Deutsche Bank research: in the next few years, the share of RMB in global foreign exchange reserves will exceed that of Yen and sterling

2022-05-16 0 By

China News Service Beijing, April 8 (reporter Xia Bin)The renminbi’s share of global foreign exchange reserves is expected to surpass that of the Japanese yen and the British pound in the next few years as restrictions on overseas investment in renminbi bonds are eased, Deutsche Bank Group’s Chief Economist for Asia Pacific Michael Spencer said in a research report released Wednesday.The report pointed out that the internationalization of RMB has made great progress, and it is expected that more overseas RMB trade financing opportunities will emerge in the future to encourage the use of RMB for trade settlement, and the level of RMB offshore trading is expected to reach a new level.The report said cross-border renminbi flows had risen from rmb0.6tn in 2010 to Rmb37tn last year, reflecting the liberalisation of capital accounts and a tenfold increase in renminbi-denominated trade to Rmb5.8tn.Last year, renminbi-denominated capital account balances stood at Rmb29bn, reflecting increased cross-border use of the Chinese currency.At the same time, the renminbi is rapidly becoming a carrier currency for international transactions.The renminbi did not appear in central banks’ portfolios as a reserve currency until 2012.The renminbi accounted for just 1 per cent of total global reserves in 2016, rising to 2.7 per cent by the end of last year.While the renminbi’s share of global reserves is still small, it has grown from nothing in a short time.Looking ahead, the report argues that for further internationalisation of the renminbi, the offshore renminbi market needs to have sufficient liquidity to allow market participants to hedge their exposure to the renminbi.As the offshore market grows, offshore renminbi rates and exchange rates may diverge significantly from the onshore market in some cases.Therefore, In the process of promoting RMB internationalization, China also needs to further strengthen the integration of onshore and offshore markets.In addition, it could increase the use and practicality of the renminbi outside China and try to increase its exposure both inside and outside China, which would help position the renminbi as a reserve currency.Source: