The practical significance of the soaring status of the renminbi

The real situation behind the data of "the second largest trade finance currency" previously reported by "CEConline": Among the five countries and regions that use RMB as the most trade finance, China, Hong Kong, Singapore, With a 94% share of usage, Germany and Australia, in fourth and fifth place, only account for 2% each. The sharp rise in RMB-denominated trade financing is not so much because the RMB is more acceptable in international trade, but because more capital is attracted by the appreciation of the RMB and the higher interest rates of the RMB, more funds enter the market through the "express train" of trade financing. The result of Chinese arbitrage.

The Times recently did an in-depth report on this topic. The report also believes that it has become the world's second trade financing currency, but its practical significance to the RMB is still limited. The current reality of international trade is that even if the letter of credit is opened in RMB, it is still settled in US dollars. Therefore, the proportion of RMB in the international trade balance is less than 1%. To improve the quality of the renminbi and carry out substantial internationalization, the key is to open the capital account and realize free convertibility. The following is an excerpt from the report:

Trade finance currency does not equal trade currency , which means that in commodity transactions, banks use structured short-term financing tools to finance inventory, prepayments, accounts receivable and other assets in commodity transactions (such as crude oil, metals, grains, etc.). Trade finance currency is a large part of the business of traditional commercial banks, and it is the second largest source of income after the deposit and loan business. Taking importers and exporters as an example, in the process from accepting orders to sending and receiving goods to paying and accepting payment, there is a cycle, that is, a time difference. Unlike retail, which pays the money and delivers the goods at the same time, the company will go to the bank in order to increase business turnover. trade finance. The process is that the bank first checks the goods for the importer and exporter, and then sends the money to the customer as soon as possible. At the same time, the bank will collect the deferred amount from the other party after a certain period of time (such as 30 days), and charge interest. Although interest is charged, it will make the transaction safer and more trustworthy for both parties. The bank uses its credit as a guarantee in the middle.

"This news is very powerful at first glance, but in fact, in terms of international trade, European import and export trade is relatively low, banks have no business, and their credit ratings are low. During the period of activity expansion, the letter of credit issued by the bank is of course opened in RMB, but this does not reflect the actual situation." A foreign exchange manager of BOC Hong Kong told The Times that because people cannot convert freely, Hong Kong has the largest offshore Renminbi deposit base - more than 700 billion yuan ($115 billion), and it is also the largest renminbi trading center outside mainland China, with most of these transactions conducted through BOC Hong Kong.

"And even if the letter of credit is issued in RMB, the settlement may not necessarily be in RMB, and more likely to be in US dollars. Let's look at the proportion of RMB in the international trade receipts and payments, the RMB Ranked very low, the proportion is less than 1%. So for the US dollar, there is no impact at all for the time being, and for the yen and the euro, the impact is not too big." The person continued to add.

"There is a fact that a large part of the 8% may be China's domestic guarantee and foreign loans, which are fake trade, not necessarily the importer doing trade financing, just a means and name of borrowing money , it is difficult to know the correct number." An insider of a large commercial bank revealed to Die Zeit, "There is a certain amount of water in this data, and it cannot be fully used as a basis. In the past two years, the life of import and export traders has not been very good. The situation of internal guarantees and foreign agents is increasing rapidly, and the State Administration of Foreign Exchange will also introduce countermeasures. If it is strictly investigated, this number may decline in the future."

And according to other data from SWIFT, the performance of the renminbi is not eye-catching. As far as the global payment currency is concerned, the renminbi's ranking as a global payment currency remained at the 12th place in October, and its market share even declined slightly, accounting for only 0.84%, behind Hong Kong dollar and Thai baht. The total value of global payments in currencies rose 4.6% in October, but the renminbi grew only 1.5%. In terms of trading currencies, although the renminbi ranks 8th, its share is less than 2%.

"In addition, when interpreting this news, the cost of financing should also be considered. Just because this number has risen, it should not be considered that RMB is particularly welcome when financing overseas. Because if you raise RMB overseas, the cost Although it is low, the interest rate is still higher than that of the U.S. dollar, so in terms of cost, there is no special significance to finance RMB." Gu Yifu, head of foreign currency assets and derivatives trading at China Merchants Bank, pointed out to the Times Weekly.

The key to internationalization is free convertibility

To become a so-called international currency is not an easy task. Gu Yifu believes: "The currency of trade financing is not the only indicator of the international performance of a country's currency. There are other indicators that are more important than this. For example, the performance of the status of the US dollar includes traders' reserves of US dollars, the use of US dollars in settlement, and the use of US dollars in national reserves. The use of U.S. dollars, etc., is a symbol of the economic status of the United States, and it also brings benefits to the United States to a certain extent, such as reducing settlement costs and settlement risks for American companies, and can also export inflation.”

Multiple interviewees They all said that if the renminbi is still not freely convertible, then it will not be able to achieve the goal of becoming a major international currency. "Generally speaking, in addition to the trade financing currency, the purchase of RMB bonds as national reserves, the RMB's special drawing rights status in the IMF, and the RMB as an international settlement currency, all these things can be done, only then can the RMB play a role in the international arena. The status has been substantially improved. The change in the data of SWIFT alone may not have much impact.” Gu Yifu analyzed, “To accomplish this, there is a very important condition, that is, the need for the free convertibility of the RMB.” “The RMB will eventually become Internationalization, but to achieve this goal, the free flow of capital projects must be realized, and the Shanghai Free Trade Zone has already realized this attempt.” Du Jinmin believes.

“It is necessary to open up the RMB as a capital item, because only the free convertibility of the RMB can make the RMB truly international.” Lin Jiang analyzed, “However, how to maintain the stability of the exchange rate is another problem. If the core competitiveness of Chinese enterprises is not strong , coupled with the realization of the free convertibility of the RMB, it will be difficult for the exchange rate to maintain stability, and it will be easy to be speculated by speculators such as Soros and Buffett, which will affect the stability of financial institutions. Liberate interest rate controls, and then once the free convertibility of RMB is achieved, the central bank will introduce measures to deal with possible exchange rate fluctuations.”