
Hanyu Pinyinrénmínbì guójìhuà

Since the late 2000s, the People's Republic of China (PRC) has sought to internationalize its official currency, the Renminbi (RMB). This initiative aims to reduce dependence on the United States dollar and enhance China's influence in the global financial system. Key strategies have included promoting the use of the yuan in international trade invoicing, cross-border lending, and bond issuance. Additionally, China has developed alternative payment systems such as the Cross-Border Interbank Payment System (CIPS) and the digital yuan, facilitating transactions outside traditional networks like SWIFT. The establishment of central bank swap lines and the expansion of offshore yuan markets further support this goal.[1]

Development

[edit]

Until the early 2000s, the Renminbi (RMB) was not convertible and its flow in and out of China was tightly restricted. The first step toward liberalisation came in 2004, when China began allowing limited border trade settlements in yuan. That same year, banks in Hong Kong were permitted to offer RMB deposit-taking, exchange, remittance, and card services for personal accounts, following approval by the State Council and arrangements with the Hong Kong Monetary Authority (HKMA). By 2009, RMB deposits in Hong Kong had risen from ¥12 billion in 2004 to ¥59 billion, and the territory emerged as the largest offshore centre for RMB activity.[2]

The internationalisation push accelerated after the 2007–2008 financial crisis. In July 2007, the China Development Bank issued the first offshore RMB-denominated bonds in Hong Kong, creating the “dim sum bond” market, which expanded rapidly as banks, corporations such as McDonald’s, and supranational institutions like the Asian Development Bank issued debt in offshore RMB (CNH). By 2013, the market had grown to ¥310 billion outstanding.[3] In parallel, Taiwan developed a Formosa bond market after signing a 2012 memorandum with Beijing, and similar RMB bond issuance spread to Singapore and other centres.

On 24 December 2008, China launched the Cross-Border Trade RMB Settlement Pilot Project, initially limited to Yunnan–ASEAN and Guangdong–Hong Kong–Macau trade. By 2010, the pilot expanded to 20 provinces, municipalities and autonomous regions, and by 2014 RMB settlements reached ¥5.9 trillion, or 22% of China’s trade volume.[4]

From 2009 onward, the People’s Bank of China (PBoC) signed a growing number of currency swap agreements with central banks, covering countries such as Argentina, Brazil, Turkey, South Korea, and the UK.[5] In August 2010, the PBoC allowed central banks and offshore clearing banks to invest surplus RMB in the onshore China Interbank Bond Market, and soon afterwards permitted outward direct investment (ODI) in RMB. That year, China and Russia began trading in their own currencies, abandoning the United States dollar in bilateral trade, followed by a similar arrangement with Japan in 2011.[6] In December 2011, the Renminbi Qualified Foreign Institutional Investor (RQFII) programme was introduced to allow offshore RMB funds to invest in mainland securities markets.[7]

China also experimented with financial reforms through the Shanghai Free-Trade Zone (SFTZ), launched in 2013, where RMB could circulate more freely between Free Trade Accounts and offshore accounts. In the same year, the UK became the first G7 country to establish an official RMB swap line. By late 2013, the RMB had overtaken the euro to become the second-most used currency in global trade finance, behind only the U.S. dollar.[8]

Between 2014 and 2017, a series of liberalisations deepened offshore RMB use. The Shanghai–Hong Kong Stock Connect was launched in 2014 to allow cross-border equity trading, followed in 2017 by Bond Connect to link mainland and Hong Kong bond markets. The China International Payments System (CIPS) was established in 2015 as an alternative to SWIFT, and the World Bank issued the first SDR bonds payable in RMB in 2016. In 2018, yuan-denominated oil futures were introduced on the Shanghai International Energy Exchange, marking a step toward pricing commodities in RMB.

Further reforms removed barriers for inbound investors: in September 2019 the State Administration of Foreign Exchange (SAFE) abolished quotas under the Qualified Foreign Institutional Investor (QFII) and RQFII programmes, and in 2020 the two schemes were merged with simplified application and expanded investment scope. By 2020, the RMB accounted for 4.3% of global foreign exchange turnover and was held in reserves by more than 70 central banks, though it remained used for less than 2% of global payments.

RMB as a reserve currency

[edit]
See also: Reserve currency § Global currency reserves

The road to the RMB Internationalization is far from complete.

  • First, the size of the home economy must be large relative to others.
  • Second, economic stability in the form of low inflation, small budget deficits and stable growth is also important. China's record of supportive government policies and macro-economic stability has undoubtedly contributed to the RMB's appeal in recent years. The bursting of Japan's bubble in the early 1990s was arguably one of the main reasons why yen internationalization stalled.
  • Third, strong official and institutional support. This was an important reason for the dollar's adoption as a global currency after the Second World War, formalised through the Bretton Woods system. China has been doing that in the last few years, promoting the use of RMB and its infrastructure with ASEAN, Russia, United Kingdom, Germany, Canada, Australia, etc. At the China Development Forum in March 2014, the People's Bank of China (PBoC) stressed the importance of strengthening financial regulations, establishing a deposit insurance scheme and improving market-driven exit mechanisms for financial institutions, while pushing forward reforms.
  • Fourth, deep, open and well-regulated capital markets are necessary so the currency can be used to finance trade as well as provide a large enough market in securities for investors. The opening up of China's onshore capital market will be an important step in the RMB becoming a major investment currency. This is one area where progress has been deliberately slow. For the RMB to be a truly global and become a more widely held reserve currency there needs to be greater access for foreign investors to local capital markets, even deeper global RMB liquidity and wider cross-border flow channels.

On 14 August 2020, the People's Bank of China released the "Report on the Internationalization of RMB in 2020". The report said that RMB's function of reserve currency has gradually emerged. In the first quarter 2020, the share of RMB in global foreign exchange reserves rose to 2.02%, a record high. As of the end of 2019, the People's Bank of China has set up RMB clearing banks in 25 countries and regions outside of mainland China, which has made the use of RMB more secure and transaction costs have decreased.[9]

Renminbi hubs outside China

[edit]

Since the late 2000s, China has encouraged the creation of offshore hubs for the RMB to expand its international use. Early initiatives included bilateral swap agreements and the designation of clearing banks in major financial centres. In Asia, Hong Kong and Macau became the first and largest offshore markets, with RMB deposits, trade settlement, and bond issuance expanding rapidly after 2010. Singapore followed with the designation of ICBC as a clearing bank in 2013, bilateral swap facilities, and the launch of direct CNY/SGD trading in 2014. Taiwan and South Korea also established clearing arrangements with Bank of China (Taipei) and Bank of Communications (Seoul), while Japan began direct RMB–yen trading in 2012. Russia developed RMB–rouble trading on the Moscow Exchange starting in 2010, with turnover growing steadily through the 2010s. In 2025 Turkey signed an agreement with China to create a clearing system after earlier currency-swap cooperation.

In Europe, London quickly became the leading European hub, accounting for over 60% of RMB activity outside China by 2013 and later ranking second globally in RMB settlements via SWIFT. Frankfurt was designated an official clearing centre in 2014, reflecting Germany’s role as China’s largest EU trading partner. Paris and Luxembourg also grew as centres for RMB deposits and bond issuance, with Luxembourg emerging as the leading RMB securities settlement venue in Europe. Switzerland signed a swap line with China in 2014, expanding European access to RMB. In the Americas, Canada became the first country to sign a reciprocal currency deal with China in 2014, enabling direct trading between the Canadian dollar and the yuan. In the Pacific, Australia signed a swap agreement with the PBoC in 2012, established clearing arrangements by 2014, and invested part of its foreign reserves in RMB-denominated bonds.

By the mid-2020s, this network of offshore hubs stretching across Asia, Europe, North America, and Australia had created multiple channels for RMB clearing, bond issuance, and foreign exchange trading.[10]

Appointed

Date

Country Clearing Bank Clearing hour

(GMT)

24 December 2003 Hong Kong BoC, Hong Kong[11] 00:30-21:00[12]
September 2004 Macau BoC, Macau branch[13]
11 December 2012 Taiwan BoC, Taipei branch[14]
8 February 2013 Singapore ICBC, Singapore branch[15]
18 June 2014 UK CCB, London branch[16]
19 June 2014 Germany BoC, Frankfurt branch[17]
4 July 2014 South Korea BoCom, Seoul branch[18]
15 September 2014 France BoC, Paris Branch[19]
16 September 2014 Luxembourg ICBC, Luxembourg[20]
3 November 2014 Qatar ICBC, Doha
8 November 2014 Canada ICBC, Toronto[21]
17 November 2014 Australia BoC, Sydney[22]
6 January 2015 Thailand ICBC, Bangkok[23]
6 January 2015 Malaysia BoC, Malaysia[24]
25 May 2015 Chile CCB, Santiago
28 June 2015 Hungary BoC, Budapest[25]
9 July 2015 South Africa BoC, Johannesburg[26]
17 September 2015 Argentina ICBC, Buenos Aires[27]
30 September 2015 Zambia BoC, Lusaka[28]
30 November 2015  Switzerland CCB, Zurich[29]
21 September 2016 USA BoC, NYC[30]
September 2016 Russia ICBC, Moscow
December 2016 UAE ABC, Dubai

List of RMB Bilateral Swap Agreements

[edit]
Earliest agreement[31][32] Economic partner Max. value in foreign currency
(including extensions) 		Max. value in RMB
(including extensions)
12 December 2008 South Korea KRW 64 trillion ¥360 billion[33][34]
25 November 2020 Hong Kong HKD 590 billion ¥500 billion[31][35]
8 February 2009 Malaysia MYR 90 billion ¥180 billion[36]
11 March 2009 Belarus BYR 16 trillion ¥7 billion[37][38]
23 March 2009 Indonesia IDR 878 trillion ¥400 billion[39][40]
29 March 2009 Argentina ARS 38 billion ¥70 billion[41]
9 June 2010 Iceland ISK 66 billion ¥3.5 billion[42]
23 July 2010 Singapore SGD 60 billion ¥300 billion[43]
18 April 2011 New Zealand NZD 5 billion ¥25 billion[44]
19 April 2011 Uzbekistan UZS 167 billion ¥0.7 billion
6 May 2011 Mongolia MNT 2 trillion ¥15 billion[45][46]
13 June 2011 Kazakhstan KZT 150 billion ¥7 billion[47]
23 June 2011 Russian Federation RUB 815 billion ¥150 billion[48][49]
22 December 2011 Thailand THB 320 billion ¥70 billion[50][51]
23 December 2011 Pakistan PKR 140 billion ¥10 billion[52]
17 January 2012 United Arab Emirates AED 20 billion ¥35 billion[53]
21 February 2012 Turkey TRY 189 billion ¥35 billion
22 March 2012 Australia AUD 30 billion ¥200 billion[54]
26 June 2012 Ukraine UAH 19 billion ¥15 billion[55]
26 March 2013[56] Brazil BRL 60 billion ¥190 billion[5]
22 June 2013 United Kingdom GBP 21 billion ¥200 billion[57]
9 September 2013 Hungary HUF 375 billion ¥10 billion[58]
12 September 2013 Albania ALL 35.8 billion ¥2 billion[59]
9 October 2013 European Union EUR 45 billion ¥350 billion[60]
21 July 2014  Switzerland CHF 21 billion ¥150 billion[61]
16 September 2014 Sri Lanka LKR 225 billion ¥10 billion[62]
3 November 2014 Qatar QAR 20.8 billion ¥35 billion[63]
8 November 2014 Canada CAD 30 billion ¥200 billion[64]
23 December 2014   Nepal NPR ¥ billion[65]
18 March 2015 Suriname SRD 520 million ¥ 1 billion
10 April 2015 South Africa ZAR 54 billion ¥ 30 billion[66]
25 May 2015 Chile CLP 2.2 trillion ¥ 22 billion[67]
5 September 2015 Tajikistan TJS 3.2 billion ¥ 3.2 billion[68]
5 December 2019 Macau MOP 35 billion ¥ 30 billion[68]
20 November 2023 Saudi Arabia SAR 26 billion ¥ 50 billion[68]
Total (excluding Nepal) ¥3,489 billion

See also

[edit]

References

[edit]
  1. ^ "China is ditching the dollar fast". The Economist. 10 September 2025. Retrieved 28 September 2025.
  2. ^ Chan, Denise (29 December 2009). "Yuan deposits in Hong Kong hit record high". South China Morning Post. Retrieved 28 September 2025.
  3. ^ Wei, Lingling (4 July 2007). "China Development Bank issues first yuan bond in Hong Kong". The Washington Post. Retrieved 28 September 2025.
  4. ^ "Report on Cross-Border RMB Settlement Pilot" (in Chinese). People’s Bank of China. 2014. Retrieved 28 September 2025.
  5. ^ a b Wigglesworth, Robin (27 March 2013). "Brazil signs $30bn currency swap deal with China". Financial Times. Retrieved 28 September 2025.
  6. ^ Kramer, Andrew E. (14 December 2010). "Sidestepping the U.S. Dollar, a Russian Exchange Will Swap Rubles and Renminbi". The New York Times. Retrieved 10 October 2013.
  7. ^ "China launches RQFII programme". Xinhua/China Daily. 16 December 2011. Retrieved 28 September 2025.
  8. ^ Sreeja, VN (3 December 2013). "Yuan Overtakes Euro As Second-Most Used Currency in International Trade Settlement: SWIFT". International Business Times. Retrieved 13 August 2014.
  9. ^ "《2020年人民币国际化报告》发布：人民币在全球外汇储备中占比创新高". Xinhua Net. Archived from the original on 19 August 2020. Retrieved 18 August 2020.
  10. ^ "China is ditching the dollar fast". The Economist. 10 September 2025. Retrieved 28 September 2025.
  11. ^ "People's Bank of China Announcement No. 20 of 2003". The People's Bank of China, News. 24 December 2014. Retrieved 22 August 2014.
  12. ^ Mataro, Elena (12 August 2014). "Bank of China extends RMB clearing to London hours". FX-Week. Retrieved 25 August 2014.
  13. ^ "People's Bank of China Announcement No.8 of 2004". PBC, News. 6 August 2004. Retrieved 22 August 2014.
  14. ^ "Bank of China Taipei Branch Authorized as RMB Clearing Bank in Taiwan". BOC News. 12 December 2012. Retrieved 22 August 2014.
  15. ^ "Regional Gateway for RMB". Monetary Authority of Singapore. 27 March 2014. Retrieved 22 August 2014.
  16. ^ "First renminbi clearing bank outside Asia appointed in London". GOV.UK, News story. 18 June 2014. Retrieved 22 August 2014.
  17. ^ Zha, Weixin (19 June 2014). "Bank of China Wins First Yuan Clearing Deal in Euro Area". Bloomberg. Retrieved 22 August 2014.
  18. ^ Li, Fion (4 July 2014). "Bank of Communications Wins First Yuan Clearing Mandate in Seoul". Bloomberg. Retrieved 22 August 2014.
  19. ^ "BOC becomes RMB clearing bank in Paris". Xinhua News. 15 September 2014. Archived from the original on 20 September 2014. Retrieved 16 September 2014.
  20. ^ Liu, Cecily (16 September 2014). "ICBC becomes renminbi clearing bank in Luxembourg". China Daily. Retrieved 17 September 2014.
  21. ^ william.kazer@wsj.com (9 November 2014). "China Names ICBC for Yuan Clearing in Canada". The Wall Street Journal. Retrieved 11 November 2014.
  22. ^ Purvis, Benjamin (19 November 2014). "Bank of China Named Sydney Yuan Clearing Bank, Signs ASX Accord". Bloomberg. Retrieved 21 January 2015.
  23. ^ "แบงก์ชาติจีนดันตั้ง "ไอซีบีซี" รับเคลียริ่งเงินหยวนในไทย". Krungthep Turakij newspaper. 7 January 2015.
  24. ^ "Bank of China (Malaysia) appointed clearing bank for RMB business in Malaysia". Borneo Post. 6 January 2015. Retrieved 21 January 2015.
  25. ^ "BOC authorized as RMB clearing bank in Hungary". English.gov.cn. 28 June 2015. Retrieved 24 July 2017.
  26. ^ "BOC's Johannesburg branch becomes RMB clearing bank in South Africa". China Knowledge. Retrieved 21 September 2016.
  27. ^ "ICBC (Argentina) Officially Launches RMB Clearing Business". ICBC. Archived from the original on 12 August 2016. Retrieved 21 September 2016.
  28. ^ "China names Bank of China as yuan clearing bank in Zambia". Reuters. 30 September 2015. Retrieved 21 September 2016.
  29. ^ "Renminbi clearing services now available in Switzerland" (PDF). SNB BNS. 30 November 2015. Retrieved 21 September 2016.
  30. ^ "Daily Wrap: PBoC RMB Clearing, Coal Output Boost". Red Pulse (China Market Intelligence). 22 September 2016.
  31. ^ a b "RMB Settlement", p.10. Kasikorn Research Center (KResearch), Bangkok, 8 February 2011
  32. ^ "The People's Bank of China, News". PBC. Retrieved 23 July 2014.
  33. ^ "Korea, China Seek Permanent Currency Swap". The Chosun Ilbo. Retrieved 10 October 2013.
  34. ^ "China lends first foreign-denominated funds under currency swap". Xinhua News Agency. 31 May 2014. Retrieved 24 July 2014.
  35. ^ "People's Bank of China and Hong Kong Monetary Authority renewed Currency Swap Agreement". Hong Kong Monetary Authority. 25 November 2020. Retrieved 14 July 2021.[permanent dead link]
  36. ^ "China, Malaysia extend currency swap deal". Xinhua News Agency. Archived from the original on 12 March 2014. Retrieved 10 October 2013.
  37. ^ "China, Belarus agree on 20b yuan currency swap". China Daily. Retrieved 10 October 2013.
  38. ^ "China, Belarus extended currency swap". Retrieved 15 May 2015.
  39. ^ Anggie Ariesta. "Kompak Buang Dolar AS, Indonesia dan China Lanjutkan Dedolarisasi". sindonews.com. Retrieved 8 February 2025. Indonesia and China in 2025 agreed on a five-year 400-billion yuan ($55 billion) currency swap aid bilateral trade and investment.
  40. ^ Novrida Manurung; Neil Chatterjee. "Indonesia Seeks Bilateral Swap Deals With Two More Central Banks". Bloomberg News. Retrieved 10 October 2013. Indonesia and China in 2009 agreed on a three-year 100-billion yuan ($16 billion) currency swap to ease foreign-exchange shortages and aid bilateral trade and investment.
  41. ^ "UPDATE 1-Argentina, China swap a "contigency"- central bank". Reuters. 31 March 2009. Retrieved 10 October 2013.
  42. ^ Standing, Jonathan (30 September 2013). "China central bank signs 3.5 bln yuan currency swap deal with Iceland". Reuters. Retrieved 13 October 2013.
  43. ^ "China, Singapore Double Currency Swap Agreement to $48 Billion". Bloomberg News. Retrieved 10 October 2013.
  44. ^ "Chinese currency swap established". The New Zealand Herald. 19 April 2011. Retrieved 10 October 2013.
  45. ^ "Establishment of a Bilateral Local Currency Swap Supplemental Agreement between the People's Bank of China and Bank of Mongolia". People's Bank of China. Retrieved 10 October 2013.
  46. ^ "Mongolia Central Bank to Sign Currency Swap Deal With China". The Wall Street Journal. Retrieved 10 October 2013.
  47. ^ "China, Kazakhstan sign currency swap deal". People's Daily. Retrieved 10 October 2013.
  48. ^ Ostroukh, Andrey (13 October 2014). "Russia and China Open Currency-Swap Line". Dow Jones Business News. Retrieved 14 October 2014.
  49. ^ "People's Bank of China and Central Bank of the Russian Federation Successfully Launched Bilateral Currency Swap Arrangement". 2 March 2016. Retrieved 9 May 2016.
  50. ^ "Thai-China deals signed". Bangkok Post. Retrieved 10 October 2013.
  51. ^ "Fresh Progress in China-Thailand Financial Cooperation". The People's Bank of China. 24 December 2014. Retrieved 26 December 2014.
  52. ^ JOE McDONALD. "China announces currency swap with Pakistan". Associated Press. Retrieved 10 October 2013.
  53. ^ "China, UAE sign 35 billion yuan currency swap: PBOC". Reuters. 17 January 2012. Retrieved 10 October 2013.
  54. ^ Simon Rabinovitch; Neil Hume. "China and Australia in $31bn currency swap". Financial Times. Retrieved 10 October 2013.
  55. ^ Interfax-Ukraine. "Ukrainian, Chinese central banks sign $2.4 billion currency swap deal". Kyiv Post. Retrieved 12 October 2013.
  56. ^ "PBC Signed Bilateral Local Currency Swap Agreement with Banco Central do Brasil". The People's Bank of China. PBC. 1 April 2013. Retrieved 23 July 2014.
  57. ^ "UK and China in £21bn currency swap deal". BBC. 23 June 2013. Retrieved 10 October 2013.
  58. ^ "China, Hungary sign currency swap deal". China Daily. Retrieved 10 October 2013.
  59. ^ "CNH Tracker-China's cross-border payment woes drive companies to yuan". Reuters. 19 September 2013. Retrieved 13 October 2013. China's central bank has signed a bilateral currency swap agreement worth 2 billion yuan ($327 million) with the Albanian central bank, in a move to boost trade and investment between the two countries.
  60. ^ "Chinese, European central banks in currency swap deal". Agence France-Presse. Retrieved 10 October 2013.[dead link]
  61. ^ "China, Switzerland sign currency swap agreement". Beijing Time. Retrieved 21 July 2014.
  62. ^ "PBC Signed Local Currency Swap Agreement with Central Bank of Sri Lanka". PBC. Retrieved 22 September 2014.
  63. ^ Amlôt, Robin (4 November 2014). "Qatar Central Bank, People's Bank of China sign currency swap deal". CPI Financial. Retrieved 5 November 2014.
  64. ^ Andrea Hopkins. "Chinese, Canadian central banks agree to 200 bln yuan currency swap". Reuters. Retrieved 8 November 2014.
  65. ^ "Nepal, China sign currency swap deal". The Kathmandu Post. 25 December 2014. Archived from the original on 26 December 2014. Retrieved 26 December 2014.
  66. ^ "China, South Africa sign currency swap deal (Chinese)". 10 April 2015.
  67. ^ "China and Chile sign currency swap agreement". Associated Press. Retrieved 25 May 2015 – via Yahoo News.
  68. ^ a b c "Tajikistan, China sign currency swap deal". Associated Press. Retrieved 5 September 2015 – via China Daily.
Retrieved from "https://en.wikipedia.org/w/index.php?title=Internationalization_of_the_renminbi&oldid=1313726687"