RMB Trading Easier?
A new trade settlement program could make it easier to trade RMB, observers say. Under the pilot program qualifying firms in Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan can use RMB settlement for cross-border trade with foreign companies.
“This is very significant in that it pushes the RMB to a fully-convertible currency,” said Zening Ge, president of SSA & Co.’s Asia division. “Yes, it will relax RMB regulations to some degree, but only for the current account, namely the trade-related areas. For capital accounts, there is still a long way to go. Therefore, the off-shore RMB settlement won’t change the nature of RMB to a closed currency.
“The big picture for the government to do this is to bring the RMB to the status of a regional currency,” Ge continued. “Of course, the ultimate goal is to challenge the status of the U.S. dollar. For multinationals that need to import into, and export from, China, this could much simplify their transactions by maintaining only one RMB account, and they can also get RMB-based trade financing, which could be settled later with RMB.”
Read more about this development at Asia Pacific Forum.
Tags: Asia Pacific, China, FX, RMB
