Internationalisation of the Renminbi (RMB)
CIFR undertook research on the internationalisation of the Renminbi (RMB) and the implications and associated opportunities that may arise for Australian financial markets.
A background document entitled "RMB Invoicing and RMB Internationalisation: Opportunities, Outlook and some Research Issues" prepared by Geoff Weir, CIFR Consultant, provides context to the research proposal.
The use of the RMB in international trade settlement and investment has grown strongly in recent years and is likely to expand further in the future as the Chinese economy and financial system continue to develop. While this process will ultimately be driven by market forces, it will need to be supported by appropriate regulatory frameworks and policy settings both in China and in offshore RMB markets.
These developments are particularly relevant for Australia, with China likely to remain Australia’s largest trading partner in the foreseeable future. To date the use of RMB in bilateral trade settlement has been quite limited. The project will look at possible ways of encouraging greater RMB trade invoicing and, more broadly, explore a range of market and policy questions related to the development of RMB trade and investment flows between Australia and China.
The project included both international and Australian aspects, with inputs from academics, industry, the Reserve Bank of Australia, the Treasury and CIFR. The international research will be led by Barry Eichengreen, Professor of Economics and Political Science at the University of California, Berkeley, a leading international academic in this area. read more >>
International aspects, including;
- an assessment of how international RMB usage might evolve in coming decades given projections of China’s economic growth and financial development and its stated objective of “internationalising” the RMB. This part of the project will examine the role that ongoing liberalisation of China’s financial markets and capital account will play in this process; and
- an examination of the implications of RMB internationalisation for global and regional financial markets.
Australian aspects, including;
- the possible implications and opportunities for the Australian financial sector of the ongoing move towards RMB internationalisation and the policy changes in China that will necessarily accompany this;
- a survey of Chinese and Australian businesses engaging in China-Australia trade regarding their usage of RMB in invoicing and settlement of transactions and their motivations for doing so and, for those businesses not using RMB for invoicing and settlement, their awareness of RMB opportunities and the perceived barriers; and
- a detailed examination of the market conditions and policy and regulatory framework necessary for development of Australia as an offshore RMB hub, including impediments to RMB invoicing identified in the survey.
A Steering Committee chaired by CIFR and comprising representatives from CIFR, Treasury, the Reserve Bank of Australia and market representatives oversaw the research project.
The project report was launched at an event on 26 March 2014. More detail>>