Recent national and regulatory reforms in China, such as the establishment of free trade zones (FTZs) and cross border settlement and investment pilots, have spurred greater use of RMB globally.
The process of RMB internationalisation is happening in three stages:
- Global trade and payment currency
- Global investment currency
- Global reserve currency
In 2015, 26 per cent of China’s trade was settled in RMB. The recently launched
Cross-border Interbank Payment System (CIPS) has also improved payments efficiency and transparency.
The range of on and offshore RMB-denominated products available to foreign investors has grown. RMB has also emerged as a global financing currency through issuances of offshore “dim sum bonds” and onshore “Panda bonds”.
From October 2016 the RMB will be included in the IMF’s Special Drawing Rights (SDR) basket of international reserve currencies. Currently, 32 central banks invest in RMB, up from 3 in 2012.