China has made big strides in liberalizing its currency over the last few years and now it is taking steps to facilitate cross-border sweeps of the renminbi, a development that will make life easier for treasuries that operate in China.
Recently, the People’s Bank of China (PBOC), the central bank, said that it will allow companies to sweep cash offshore.
The internationalization of the renminbi involves more cross-border use of the currency, Ng said, adding that offshore renminbi currently makes up less than 1% of the currency’s global total, with 99% on shore.
Ng pointed out that SWIFT’s research indicates that while China constitutes nearly 10% of the world’s GDP, only about 1% of global foreign exchange activity occurs in renminbi. And while more than 30% of Japan’s trade is transacted in yen and 60% of the eurozone’s imports and exports are denominated in euros, 16% of China’s imports and exports are denominated in renminbi, he said. “So from a transactional point of view, there is room for the renminbi to rise.”