China continues promoting RMB use globally in 2013

BEIJING - In 2013, China continued to promote the internationalization of the yuan, or renminbi, with media and analysts buzzing about the effect of recent reforms on the increasingly global currency.

The country made progress in facilitating RMB-denominated international trade and investment, developing RMB offshore businesses, and establishing more currency swap lines and other financial agreements.

Financial reform measures announced in the last two months by China, especially a 30-point guideline issued by the central bank to support the country's first free trade zone in Shanghai, are set to help speed up RMB internationalization.

Media outlets worldwide hyped the news that the RMB had overtaken the euro and become the second-most used currency in global trade finance. Of much more significance, however, are figures related to actual trade settlement in yuan.

According to global transaction services organization SWIFT, the RMB remained the 12th payments currency in the world, with a mere 0.84 percent share of all global payments in October, even lower than the Thai baht and Swedish krona.

In comparison, the US dollar and the euro accounted for 38.1 percent and 34.7 percent of all global payments, respectively, followed by 9.9 percent for the British pound.

China is the world's second-largest economy after the US It is the world's largest exporter and second-largest importer of goods. The international use of the RMB is not at all commensurate with the importance of China's economic status.

Progress in 2013

The internationalization of the Renminbi, by definition, is the process of promoting its use outside of the Chinese mainland.

According to HSBC chief China economist Qu Hongbin, an internationalized currency means a currency that is widely accepted for investment, as a financing and payment vehicle and as a reserve, intervention and anchor currency in all countries across the world.

Sovereign currencies usually enter the global market only after the opening of the country's capital account.

However, China has been trying to introduce the RMB into the global market in an unprecedented fashion. It has been pushing the RMB into the overseas market through cross-border trade settlement since June of 2009, as its capital account is largely closed.

Since 2009, China has promoted RMB internationalization with a three-pronged approach: facilitating international trade and investment denominated and settled in RMB, encouraging offshore RMB services centers to develop offshore RMB-denominated financial products, and encouraging central banks to hold RMB as part of their foreign exchange reserves.