On January 26, 2023, a bank employee counted RMB banknotes next to US dollar banknotes at Kasikornbank in Bangkok, Thailand.
Athit Perawongmetha | Athit Perawongmetha Reuters
Dalian, China—For China Yuan Bonnie Chan, chief executive of Hong Kong Exchanges and Clearing Limited, told a panel on Tuesday that in order to be used more widely around the world, the currency needs more “applications” such as stocks and bonds.
Beijing has long promoted its ambition to increase the global use of the yuan (also known as the “renminbi” or “RMB”) in international financial markets. Dollar is the dominant currency. U.S. sanctions on Russia have also increased pressure on some countries to seek alternatives to the U.S. dollar.
Speaking at the World Economic Forum’s Summer Davos meeting in Dalian, China, Chen noted that people hold money for trade or, more importantly, as a store of wealth.
“We won’t just hold a large sum of yuan and deposit it into this bank account,” she said. “You want to own bonds, you want to own stocks, and so on.”
“One of our strategic imperatives has changed to ensure that we continue to produce more securities products denominated in renminbi so that investors around the world can actually see more applications for the renminbi and be able to use the renminbi,” Chen said. A medium for storing wealth in the form of RMB.
Last year, the Hong Kong Exchange announced “Double counter” plan Allows investors to trade Hong Kong-listed securities in Hong Kong dollars or RMB.
In 2015, the International Monetary Fund announced that it would include the RMB in its reserve currency basket next year, which was an important step in the internationalization of the RMB.
The yuan was the world’s fourth most active payment currency in value terms in May, accounting for nearly 4.5% of such transactions, according to interbank information network SWIFT. The U.S. dollar accounts for nearly 48%.
According to SWIFT data, in trade finance, the RMB exchange rate ranked third at about 5.1% in May. this EUR The U.S. dollar edged up slightly to 5.6%, with the U.S. dollar dominating the market with a share of nearly 85%, the data showed.
Hu Zuliu, founder, chairman and chief executive of Primavera Capital, told the same panel on Tuesday that despite Beijing’s increased announcements, the internationalization of the yuan may take longer than many expect.
Although China is the largest trading nation and has a large financial center, “we are not as big or as deep as the United States,” Hu said. “In addition to our capital account being closed, it is not fully convertible, which also hinders the internationalization of the RMB to some extent.”
mature financial market
Developing more RMB-denominated investment products also requires the maturity of the local financial industry. Part of that includes having a more sophisticated investor base.
Chen said the term “patient investing” came up in almost every conversation with senior leaders at the annual Lujiazui Financial Forum in Shanghai last week.
This phrase appears in the official press release to encourage long-term investment rather than short-term speculation.
“Patience comes from learning from market fluctuations,” Two Sigma Asia Pacific CEO Kenny Lam told the same panel on Tuesday.
Policymakers have been thinking more about making policies more stable and consistent, he said.
Awaiting more Chinese IPOs
Chinese companies have long sought to tap U.S. financial markets to gain prestige and greater market liquidity, but increased regulatory scrutiny from Beijing and Washington, D.C., has significantly slowed such listings over the past three years.
KraneShares founder and CEO Jonathan Krane also said during the panel discussion: “I think the IPO is critical to attracting investors back to the market. All the storytelling around it shows that a lot of progress is being made.” Tuesday.
“In the U.S., we see all this innovation, artificial intelligence, and all these companies going public and doing well, and then in China, the same industries, the same innovations are happening, and these stories should be told through the IPO market,” Crane said. .” I heard that the IPO market is “about to start to recover.”
Chinese authorities announced a new initiative last week Support IPOs, especially in Hong Kong.
Ms. Chen said that so far this year, the Hong Kong Stock Exchange has received 73 new listing applications, an increase of 50% from the second half of last year. “IPO projects are progressing smoothly,” she said, noting that a total of about 110 IPO projects are in preparation. “All we need is a good set of market conditions so that these products can be launched and priced smoothly,” she added.
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