Expectations of China further opening up its financial sector this year have boosted bankers’ and experts’ confidence in a broader use of the renminbi in global trade, investment and foreign reserves, as well as bets placed on a more flexibly floating exchange rate.
A survey done by the Bank of China published on Jan 31 indicated that last year, 76 percent of respondents from 3,134 overseas enterprises and 118 financial institutions in 25 countries and regions believed that the yuan will play a role as important as other major international currencies, including the US dollar, British pound, euro and Japanese yen.
That proportion increased from 72 percent from the annual survey in 2016, reflecting strengthened confidence in the yuan’s global usage, said the bank.
More than 60 percent of respondents indicated they will increase their use of yuan in global trade, investment and foreign reserves, according to the survey. In 2017, the yuan remained the world’s sixth-largest currency in payments and seventh-largest in foreign exchange reserves.
“The market’s demand for yuan-denominated assets will be huge in the future,” Zhang Qingsong, vice-president of the Bank of China, said at a news conference on Jan 31. Zhang said plans to launch crude oil futures in Shanghai will support the yuan’s use in setting commodity prices in global trading.
Other favorable conditions for strengthen the yuan’s international status include further implementation of the Belt and Road Initiative.
That strong confidence in the yuan was expressed after China’s top representative delivered a speech last week at the World Economic Forum in Davos, Switzerland, saying the country will substantially open up the services and financial sectors and create a more attractive investment environment.
Wang Yongli, vice-chairman of China International Futures Co, told China Daily further opening-up of domestic financial markets and encouraging use of the yuan in international financial asset pricing and settlement are inevitable in boosting its global usage.
Experts forecast that the yuan’s exchange rate will remain relatively steady this year, but it will float more freely as the market plays a stronger role in deciding its value.
The yuan’s spot exchange rate for onshore trading strengthened to 6.2920 per dollar at the close on Jan 31, the highest since August 10, 2015. The currency has appreciated by 3.5 percent in the first month this year.