As China's cooperation with Southeast Asian economies becomes ever closer, several positive factors have generated favorable conditions for the internationalization of the renminbi especially in these regions
In recent years, the pace of RMB internationalization has accelerated and there has been interesting progress.
The report of the 20th National Congress of the Communist Party of China clearly states that China should promote the internationalization of the RMB in an orderly manner.
In the process of promoting the "outsourcing" of the renminbi, a key source of motivation was above all the frequent trade exchanges with foreign markets, with the ASEAN region, closely linked to Beijing, representing an important frontier for cooperation economic and commercial.
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Ba Shusong, director of the academic committee of China Banking and Insurance News, managing director and chief China economist of Hong Kong Exchanges and Clearing Limited, chief economist of the China Banking Association and executive dean of the HSBC Financial Research Institute of Peking University, said: "From a regional perspective, Southeast Asia is in a priority position in promoting the internationalization of the RMB, because compared to other regions, Southeast Asia is the most comprehensive in terms of local use of the RMB, conditions of local financial infrastructures and cooperation mechanisms."
Internationalization of the RMB and new integration of the economy and trade of Southeast Asia
Currently, the ASEAN region is discussing how to reduce dependence on the US dollar, euro, etc. as intermediate payment currencies in the trade and investment process and further promote the use of local currencies.
And this represents a common trend globally, especially among countries that would like to reduce their dependence on the use of the US dollar.
At the same time, following the wave of the COVID epidemic, the current international economic and political landscape is undergoing continuous restructuring, with long global and industrial supply chains being reorganized to make them less vulnerable to international shocks.
In this context, China's manufacturing industry is also reorganizing its cooperation with other countries in the supply chain, with the Southeast Asian regions being most closely connected. And the RCEP (Regional Comprehensive Economic Partnership Agreement) provides Beijing with a new cooperation framework to continue deepening the above-mentioned ties.
In this complex international situation, in 2022, even during the epidemic prevention and control period, the People's Bank of China actively participated in the RMB liquidity arrangement promoted and initiated by the Bank for International Settlements and the Monetary Authority of Singapore , the Bank of Malaysia and the Bank of Indonesia, actively participating in the signing of important agreements. In this way, branches of many Chinese banks in Southeast Asia have become direct participants in such agreements.
"We should combine the promotion of RMB internationalization with the demands of Southeast Asian economies to reduce the use of the US dollar as an intermediate payment currency, the continued strengthening of economic and trade cooperation between China and Southeast Asia, and the continued restructuring of industrial chains, and further deepen the regional integration between China and Southeast Asia, Ba Shusong said.
Speaking on various issues such as how the renminbi "exits", how to make renminbi trade prices between China and Southeast Asian economies more convenient, and how to develop renminbi-denominated financial products, Ba Shusong suggested that the China-Singapore financial summit should play a more active and important role.
Ba Shusong pointed out that Asian Development Bank statistics show that currently, in the process of regional trade between China and Southeast Asian economies, 80% of international debt, securities transactions and cross-border payments are still conducted with the US dollar as an intermediate currency. The reason why the US dollar can maintain its strong position is directly related to its developed financial market, comprehensive system of financial products and financial payment structures that support the evaluation of currency trade and investments.
In recent years, although the share of the RMB in international claims has increased significantly, there is still a significant gap compared to China's share of global GDP.
It is worth mentioning that, despite sharp interest rate increases by the Federal Reserve, the RMB exchange rate has shown some stability and, compared to other currencies, has depreciated less against the US dollar.
At the same time, as China's cooperation with Southeast Asian economies becomes increasingly closer, these positive factors have therefore created favorable conditions for RMB internationalization in these regions.
Furthermore, the digital renminbi, being one of the few sovereign digital currencies in the world led by central banks - which has successfully completed testing - has achieved important results in test applications in domestic and foreign retail sectors.
In the future, according to Chinese experts, "how to effectively use digital renminbi to achieve accelerated development, promote trade exchanges between Chinese and New Zealand financial institutions, and promote innovation in renminbi-denominated financial products will become an important topic at the China Financial Summit -Singapore and will deserve thorough discussion."
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