Summary Milestones! RMB “into the basket†The IMF said that the yuan will account for 10.92% of the SDR currency basket. After adjustment, the proportion of the US dollar will account for 41.73%, and the euro will be 30.93%. Yen and...
milestone! RMB "into the basket" The IMF said that the yuan will account for 10.92% of the SDR currency basket. After adjustment, the proportion of the US dollar will account for 41.73%, and the euro will be 30.93%. The yen and the pound will account for 8.33% and 8.09% respectively
The internationalization of the renminbi ushered in a historic moment!
At 1 am on December 1, Beijing time, the Executive Board of the International Monetary Fund (IMF), representing 188 member states, announced in Washington that the vote had met the widely available standard and the IMF included the RMB in the special drawing rights. (SDR) currency basket. This decision will take effect from October 1 next year. This is also the fifth member of the IMF basket currency after the dollar, euro, pound, and yen.
The IMF said that the yuan will account for 10.92% of the SDR currency basket. After adjustment, the proportion of the US dollar will account for 41.73%, and the euro will be 30.93%. The yen and the pound will account for 8.33% and 8.09% respectively.
The entire round of evaluation lasted for five years, and the IMF finally approved the entry of the RMB into the SDR. IMF Managing Director Lagarde said at the press conference: "The entry of RMB into SDR will be an important milestone for the integration of China's economy into the global financial system. This is also an acknowledgement of the progress made by the Chinese government in the reform of the monetary and financial system in the past few years. â€
A press release issued by the IMF to the Shanghai Stock Exchange reporter indicates that the existing SDR currency basket will remain until September 30, 2016, and the new SDR currency basket containing RMB will be opened on October 1, 2016. This is to allow SDR users to have more certainty and predictability, and to make technical adjustments using the time of the interval.
Although the iconic significance of joining the SDR is greater than the real meaning, although the SDR created and allocated to member countries by the IMF as of September is only $280 billion (about 2.5% of the global reserve currency assets in the same period), although the SDR new currency basket will be next year. It will take effect on October 1st, but for China, the significance of joining SDR is not significant: this is the staged affirmation of the internationalization of the RMB by the international community.
Inspired by the good news, we must also clearly understand that joining SDR is not the ultimate goal of RMB internationalization. Even the internationalization of RMB is not a goal in itself. Deliberate pursuit of RMB internationalization is tantamount to asking for fish. The internationalization of a country's currency is a manifestation of its comprehensive national strength. It is a long-term process. It aims to establish and improve various financial systems in China through the internationalization of the renminbi and improve its voice in the international financial market. Economic development services.
More than advertising effects
The entry of the RMB into the SDR basket has a significant advertising effect. At the beginning of the SDR in 1969, it was linked to gold and was decided by 16 currencies until it fell to 5 in 1980 (US dollar, Japanese yen, British pound, German mark and franc). In 2000, the euro replaced the German mark and the franc, forming the current SDR currency basket. That is to say, regardless of the replacement of the German mark and the franc by the euro, the SDR currency basket has not been adjusted for more than 30 years.
Liang Hong, head of research department and managing director of CICC, believes that the addition of RMB to the basket has important symbolic significance. It will be the first truly new addition to the post-Bretton Woods era, the first currency from developing countries and the first to join SDRs according to freely usable standards.
In addition to the symbolic meaning, the entry of the RMB into the SDR basket will substantially promote the internationalization of the RMB. Professor Shi Kang, deputy director of the China Center for Economic Research at the Chinese University of Hong Kong, told reporters that although in the short term, the direct demand for RMB from the SDR basket is limited, the impact on the market is small, but in the long run, for the RMB international It is meaningful. In the process of joining the SDR, the IMF has put forward a series of standards and requirements, which will help accelerate China's various financial reforms and benefit the internationalization of the RMB. Especially after joining the SDR, the market will continue to increase the recognition of the renminbi.
Zhang Chun, executive dean of the Shanghai Institute of Advanced Finance and professor of finance, stressed that: “It seems that the symbolic meaning is greater than the substantive meaning, but this symbolic meaning is also very important for China. At least the United States, Japan and other countries have not Clearly opposed, this is the recognition and affirmation of the international community's phased achievements in the internationalization of the renminbi."
Qi Shenglin, executive director of the Institute of International Monetary Research at Renmin University of China and dean of the Institute of Internet Finance at Zhejiang University, told reporters: "For a long time, due to the game of various countries, the role of SDR is actually very limited. The RMB joins the SDR currency basket, which is also the hope of the IMF. Seeing that the currency of developing countries has joined the so-called 'elite club', it is more conducive to emerging market countries to make their own voice, which will help SDR play a greater role in the future."
In October 2010, the IMF revised the weight of the currency in the SDR basket. The weights of the US dollar, euro, pound, and yen were 41.9%, 37.4%, 11.3%, and 9.4%, respectively. After the renminbi joins the SDR, it means that the weights of the five major currencies will be re-divided.
Lu Zhengwei, chief economist of Industrial Bank, told reporters that the IMF has been trying to adjust the calculation method of weights because the current calculation methods have obvious shortcomings. First of all, the official foreign exchange reserves cannot fully reflect the importance of a country's currency in the international financial trading system. It also needs to consider factors such as the activeness of the foreign exchange market and the use of financial assets. Second, the current formula gives the export too high a weight.
“We expect that the adjusted direction will be added to other parameters in the freely usable system.†Lu political commissar said, for example, SWIFT's cross-border payment and trade financing, trading volume in the foreign exchange market and its derivatives market.
Lian Ping, chief economist of Bank of Communications, had expected that if the yuan could enter the SDR currency basket in the near future, it would become a fixed currency of SDR. It is estimated that the proportion of the yuan may reach double digits. Of course, due to the addition of the renminbi, the share of the other four currencies will correspondingly decrease.
Increased global attractiveness of RMB assets
The renminbi "into the basket", the monetary authorities made a lot of preparations for this, it can be described as a matter of course, has been regarded by many experts and scholars as an important milestone in the road of internationalization of the renminbi.
Lian Ping, chief economist of Bank of Communications, believes that the addition of RMB to SDR has two positive effects on accelerating the internationalization of the RMB: First, the demonstration effect. SDR is an internationally recognized “super-sovereign reserve currencyâ€. The addition of SDR means that the status of the RMB as an international reserve currency has been officially recognized by the IMF and can be justified as the official reserve reserve currency of 188 member states.
"The second is the reverse effect." Lian Ping believes that before and after the renminbi joined the SDR, China has taken and will continue to adopt a series of measures conducive to the opening of capital and financial accounts, including issuing renminbi-denominated central bank bills overseas and improving the renminbi exchange rate. The middle price mechanism and the expansion of the inter-bank bond market will in turn further promote the internationalization of the RMB.
Earlier, some analysts believe that the symbolic significance of the renminbi's participation in SDR is greater than the substantive significance, but more market participants believe that its substantive significance is also quite significant.
Zhang Shanshan, an analyst at China Credit Ratings Research Department, told reporters that the RMB “into the basket†SDR not only has a positive effect on the RMB becoming a reserve currency, but also is of great significance to the reform and opening up of the Chinese financial system.
"If handled properly, the impact of joining the SDR on China's financial industry is comparable to the promotion of the real economy in the WTO." Zhang Shanshan said that China has introduced a large number of policy measures in the process of creating conditions for the RMB to join the SDR. It will promote the reform and opening up of China's financial system, and this wave of reform and opening up will force China's financial industry to face competition and strive to improve efficiency.
More importantly, the attractiveness of RMB assets around the world is also increasing. Standard Chartered Bank researcher said that the RMB has joined the SDR, and Standard Chartered has received inquiries from many foreign central banks, foreign sovereign wealth funds and other institutions on RMB assets.
Wang Han, chief macro analyst of Industrial Securities, pointed out that since SDR is an international reserve asset and its corresponding basket of currencies has a reserve nature, after joining SDR, the central bank holding SDR as a reserve needs to increase the RMB asset reserve. To a certain extent, the proportion of the renminbi as a reserve asset has been raised, but given the small amount of SDR, the degree of proportional increase is limited. The more important role should be that the global attractiveness of RMB assets is bound to increase.
RMB internationalization service domestic real economy
Some commentators in the market believe that after joining the SDR, in the face of the Fed’s interest rate hike and the strengthening of the US dollar, the central bank will once again release the depreciation pressure by letting the RMB depreciate rapidly.
In this regard, Shi Kang believes that whether the renminbi will depreciate is actually irrelevant to SDR. If the renminbi has a depreciation trend, even if China joins the SDR, it will not change this trend. Whether the renminbi depreciates depends on the market's confidence in the Chinese economy and confidence in China's reform. If the market believes that the current government has the ability to lead the Chinese economy back into a stable development channel, even a short-term economic downturn will not affect this expectation. The RMB will fluctuate in the short term, but there is no room for long-term depreciation.
Zhang Chun also told reporters: "The attractiveness of RMB assets is not directly related to specific events such as joining SDR, but depends on whether China's economy can be successfully transformed and financial reforms can be opened to the outside world."
Joining the SDR currency basket is by no means the ultimate goal. Before the international political and economic structure has changed greatly, it is not advisable to try to shake the dominant position of the US dollar in international finance and challenge the hegemony of the US dollar. Shi Kang believes that the formation of a major currency is determined by its economic status and overall strength. As long as China's economy develops well, the internationalization of the renminbi is a matter of course. Deliberately pursuing the international status of the renminbi is the result of seeking a fish.
Qi Shenglin emphasized to reporters that joining the SDR currency basket means that China must participate in international affairs in accordance with international rules, which can force domestic financial reforms, especially market-based reforms of exchange rates and interest rates. A financial market with multiple entities, rules and transparency, depth and breadth, and good financial infrastructure will not only benefit the internationalization of the RMB, but also serve the transformation and upgrading of China's economy.
Zhang Chun stressed: "The renminbi is not internationalized for internationalization. China is already the second largest economy. Enterprises have the need to go abroad to invest. Residents have the need to deploy assets globally. If the local currency is not internationalized, it will drag the entity. In fact, the internationalization of the renminbi is in the common interest of both China and the United States. Although the United States does not want the renminbi to challenge the dominance of the dollar in the short term, the dollar alone will cause problems such as trade deficits and excessive borrowing. The renminbi can be properly shared, provided of course that China can also enjoy the benefits of internationalization of its currency."
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