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Prepare RMB to go global China should prepare well for the debut of the renminbi (RMB) or yuan as a key international currency, said an editorial in the Guangzhou-based 21st-Century Business Herald.
It is estimated that about 30 billion RMB (US$3.6 billion) is currently circulating overseas. Although the figure barely accounts for 2 per cent of all RMB in circulation and is dwarfed compared with key currencies such as the US dollar, Japanese yen or euro, the phenomenon is still widely seen as a sign of the RMB's potential to become an international currency. The circulation of RMB outside China demonstrates other countries' confidence in the Chinese economy and its financial system. However, the journey of RMB towards becoming an international currency is bound to be a long trek. The transformation of a local currency into an international one must be buttressed by a country's strong and comprehensive power. The gap between China's GDP and that of the United States, the euro-zone economies or Japan as well as problems in China's economic and financial systems mean the time for the RMB to go international is still far away, the editorial pointed out. The RMB is still inconvertible on capital account and the current foreign-exchange system is rigid. Economic factors aside, geopolitics could be another hurdle hampering the internationalization of RMB, the newspaper noted. Although the stable and robust Chinese economy is of great significance for maintaining regional and world economic and financial stability, many countries are still wary of China's high-speed development. Therefore, the rise of the RMB may encounter some discrimination or even hostility in the process. Thus the emergence of the RMB as an international currency will be a gradual process and a natural result of China's booming economy. But China should remain cool-headed about the rise of the RMB as an international currency, weighing well the pros and cons of its internationalization, the editorial cautioned. The internationalization of the RMB will mean greater responsibility for China as a major power. As the RMB evolves into an international currency, its relation with other countries' financial systems will strengthen. As a result, more international factors will be taken into consideration when making domestic monetary policies because domestic economic fluctuations or macroeconomic policy changes will also affect other countries significantly. If a country's currency is to become an international one, that country must export its money. Theoretically, there are two ways to do this, one is through trade deficits and the other is via capital outflow. Either way, currency exports will bring great risks that must be dealt with using the utmost caution. Since the internationalization of the RMB is an inevitable trend, China should prepare well for it, creating favourable conditions for the currency's early debut while avoiding haste, the editorial suggested. China should speed up the adjustment of its unbalanced economic structure and the establishment of a market-orientated financial system. A more efficient foreign-exchange mechanism and a cautious plan for opening up the capital account are also vital to that process, the editorial added. |
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