The internationalization of the renminbi is a hot topic this year. The United Kingdom, Germany and Switzerland have all taken the initiative to establish an offshore trading center for the renminbi. Many countries have signed currency exchange agreements with China. But Marc Chandler believes that the degree of internationalization of the renminbi is overestimated. The so-called internationalization of the renminbi is only related to the trade between China and Hong Kong, as well as some currency swap agreements, and none of these agreements have been implemented.
First of all, the use of RMB between transactions between China and Hong Kong certainly cannot be counted as “internationalizationâ€. Secondly, the currency swap agreements between countries and China are only for the sake of “swinging†and have not yet been put into use. There are no requirements for no instructions. Of course, the swap agreement may be important for financial centers such as London, Singapore, and Zurich, as well as those planned for the “offshore center of the renminbiâ€.
According to information released by the China Foreign Exchange Administration (SAFE) on December 16, as of the end of November, Chinese companies were suspected of fraudulent foreign exchange transactions of $2.5 billion this year. A total of 112 companies were involved in the case, 41 will be subject to administrative penalties and 12 will be considered illegal. Marc Chandler thinks this may be just the tip of the iceberg.
According to the SWIFT report on the 9th of this month, the RMB became the second largest currency after the US dollar in trade finance. The news brought a variety of exaggerated imaginations, and some even suggested that the dollar would be replaced by the renminbi. This statement is inevitably inflated. The rise in the use of renminbi in trade finance (such as letters of credit) may only indicate that some people use trade capital flows to cover up capital flows. A letter of credit is a guise used to enter the Chinese capital market and thereby obtain relatively high interest rates.
The vast majority of the use of the renminbi is between Hong Kong, Singapore and mainland China, and the total amount of international trade that is actually settled in renminbi is small. According to SWIFT, RMB trade finance ranked second in the United States in January and March 2013, but fell back to third place after the Chinese government cracked down on invoices. The actual settlement in renminbi accounted for less than 1% of the global total, lower than the Thai baht and the Swedish krona. Far from keeping up with the use of renminbi in trade finance.
First of all, the use of RMB between transactions between China and Hong Kong certainly cannot be counted as “internationalizationâ€. Secondly, the currency swap agreements between countries and China are only for the sake of “swinging†and have not yet been put into use. There are no requirements for no instructions. Of course, the swap agreement may be important for financial centers such as London, Singapore, and Zurich, as well as those planned for the “offshore center of the renminbiâ€.
According to information released by the China Foreign Exchange Administration (SAFE) on December 16, as of the end of November, Chinese companies were suspected of fraudulent foreign exchange transactions of $2.5 billion this year. A total of 112 companies were involved in the case, 41 will be subject to administrative penalties and 12 will be considered illegal. Marc Chandler thinks this may be just the tip of the iceberg.
According to the SWIFT report on the 9th of this month, the RMB became the second largest currency after the US dollar in trade finance. The news brought a variety of exaggerated imaginations, and some even suggested that the dollar would be replaced by the renminbi. This statement is inevitably inflated. The rise in the use of renminbi in trade finance (such as letters of credit) may only indicate that some people use trade capital flows to cover up capital flows. A letter of credit is a guise used to enter the Chinese capital market and thereby obtain relatively high interest rates.
The vast majority of the use of the renminbi is between Hong Kong, Singapore and mainland China, and the total amount of international trade that is actually settled in renminbi is small. According to SWIFT, RMB trade finance ranked second in the United States in January and March 2013, but fell back to third place after the Chinese government cracked down on invoices. The actual settlement in renminbi accounted for less than 1% of the global total, lower than the Thai baht and the Swedish krona. Far from keeping up with the use of renminbi in trade finance.
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