China’s Renminbi (RMB) in a More Diversified Global Economy

Li Jiming, Chinese ambassador to Bangladesh

We just waved goodbye to a topsy-turvy year 2020, before a volatile 2021 embraces us right ahead. And maybe in nowhere is the volatility more keenly felt than in the global financial market, which has been on a roller coaster ride since the onset of Covid-19. The first 3 months of 2020 saw the USD jumped to a more-than-three-year high as the pandemic sparked a capital flight to the haven of the world’s largest reserve currency. But as the global economy slowly recovers, the dollar retreated into a downward spiral, and is projected to weaken further this year against other major currencies due to the brighter economic prospects in those countries.

Though the USD is still unequivocally the world’s most dominant currency in international trade and denomination, concerns continue to grow over the past decade about the long-term health of the dollar. On the other hand, as the global economic landscape is developing towards more diversity, the world is also gradually moving away from excessive reliance on the greenback. So luckily for us, we are not left without any alternatives, for example the euro and the Japanese yen, though maybe not in anytime soon. This tendency became even clearer when China’s renminbi (RMB) was included in IMF’s Special Drawing Right (SDR) currency basket in 2016, making it the first and the only currency from a developing country that functions as a global reserve currency.Today, we are seeing the international anticipation on RMB’s role as a global currency being pushed up even higher, for China is now well on its way to surpass the US as the largest consumer market, after it became the world’s largest trading nation in 2013 and the largest foreign direct investment (FDI) destination in 2014, as well as the only major economy recording positive growth in 2020. So what are the prospects of the international use of the RMB, and what could it bring to a world that is still facing considerable financial risks from the lingering pandemic and other economic threats?

RMB as a Main Player in International Monetary System

Since being included in the SDR currency basket, the RMB, also known as yuan, has been increasingly used in cross-border payment and financing worldwide. More central banks of different countries hold RMB-denominated assets as reserves and the RMB as an invoicing currency witnessed remarkable progress. Nowadays, the size of RMB reserves is the 5th largest in the International Monetary Fund (IMF)’s Currency Composition of the Official Foreign Exchange Reserves (COFER). Besides, the market share of the RMB in the foreign exchange trading is standing at 4.3%, ranking 5th as an international payment currency.

In particular, spurred by the market demand, the use of RMB has gained active progress in neighboring countries of China and the countries along the “Belt & Road”. In 2019, the cross-border RMB settlement between China and the neighboring countries registered 3.6trillion yuan, among which the trade in goods amounted to994.5 billion yuan, and the direct investment351.2 billion. Furthermore, the total cross-border RMB payments and receipts between China and the countries involved in the “Belt & Road Initiative (BRI)” reached over 2.73 trillion yuan, including 732.5 billion yuan of trade in goods and 252.4 billion yuan of direct investment.

Similarly, the bilateral currency and financial cooperation between China and neighboring countries and the BRI countries are also getting constantly deepened. Since 2008, China has signed bilateral local currency settlement agreements with 9 countries such as Vietnam, Laos, Russia and Kazakhstan, and has signed bilateral local currency swap agreements with the central banks or monetary authorities of 23 countries such as Russia, Indonesia, the United Arab Emirates, Egypt and Turkey. By the end of 2019, China’s central bank, the People’s Bank of China (PBC) has signed bilateral currency swap agreements with the central banks or monetary authorities of 39 countries and regions, covering both major developed and emerging economies in the world, as well as the major offshore RMB markets, totaling more than 3.7 trillion yuan.

In 2019 alone, the PBC renewed its bilateral local currency swap agreements with the Centrale Bank van Suriname, Singapore Monetary Authority, Turkey Central Bank, European Central Bank and Hungary Central Bank, with a total amount of 683 billion yuan. In the past October, the Republic of Korea signed a deal with China to extend the bilateral currency swap agreement and expand the size to USD 59 billion.Rising Resilience, Promising Prospect

Though a newcomer in the global reserve currency family, the RMB proves itself remarkably stable and resilient amid adverse and uncertain economic conditions, including during the Asian financial crisis in 1997 and the global financial crisis in 2008. Most recently, during the year of 2019 and 2020, despite headwinds from the ongoing trade tensions and unprecedented disruption caused by the Covid-19 pandemic, the RMB still saw a steady increase of its share in the international transactions used by businesses globally.

Given that market optimism in China is returning gradually, the RMB has quickly stabilized compared with other major global currencies that are seeing significant drops in value. For international market participants this is reflected in less foreign exchange volatility, making RMB-denominated investments the preferred asset class and currency in settling cross-border payments. Resumed business activity will also bolster confidence in the RMB. All of these give the yuan assets clear advantages at a time when market participants are seeking a “flight to safety” and the demand for safe assets is expected to rise further.

According to the research centre at the State Administration of Foreign Exchange of China, the RMB has become a sought-after asset for global investors seeking stability and absolute returns, thanks to China’s quick recovery from the pandemic and its outstanding economic performance. For example, China’s five-year government bonds offer an annual yield over 3% while in comparison, US government debt of the same maturity hovers around only 0.4% and the yield on German bonds is a negative rate of about 0.8%.

Notably, the new regulations and frameworks being introduced by various Chinese agencies are providing further impetus to cross-border RMB use. The trade facilitation arrangements with key partners, such as the launch of digital currency, the introduction of new Free Trade Zones, the expansion of the BRI and the inclusion of China “A” shares in the MSCI index are among key elements. In the latest development, the establishment of the Regional Comprehensive Economic Partnership (RCEP) will give the currency a bigger role to play in regional and international cooperation. Similarly, on December 30th, China and the EU reached a Comprehensive Agreement on Investment that guarantees greater market access and investment opportunities for both sides.

With RMB’s function as a settlement and denomination currency becoming increasingly important, and its attractiveness for financing gradually picking up, the future may see the introduction of more robust measures to shore up and strengthen the currency as China moves to open its financial markets wider. A recent Morgan Stanley analysis predicts yuan to become the third most-recognized currency by 2030 after the American dollar and the euro, accounting for between 5 per cent and 10 per cent of global foreign exchange reserve assets.

China-Bangladesh Bilateral Currency Cooperation

China is Bangladesh’s largest trading partner, who also newly became its No.1 source of FDI net inflow in 2019. Meanwhile, Bangladesh has been one of the major recipients of Chinese concessional and commercial loans for years. So the question for our two countries is not really whether or not we should set up some kind of bilateral currency cooperation mechanism, which will be beneficial beyond any doubt, but how.

The first and most effective approach for Bangladesh would be to enter a bilateral currency exchange deal with China. This is also currently the most common practice between China and other countries. By signing an exchange agreement, Bangladesh will be able to promote the overall use of the RMB in bilateral trade, investment and the diversification of its own financial portfolios. Other approaches include to take RMB loans in financing projects and to increase cross-border trade settlements in RMB. Another possible way to do this, taking inspiration from a recent proposal by Saudi Aramco, Saudi Arabia’s state-controlled oil company, is to float RMB-denominated bonds in China’s onshore market by foreign entities, also known as the Panda bonds. For companies who have a business demand for the RMB, funding it by issuing Panda bonds can reduce the risks from currency mismatch, cut exchange costs and mitigate foreign exchange risk.

Besides, there is another less obvious but equally critical advantage to the monetary cooperation, which is to help Bangladesh forge closer economic ties with other BRI countries, since the RMB is now extensively used in trade, financing and capital exchanges in these places. With the number of countries opting for wider RMB use increasing steadily, this network is also going expand in both size and strength.

China’s New Year’s Resolution

A New Year always brings hopes and joy. And for Bangladesh and China, 2021 brings something more. This year marks the 50th anniversary of the independence of Bangladesh. It also entails the beginning of a brand new development stage for China, where the country has pledged to further open up its financial market and to allow greater foreign access.

While China’s resolution is bound to present more opportunities to foreign investors, an increasing share of them will be available exclusively in the form of the RMB. For example, during the 2nd Belt and Road Forum for International Cooperation in 2019, Chinese President Xi Jinping announced that the China Development Bank (CDB) would provide 250 billion yuan of special loans to support BRI-related cooperation projects – in RMB only. As the USD hegemony will foreseeably weaken in a post-Covid, multi-polar world, I believe it is safe to say that whoever starts to invest in the RMB is banking on the promising future of a more balanced and diversified global economy.

The writer is the Chinese ambassador to Bangladesh

119 thoughts on “China’s Renminbi (RMB) in a More Diversified Global Economy

  • February 23, 2022 at 10:11 am
    Permalink

    чемпион онлайн на деньги: реальная игра с регистрацией Рады приветствовать вас на сайте онлайн Чемпиона, где игроки могут найти информацию о всех популярных залах клуба. У нас есть подробный список всех особенностей каждого ресурса: реальные бонусы для тех, кто делает депозиты, детальные обзоры ресурсов, таблицы с описанием минимальных депозитов, выводов выигрышей, кэшбэк для постояльцев, Казино champion (чемпион) – Отзывы игроков за 2020 год: champion новое зеркало
    Как происходит регистрация в champion? Занимает регистрация в казино чемпион всего 1-2 минуты. Для создания профиля предлагается заполнить короткую анкету или авторизоваться через одну из популярных социальных сетей, таких как Twitter, Facebook, VKontakte, Odnoklassniki, Яндекс.
    Офшорная Достоинства Быстрая регистрация Бонус 10 400 ? Широкая линия Высокие коэффициенты Недостатки Блокировки сайта

  • February 24, 2022 at 2:41 am
    Permalink

    Игры для андроид стали неотъемлемой частью современного виртуального мира. Игры, имеющиеся на нашем сайте, мгновенно захватывают и заставляют забыть о будничных проблемах. Разработчики игр заботятся о том, чтобы наиболее успешная платформа Android пополнялась все более интересными и захватывающими приложениями. Такой огромный ассортимент иногда вызывает растерянность, но мы поможем вам выбрать именно то, что нужно. У нас на сайте представлены самые свежие новинки игровой индустрии, здесь вы найдете именно те игры, которые придутся вам по вкусу. На нашем ресурсе собраны только наиболее популярные игры, проверенные тысячами геймеров из разных уголков земного шара.

  • February 27, 2022 at 2:31 pm
    Permalink

    cykel can you buy stromectol over the counter in tijuana, mexico zapasy ivermectin pour on for chickens injectable ivermectin – stromectol tea tree oil [url=http://ivermectin3mg.com/#]ivermectin where
    to buy[/url] fdzien stromectol used for killing lice and nits

  • March 21, 2022 at 4:40 pm
    Permalink

    It’s actually very complex in this full of activity life to listen news on TV, therefore I just use the web for that purpose, and obtain the most recent information.|

  • March 27, 2022 at 12:10 am
    Permalink

    cialis 5mg canada profile cialis dosage forum last post canada cialis – comparison viagra
    cialis levitra [url=http://ltadalafil.com]cialis vs viagra
    vs levitra[/url] cialis and blocked nose

  • April 8, 2022 at 6:44 pm
    Permalink

    After checking out a few of the blog articles on your blog, I
    really like your technique of blogging. I book-marked it to my bookmark site list and will be checking
    back in the near future. Take a look at my
    website as well and tell me how you feel.

  • April 9, 2022 at 1:33 am
    Permalink

    I was able to find good info from your articles.

  • April 9, 2022 at 4:44 am
    Permalink

    I enjoy what you guys are up too. This kind of clever work and reporting!
    Keep up the superb works guys I’ve incorporated you guys to my blogroll.

  • April 9, 2022 at 6:03 am
    Permalink

    It’s in fact very complicated in this active life to listen news
    on TV, so I just use internet for that reason, and take
    the most up-to-date news.

  • April 9, 2022 at 8:51 am
    Permalink

    Unquestionably imagine that which you said. Your favorite justification seemed to be
    at the internet the simplest thing to keep in mind of.

    I say to you, I certainly get irked whilst folks think about worries that they
    just do not know about. You controlled to hit the nail upon the top as
    neatly as defined out the whole thing without having side effect , other folks could
    take a signal. Will likely be back to get more. Thank you

  • April 9, 2022 at 9:28 am
    Permalink

    Wow that was odd. I just wrote an really long comment but after I clicked submit
    my comment didn’t appear. Grrrr… well I’m not writing all
    that over again. Anyways, just wanted to say superb blog!

  • April 9, 2022 at 12:37 pm
    Permalink

    I am sure this paragraph has touched all the internet people, its
    really really fastidious paragraph on building up new webpage.

  • April 9, 2022 at 4:18 pm
    Permalink

    My brother suggested I might like this website. He was totally right.
    This post actually made my day. You can not imagine simply
    how much time I had spent for this information! Thanks!

  • April 9, 2022 at 6:05 pm
    Permalink

    Great delivery. Solid arguments. Keep up the amazing effort.

  • April 10, 2022 at 1:08 am
    Permalink

    sexuellement a quelle frequence peut-on prendre le
    stromectol rabun stromectol dosis for crusted scabies
    hydroxychloroquine formula
    ivermectin human dosage [url=http://hydroxychloroquine200mg.com/#]hydroxychloroquine
    over the counter equivalent[/url] ausgebaut should people with nervous disorders take stromectol

  • April 10, 2022 at 3:49 am
    Permalink

    Good way of telling, and fastidious post to take information regarding my presentation focus, which i
    am going to present in academy.

  • April 10, 2022 at 6:49 am
    Permalink

    What’s up to all, how is all, I think every one is getting more from
    this website, and your views are fastidious for new users.

  • April 10, 2022 at 10:21 am
    Permalink

    Woah! I’m really loving the template/theme of this blog.
    It’s simple, yet effective. A lot of times it’s tough to
    get that “perfect balance” between superb usability and visual appeal.
    I must say you have done a amazing job with this. In addition, the blog loads extremely fast for me on Opera.
    Superb Blog!

  • April 10, 2022 at 10:44 am
    Permalink

    I think the admin of this web site is genuinely working hard for his
    web site, as here every material is quality based stuff.

  • April 10, 2022 at 11:59 am
    Permalink

    Hey there, You have done a great job. I’ll certainly digg it and personally suggest to my friends.
    I am sure they will be benefited from this site.

  • April 10, 2022 at 2:13 pm
    Permalink

    Howdy I am so delighted I found your web site, I really found you by error, while I was researching on Digg for something else, Regardless I am here now and would just like to say thank you for a
    tremendous post and a all round interesting blog (I also love
    the theme/design), I don’t have time to go through it
    all at the moment but I have book-marked it and also included your RSS feeds, so when I have time I will be back to read a great deal more, Please do keep up the excellent work.

  • April 10, 2022 at 6:51 pm
    Permalink

    Hey would you mind letting me know which webhost you’re
    working with? I’ve loaded your blog in 3 different
    browsers and I must say this blog loads a lot faster then most.
    Can you suggest a good hosting provider at
    a reasonable price? Cheers, I appreciate it!

  • April 10, 2022 at 7:09 pm
    Permalink

    We’re a group of volunteers and opening a new scheme in our community.
    Your web site provided us with valuable info to work on. You have done a formidable job and
    our whole community will be thankful to you.

  • April 10, 2022 at 7:46 pm
    Permalink

    Hello, after reading this awesome piece of writing i am as well happy to share my familiarity here with
    mates.

  • April 11, 2022 at 10:53 pm
    Permalink

    I think this is among the most significant info for me. And i’m
    glad reading your article. But should remark on few general things, The web
    site style is great, the articles is really great : D.
    Good job, cheers

  • April 13, 2022 at 7:28 pm
    Permalink

    Excellent beat ! I would like to apprentice even as you amend your web site, how could i subscribe for a
    blog website? The account aided me a applicable deal.
    I have been a little bit familiar of this your broadcast offered brilliant clear concept

  • April 15, 2022 at 11:47 am
    Permalink

    Why people still make use of to read news papers when in this technological world everything is accessible on web?

  • April 15, 2022 at 3:44 pm
    Permalink

    Hi there I am so grateful I found your blog, I really found you by accident, while I
    was looking on Yahoo for something else, Regardless I am here
    now and would just like to say thanks a lot for a incredible post and a all
    round entertaining blog (I also love the theme/design),
    I don’t have time to browse it all at the minute but I have book-marked it and also added in your RSS feeds, so
    when I have time I will be back to read a great deal more,
    Please do keep up the superb work.

  • April 16, 2022 at 8:10 am
    Permalink

    What a material of un-ambiguity and preserveness of precious know-how regarding unpredicted
    emotions.

  • April 16, 2022 at 4:02 pm
    Permalink

    Appreciate the recommendation. Will try it out.

  • April 17, 2022 at 12:13 am
    Permalink

    Superb post however , I was wondering if you could write a litte more on this subject?
    I’d be very thankful if you could elaborate a little bit further.
    Many thanks!

  • April 17, 2022 at 12:16 am
    Permalink

    This design is steller! You definitely know how to keep a reader entertained.
    Between your wit and your videos, I was almost moved to start my own blog (well,
    almost…HaHa!) Wonderful job. I really enjoyed what
    you had to say, and more than that, how you presented it.
    Too cool!

  • April 17, 2022 at 12:59 am
    Permalink

    Spot on with this write-up, I seriously think this website needs
    far more attention. I’ll probably be back again to see more, thanks for the
    advice!

  • April 17, 2022 at 7:15 am
    Permalink

    Nice post. I was checking constantly this blog and I
    am impressed! Very helpful information specially the last part 🙂
    I care for such info much. I was looking for this certain info for
    a long time. Thank you and good luck.

  • April 17, 2022 at 7:54 am
    Permalink

    Amazing! This blog looks just like my old one! It’s on a entirely different topic but it
    has pretty much the same layout and design. Great choice
    of colors!

  • April 17, 2022 at 5:14 pm
    Permalink

    Hey there! I’m at work surfing around your blog from
    my new iphone 3gs! Just wanted to say I love reading through your blog and look forward to all
    your posts! Carry on the excellent work!

  • April 17, 2022 at 5:15 pm
    Permalink

    Hey There. I found your blog the use of msn. This
    is an extremely well written article. I’ll make sure to bookmark it and come back to learn more of your helpful information. Thank you for
    the post. I will definitely comeback.

  • April 17, 2022 at 11:52 pm
    Permalink

    Great goods from you, man. I’ve bear in mind your stuff previous to and you are just too magnificent.
    I really like what you have obtained here, really like what you are
    stating and the way through which you say it.
    You are making it enjoyable and you continue to care
    for to stay it sensible. I can’t wait to read far more from you.
    That is really a tremendous web site.

  • April 18, 2022 at 11:26 am
    Permalink

    Howdy I am so glad I found your web site, I really found you by mistake, while I was
    researching on Aol for something else, Regardless I am here now and
    would just like to say kudos for a tremendous post and a all round entertaining blog (I also
    love the theme/design), I don’t have time to browse it all at
    the minute but I have bookmarked it and also included your RSS feeds,
    so when I have time I will be back to read a lot more, Please do keep up the excellent work.

  • April 18, 2022 at 2:28 pm
    Permalink

    Remarkable issues here. I’m very happy to peer your article.
    Thank you a lot and I’m having a look ahead to contact
    you. Will you kindly drop me a mail?

  • April 18, 2022 at 10:47 pm
    Permalink

    You can certainly see your skills within the work you write.
    The sector hopes for more passionate writers such as you who aren’t
    afraid to mention how they believe. Always go after your heart.

  • April 19, 2022 at 3:57 am
    Permalink

    When I initially commented I clicked the “Notify me when new comments are added” checkbox
    and now each time a comment is added I get three emails with the same comment.
    Is there any way you can remove me from that service?

    Thank you!

  • April 19, 2022 at 5:58 am
    Permalink

    The other day, while I was at work, my sister stole my iphone and tested
    to see if it can survive a 40 foot drop, just so she can be
    a youtube sensation. My iPad is now destroyed and she has 83 views.
    I know this is completely off topic but I had
    to share it with someone!

  • April 19, 2022 at 9:06 am
    Permalink

    Heya i am for the first time here. I came
    across this board and I in finding It truly useful &
    it helped me out a lot. I hope to offer something back and help others
    such as you helped me.

  • April 19, 2022 at 10:41 am
    Permalink

    After looking over a few of the blog articles
    on your site, I truly like your way of writing a blog. I book-marked it to my bookmark webpage list and will be checking back in the near future.
    Take a look at my website as well and let me know how you feel.

  • April 19, 2022 at 1:33 pm
    Permalink

    Hi there, I enjoy reading through your article post.
    I like to write a little comment to support
    you.

  • April 19, 2022 at 4:25 pm
    Permalink

    I do believe all the concepts you’ve offered on your post.
    They’re very convincing and can definitely work. Still, the posts are very quick for newbies.
    Could you please lengthen them a bit from next
    time? Thanks for the post.

  • April 23, 2022 at 12:48 pm
    Permalink

    cialis tadalafil 20mg uk guestbook.pl cialis 5mg in total there are tadalafil over counter – cialis from canada over the counter
    usergroups [url=https://pharmacy-walmart.org]cialis over the counter[/url]
    cialis for daily use prices valid css

  • May 2, 2022 at 2:35 am
    Permalink

    Hello there, You have done an excellent job.
    I’ll definitely digg it and personally suggest to my friends.
    I’m confident they will be benefited from this website.

  • May 2, 2022 at 9:03 pm
    Permalink

    Very quickly this web site will be famous among all blog visitors, due to it’s fastidious articles or reviews

  • May 3, 2022 at 2:35 am
    Permalink

    Quality articles is the key to interest the people to pay a quick visit the
    website, that’s what this site is providing.

  • May 3, 2022 at 7:30 am
    Permalink

    No matter if some one searches for his essential thing,
    therefore he/she needs to be available that in detail, thus that thing
    is maintained over here.

  • May 3, 2022 at 3:52 pm
    Permalink

    I’m impressed, I must say. Seldom do I encounter a blog that’s
    equally educative and engaging, and without a doubt, you have hit the nail on the head.
    The issue is something which too few folks are speaking intelligently about.
    I’m very happy that I found this in my search for something relating to this.

  • May 3, 2022 at 5:16 pm
    Permalink

    I’d like to thank you for the efforts you have put in writing this site.

    I am hoping to view the same high-grade content by you later on as
    well. In fact, your creative writing abilities
    has motivated me to get my own, personal website now 😉

  • May 4, 2022 at 1:03 am
    Permalink

    I am not sure where you’re getting your information, but good topic.
    I needs to spend some time learning much more or understanding more.

    Thanks for great info I was looking for this information for my mission.

  • May 4, 2022 at 2:57 am
    Permalink

    I love your blog.. very nice colors & theme.
    Did you make this website yourself or did you hire someone to do it for you?
    Plz reply as I’m looking to construct my own blog and would like to find out where
    u got this from. thank you

  • May 4, 2022 at 4:54 am
    Permalink

    Thanks for sharing such a good thought, article is
    nice, thats why i have read it fully

  • May 4, 2022 at 11:29 am
    Permalink

    You could definitely see your enthusiasm in the work you write.
    The arena hopes for even more passionate writers like you who aren’t afraid to say how
    they believe. At all times go after your heart.

  • May 4, 2022 at 2:38 pm
    Permalink

    Hi everyone, it’s my first pay a quick visit at this site, and piece of writing is truly fruitful
    in favor of me, keep up posting such content.

  • May 5, 2022 at 10:07 am
    Permalink

    Hi! I just would like to give you a big thumbs up for the great information you’ve
    got here on this post. I’ll be returning to your site for more soon.

  • May 5, 2022 at 10:26 am
    Permalink

    Hey! Would you mind if I share your blog with my
    myspace group? There’s a lot of people that I think would really appreciate your content.
    Please let me know. Thanks

  • May 5, 2022 at 1:37 pm
    Permalink

    Thanks for any other excellent article. The place else may
    just anybody get that kind of info in such a perfect
    method of writing? I’ve a presentation next week, and I am at the search for such information.

Comments are closed.

Scroll Up