Chinese currency Renminbi (RMB), or yuan, has embarked on a quick internationalization process, and is on the way to become a world payments currency, Mark Boleat, Policy Chairman with the City of London Corporation, said in London on Tuesday.
In an interview with Xinhua, Boleat said he expected to see the amount of RMB-denominated trade settlement to further increase in the future.
“The internationalization of the Chinese currency is helping to increase trade and investment flows between China and the rest of the world,” he added.
He noted that China had undergone a number of reforms in its financial system over the last decade, including the introduction of the Qualified Foreign Institutional Investor scheme (QFII), and the Qualified Domestic Institutional Investor scheme (QDII) to allow capital flows.
“These sorts of reforms, alongside work to increase international use of the RMB, are important for the development of the Chinese financial system,” he said.
According to a report from the City of London Corporation on Monday, European corporate and institutional investors interested in China welcomed the availability of RMB products and services in London, highlighting benefits of adopting the RMB in cross-border trade settlements with China.
However, commenting on the possibilities for RMB to become a reserve currency internationally, Boleat said it could take a long time.
The RMB may well ultimately become a major global currency on par with the U.S. dollar and the euro, Boleat said. But right now, the focus should be put on increasing the use of the RMB in trade, and on building on Hong Kong’s success in developing RMB investment products.
“This is a big job in itself – becoming a reserve currency could only come when RMB has become an internationally used trade and investment currency.”
Boleat will leave on Tuesday for a seven-day visit in China, during which he will attend a meeting held by the Shanghai International Financial Advisory Council, and is scheduled to speak at the high-profile Lujiazui Forum on RMB internationalization, and on globalisation of the Chinese financial system.
Boleat described the visit to China as an important opportunity for the City of London to engage with key Chinese decision makers and businesses.
“Enhancing the financial sector links between the UK and China, supporting the international usage of the RMB for trade and investment, and promoting London’s role as a western hub for the international RMB market are all priorities of my visit and the City of London’s work with China in the long term.”