With the exchange rate of the renminbi steadily rising, and the Belt and Road Initiative furthering Chinese investment overseas, China is approaching the day when it can promote the internationalization of its currency, said an adviser to the People’s Bank of China.
Sheng Songcheng, a central bank adviser, said renminbi internationalization is China’s long-term strategic objective, and now it is mature enough to promote that goal.
“The renminbi exchange rate is steady and going up and the nation’s foreign exchange reserve climbed for seven months, and the Belt and Road Initiative is welcomed by foreign countries, so I believe we are at the golden time to promote renminbi internationalization,” Sheng said.
Sheng added that China’s bond market is more open to the world, which offers a backflow channel for renminbi.
China’s foreign exchange reserves in August totaled $3.09 trillion, increasing for the seventh consecutive month, central bank data showed on Sept 7.
The Asian Infrastructure Investment Bank said in June that it approved three applications to join the bank, bringing its total approved membership to 80.
Ying Yong, deputy governor of People’s Bank of China, also said in June that China will expand the use of the renminbi in countries and regions related to the Belt and Road Initiative by improving cross-border payment and settlement facilities for the currency.
“But China is not at the right time to change renminbi exchange rate formation mechanism,” Sheng said.
He said reform of renminbi exchange rate formation mechanism should be pushed forward at the time when the renminbi exchange rate is stable; currently, it is still fluctuating. If the mechanism is changed, a big tumble or jump in the exchange rate could damage the nation’s economy, he said.
There are many uncertainties in the global economy, especially that of the United States, which is another important reason for delaying the timetable of the reform, Sheng said.
“The trend of long-term appreciation of the renminbi is not changed, so we have better time to carry out the reform of the renminbi exchange rate formation mechanism, and what we should do now is to maintain the stability of the renminbi,” he said.
Guan Tao, former director of the international payments department at the State Administration of Foreign Exchange, said with renminbi exchange rate fluctuation, investors have paid attention to the fundamentals of the Chinese economy, which will help its drive toward renminbi internationalization.
“China’s huge economic potential and more open financial market can be important for renminbi internationalization,” Guan said.