EY’s impressive Canary Wharf venue and excellent support staff helped make the third event in the series a success on May 24. It also helped to have great content provided by the 10 speakers and panellists who took the podium to discuss Renminbi (RMB) Internationalisation and China’s Financial Innovation. Among them was Jin Mei, Chief Representative, People’s Bank of China Representative Office for Europe. She spoke about the latest policies related to RMB business and capital account liberalisation, the outlook for RMB internationalisation, as well as London’s position and role in the process. Here are excerpts:-
“I hope that by the end of my speech you will have more confidence in investing in China and are more interested in using the RMB.
The first point I want to emphasise is that RMB internationalisation is a long-term process and has been moving forward step-by-step over time. This is not only a trend but also an established guideline, despite some minor twists and turns. The general trend will not change in terms of policies.
The second point I want to highlight is that we are pushing forward with RMB internationalisation and capital account liberalisation in a sound and orderly manner, while ensuring that the risks are controllable, and forestalling any systemic or regional financial risks. [When implementing these measures], we follow three principles. First, we adopt a macro-prudential approach in managing private and public external debt so as to avoid large-scale currency mismatch. Second, we conduct necessary monitoring of cross-border financial trade. Third, we maintain appropriate control over short-term speculative cross-border types of loans.
According to the 13th five-year plan, in the next five years from 2016 to 2020 China will continue to widen the opening of its financial sectors, realise RMB convertibility and capital account opening in an orderly manner and make the RMB a convertible and freely useable currency.
However, considering capital account convertibility is a complicated and long-term issue, China has no [fixed timeframe]. On the contrary, it is the market that determines how fast it can go and how long it takes to reach certain goals. [When implementing these measures], the PBOC will evaluate all the difficulties that might arise ahead and make necessary preparations in line with established principles of better serving the economy, facilitating investment and trade, and preventing risks.
The third point I want to talk about is that China welcomes international investors to tap the country’s stock market and create a win-win situation. In recent years, China’s stock market has developed rapidly and it is now taking the lead globally in terms of speed. In terms of size, China’s stock market has risen to third in the world and the country’s corporate bond market is ranked second. As China’s economy enters a New Normal, and the country’s reform enters deep waters, China’s stock market will see more emphasis on innovation, coordination, growing, opening and sharing. China will gradually improve its market environment so as to attract, retain and benefit more and more issuers and investors. In the future, China’s stock market will continue to grow at a reasonable speed and meet the growing financing demands of the real economy. Also in line with demands of the real economy, China will promote product and markets innovation in the bond market and enhance risk resolution as well as investor protection. Along with the general trend of financial market opening up, China will further open its bond market, allowing more foreign issuers of different types into the interbank stock market, widening the spectrum of foreign institutions issuing RMB bonds, encouraging more offshore investors to participate in the interbank bond market, enhancing investor structure and promoting self-discipline among foreign issuers and investors.
Finally, I will spend some time talking about RMB business in the UK and the development of the London offshore RMB market.
In 2015, total receipt and payment amount for cross-border RMB business between China and the UK reached about 290.4 billion yuan, increasing 10.5% compared with the previous year. Cross-border RMB receipt and payment for bilateral trade reached about 153.4 billion yuan, increasing by 112.7% year-on-year and accounting for 31% of total import and export between China and the UK.
In January to April this year, the total receipt and payment amount for cross-border RMB business between China and the UK reached about 88.6 billion yuan, cross-border RMB receipt and payment for bilateral trade reached about 52.5 billion yuan, accounting for 36% of total import and export between China and the UK.
[But] there is still great potential for use of RMB in settlement between China and UK.
As an international financial centre, London can play a unique role in the process of RMB internationalisation. Together with the UK Treasury and Bank of England, the PBOC would like to further financial and monetary cooperation between China and the UK and promote the diversification of the international monetary system.”