Do you know this? China's renminbi is constantly improving its status in international payments, even surpassing Japan's yen to become the fourth most active currency in the world! This is exciting news and a topic worthy of our in-depth consideration. Why is the renminbi able to surpass the yen, and what impact does this have on the Chinese economy and the world economy?
Behind the renminbi's overtaking of the yen
The ranking of the renminbi in international payments is an important indicator of a country's economic strength and international influence. The renminbi was able to overtake the yen, first of all, because of the strong performance of the Chinese economy. According to the International Monetary Fund (IMF), China's economy grew by 8.1% in 2021, making it the only major economy in the world to achieve positive growth and contributing more than 30% to global economic growth.
China's foreign trade also hit a record high, with the total import and export value reaching 35.65 trillion yuan, a year-on-year increase of 21.9%, accounting for 13.5% of the global trade share, ranking first in the world. The size of China's economy and trade volume provide strong support for the international use of the renminbi.
Behind the renminbi's overtaking of the yen
The ranking of the renminbi in international payments is also an important indicator of the openness and attractiveness of a country's financial market. The renminbi was able to surpass the yen, secondly, because of China's steady financial opening-up. In recent years, China has continuously improved the basic institutional arrangements for the cross-border use of RMB, promoted a higher level of two-way opening of the financial market, and promoted a virtuous cycle of RMB onshore and offshore markets. For example, China has expanded the coverage of the RMB cross-border payment system, strengthened financial cooperation with other countries and regions, and promoted the use of RMB in countries along the "trade route".
China has also accelerated the pace of RMB capital account convertibility, relaxed the access conditions for foreign investors to enter China's financial market, and increased the allocation value of RMB assets. For example, China has expanded the scope of the RMB QFII pilot program, removed the investment quota limit for RMB QFIIs, increased the weight of the RMB in the IMF's SDR basket of currencies, and enhanced the renminbi's status as an international reserve currency.
Behind the renminbi's overtaking of the yen: the stable credibility of China's currency
The ranking of the renminbi in international payments is also an important indicator that reflects the stability and credibility of a country's currency. The renminbi was able to surpass the yen, in the end, because of the stable credibility of the Chinese currency. In recent years, China has adhered to the basic and stable exchange rate formation mechanism based on market supply and demand, with reference to a basket of currencies, and maintaining the basic stability of the RMB exchange rate at a reasonable and balanced level, effectively coping with fluctuations in the international financial market and external shocks, and maintaining the two-way fluctuation and flexibility of the RMB exchange rate.
In 2021, the renminbi appreciated by 6.1% against the US dollar, making it one of the world's best-performing major currencies. The appreciation of the renminbi reflects the resilience and potential of China's economy, and also improves the willingness and confidence of other countries and regions to use the renminbi for settlement. At the same time, China has also paid attention to preventing and mitigating the risks of cross-border capital flows, and has established a macro-prudential management framework for cross-border capital flows that integrates domestic and foreign currencies, maintaining the internal and external balance of the renminbi and enhancing the international credibility of the renminbi.
epilogue
The renminbi's rise to fourth place in international payments is a result of China's economic and financial development, as well as China's contribution to the world economy. This is a time for us to be proud and celebrated, and a time that requires our humility and sobriety.
There are still many challenges and opportunities on the road to the internationalization of the RMB, which require our continuous efforts and innovation. We should adhere to the market-oriented, rely on the real economy, take reform and opening up as the driving force, and take risk prevention and control as the guarantee, steadily and prudently promote the internationalization of the RMB, and make greater contributions to building a community with a shared future for mankind and promoting world peace and development.