Subject
Renminbi internationalisation.
Significance
The renminbi emerged from relative international obscurity to become the fifth most-used currency in international payments in just over a decade. Nevertheless, its international use as a currency of settlement or foreign exchange reserves remains small compared to the dollar and euro. Without full capital account convertibility, the benefits of its international usage have been restricted to exporters and offshore settlement centres, especially Hong Kong.
Impacts
Reform will raise renminbi quotas for portfolio investors, boost outward direct investment and develop China's international payment system.
Incremental reforms will help rebalance China's net international investment position.
In the longer term, internationalisation will benefit domestic bond and equity markets by increasing their depth and liquidity.
External Financing Risks: How Important is the Composition of the International Investment Position?
