ABSTRACT
International use of the renminbi (RMB) maintained strong growth momentum between 2009 and mid-2015, especially as a global clearing and settlement currency. This was fuelled by China’s strong economic growth, its dominant position in the global value chain and trade, its growing status as an exporter of capital, as well as the various policy efforts by the government and the People’s Bank of China. Between mid-2015 and the end of 2016, the RMB depreciated against the USD due to a number of factors, including the rapid strengthening of the USD index, China’s domestic stock market volatility and a decline in corporate profitability, although the CNY basket remained relatively stable during this period. As a result, offshore RMB market activities contracted accordingly. Looking forward, with the RMB exchange rate becoming more flexible and the market accustomed to its two-way volatility, the pace of the RMB internationalization should pick up again. Further progress in China’s capital account liberalization, the RMB’s inclusion in the SDR basket, the expansion of the OBOR Initiative, and the global diversification of financial assets should all provide impetuses for the creation of more RMB-denominated assets in the overseas market.
