chapter  2
35 Pages

Current situation of Renminbi internationalization

As the second largest trading nation, before the RMB settlement was launched China used the USD, JPY, and EUR as settlement currencies for cross-border trades. Since the financial crisis, the USA has carried out a Quantitative Easing policy twice and weakened the USD to promote exports and reduce the trade deficit, pushing the currency value of the USD all the way down. On the other hand, since the Japanese government’s zero-interest rate policy in the 1990s, frequent, large-scale JPY arbitrage operations have established the JPY as one of the currencies with the biggest fluctuation. The increasingly serious sovereign debt crisis greatly discouraged people’s confidence in the EUR, and to keep the crisis from spreading, the European Central Bank carried out a policy similar to the USA’s QE, causing the EUR to depreciate as well. At the same time, the instability in North Africa and the Middle East has resulted in volatility in the price of oil. All these factors have contributed to the uncertainty and complexity of the world’s economy, with the world’s main currencies’ exchange rates volatile and unpredictable. If China were still using the main currencies for trade settlement, our foreign trade enterprises would be hurt by the cost and revenue uncertainty caused by the exchange rate. Furthermore, the enterprises that provide services to the foreign trade enterprises would also be affected, endangering the stable development of our national economy.