Today I saw a very interesting report: a recent article in the Wall Street Journal revealed that the renminbi's position in the global economy is quietly rising. The article points out that the renminbi's status as an international payment option is also growing against the backdrop of a surge in the global use of China's currency, which could complicate the future influence of the West. In the event of a future conflict, Western countries impose sanctions on China, and the willingness to trade with the yuan increases, which to some extent helps to protect the Chinese economy.
Over the past few decades, China has struggled to promote the development of its financial markets and the internationalization of its renminbi, and now this strategy seems to be paying off.
According to the International Monetary Fund (IMF), the renminbi has become the world's fifth largest reserve currency due to its rising share in global currency reserves. This not only demonstrates the international community's confidence in China's economy, but also reflects the growing importance of the renminbi in international trade and investment.
Reporter for the Wall Street Journal
According to the Wall Street Journal, the global use of China's currency has surged, thanks in large part to a national push: in recent years, the Chinese government has signed a series of bilateral currency swap agreements to promote the use of the renminbi in international trade and investment.
In addition, China has also actively promoted cross-border RMB business, which has reduced the exchange rate risk of enterprises in international trade.
All these measures will help enhance the international status of the renminbi.
However, the internationalization of the renminbi also faces challenges:
On the one hand, pressure from Western countries is mounting. They fear that the internationalization of the renminbi will challenge the existing international monetary system and thus affect their interests. Therefore, they have put pressure on China on various occasions to try to slow down the process of internationalization of the yuan.
On the other hand, the internationalization of the renminbi has also put forward higher requirements for the reform and regulation of the domestic financial market. In the context of the capital account has not yet been fully opened, how to effectively prevent financial risks and maintain the stability of the financial market has become a top priority. Despite this, the internationalization of the renminbi is still progressing steadily.
Wall Street financial markets
In fact, in the context of changes in the global economic pattern, the internationalization of the renminbi is of great significance for maintaining the economic security and stability of the mainland.
The internationalization of the renminbi can reduce the mainland's dependence on external financial markets and enhance the mainland's voice in global economic governance. When dealing with external risks and pressures, the continent with an international currency will be more confident and confident.
According to relevant data, since mid-2020, the cross-border RMB settlement of mainland merchandise trade has shown a strong growth momentum, with the growth rate more than doubling on a monthly basis.
Today, RMB settlement has accounted for about one-quarter of the mainland's major commodity trade, compared with about 13% in 2022, a significant growth rate.
The latest data from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) further reveals this trend: in October, about 3.6% of global international payments were made in yuan, up significantly from less than 2% in January and just below the 3.7% in September, which hit an all-time high.
However, the reality may be more optimistic, as some RMB transactions, particularly those involving US entities, are not included in SWIFT's statistics.
Statistics from the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
The increase in the proportion of RMB in international payments reflects the achievements of the mainland in promoting the internationalization of RMB and the opening up of financial markets.
In recent years, the mainland has insisted on promoting the construction of the RMB cross-border payment system (CIPS), continuously improving its function and efficiency, providing a solid foundation for the circulation and use of RMB on a global scale, and the mainland has also actively promoted the use of RMB settlement in trade with countries along the route, reducing the risk of exchange rate fluctuations and improving trade facilitation.
The enhancement of the international status of the renminbi has also brought tangible benefits to mainland enterprises and financial institutions: on the one hand, enterprises can use renminbi to settle in international trade, which can avoid the risk of exchange rate fluctuations and reduce transaction costs. On the other hand, financial institutions conduct business on a global scale, and with the help of the RMB cross-border payment system, they can improve the efficiency of capital operation and reduce operating costs.
However, in the face of high competition in the international payment market, the mainland still needs to continue to work on several aspects:
1. The mainland should continue to promote the opening up of the financial market to the outside world and enhance the attractiveness of RMB financial assets.
2. Strengthen cooperation with international financial organizations to enhance the status of RMB in the international financial system.
3. Strengthen the construction of cross-border payment infrastructure, improve the function and efficiency of the CIPS system, and provide better support for the circulation and use of RMB on a global scale.
The international status of the renminbi has been enhanced
In recent years, China and Russia have become increasingly close, in large part due to the impact of the Russia-Ukraine conflict and Western sanctions. In this case, Russia has succeeded in replacing Saudi Arabia as China's largest oil supplier, and Russia has also become an important market for China's automotive industry.
Today, the vast majority of bilateral trade between China and Russia is settled in renminbi, a phenomenon that has attracted the attention of many countries around the world, especially those developing countries that are unlikely to side with the West in a potential conflict.
They are beginning to realize that maintaining close trade relations with China is not only good for economic development, but also conducive to maintaining international fairness and justice.
In the field of energy, Russia, as China's largest oil supplier, guarantees the mainland's energy security. In the context of the Russia-Ukraine conflict, Russian oil exports have been sanctioned by the West, which has reduced international oil prices, which has allowed China to gain a greater voice in the international oil market and further consolidated national energy security.
In terms of the automobile industry, with the rapid development of China's automobile industry, the Russian market provides a broad space for Chinese automobile companies. The cooperation between the two sides in the automotive industry has not only led to bilateral trade, but also provided technical support and personnel training for the development of the domestic automotive industry in Russia.
"Sino-Russian" bilateral trade cooperation
In addition, the settlement of bilateral trade between China and Russia in RMB will help promote the internationalization of the RMB: in the context of Western financial sanctions, Russia actively seeks to carry out local currency swaps and trade settlement business with other countries, and the local currency settlement between China and Russia not only reduces the risk of exchange rate fluctuations, but also provides a reference for other countries to settle in RMB. More and more countries have begun to attach importance to the status of the renminbi in international trade, which has promoted the internationalization of the renminbi.
Against this backdrop, many developing countries have begun to adjust their foreign policy and trade strategies, seeking to strengthen cooperation with China. They realized that maintaining friendly relations with China is conducive to economic development, national security and improvement of people's livelihood. Under such a trend, China's exchanges and cooperation with other countries in the world have become increasingly close, and its international status has been continuously enhanced.
In the face of possible future financial sanctions that will have a profound impact on the global economy, not only in the area of trade, but also in the field of financial flows, it will cause great disruption to financial flows. In such a situation, the mainland's ability to use dollar reserves could be severely hit, affecting the mainland's international financial status.
In addition, capital controls could make the renminbi less attractive as an investment tool, further affecting the renminbi's role as a reserve asset, especially in developed countries, which could exacerbate the renminbi's status dilemma.
People's Bank of China
However, this does not mean that the renminbi's rise in status is not important.
The global trade landscape is changing in the international context, especially in the context of the Western world's efforts to reduce risks towards China. The role of the renminbi in the international financial market has become increasingly prominent, which is conducive to the stable development of the mainland in a complex and volatile international environment.
In recent years, the mainland government has actively promoted the internationalization of the renminbi and achieved certain results, and the international status of the renminbi will help mainland enterprises reduce exchange rate risks and improve international competitiveness in the context of the gradual transformation of global trade.
With the gradual relaxation of capital controls, the participation of the renminbi in the international capital market continues to increase, which will help attract foreign investment, promote the globalization process of the mainland capital market, and enhance the stability of the mainland financial system.
In the context of the adjustment of the global trade pattern, the cooperation between the mainland and neighboring countries and emerging economies has become more and more close. The internationalization of the renminbi is conducive to reducing trade settlement costs, improving trade facilitation, and further promoting regional economic integration.
The development of China's economy
As the world's second-largest economy, the continent today has a responsibility to participate in global financial governance and contribute to global economic development. The internationalization of the renminbi has enabled the mainland to have more say in international financial governance, which is conducive to promoting the reform and improvement of the international financial system.
In recent years, with the deepening of global economic integration, the position of China's manufacturing industry in the global industrial chain has become increasingly prominent. In particular, Southeast Asia and other places have gradually become important bases for assembling Chinese goods into final products, which in turn are shipped to the United States and other parts of the world. In this process, the international status of the renminbi has also been continuously improved, indicating that the prospects for the export of Chinese components denominated in renminbi to these regions are very broad.
First of all, we need to see that Southeast Asia and other places have unique geographical advantages and have become important hubs for the assembly and export of Chinese goods. These areas are not only rich in resources and large populations, but also have relatively low labor costs, which makes it highly economical for enterprises to invest and build factories here. At the same time, the trade between the mainland and Southeast Asia and other countries is getting closer and closer, and the infrastructure interconnection is constantly improving, which provides a strong guarantee for the development of the assembly industry.
Secondly, with the continuous development of the mainland's manufacturing industry to the high-end, the technical content and added value of parts and components exports are also constantly improving. This has made more and more countries and regions willing to accept the renminbi as a settlement currency, thus promoting the renminbi's rising position in the international market.
The improvement of China's manufacturing industry
It is foreseeable that in the future, it will be more convenient for Chinese parts and components denominated in RMB to be exported to Southeast Asia and other regions, which will have a far-reaching impact on the mainland's foreign trade and investment.
In addition, the internationalization of the renminbi will help reduce the risk of exchange rate fluctuations and promote economic cooperation between the mainland and Southeast Asia and other regions.
As the renminbi becomes more widely used in cross-border trade and investment, enterprises can respond more flexibly to exchange rate fluctuations and reduce operating costs, while the improvement of the international status of the renminbi will also help the mainland play a greater role in global financial governance and provide strong support for the economic development of the mainland and Southeast Asia.
Finally, some intermediary countries will choose to hold higher renminbi reserves because of their close trade with China. This will help to enhance the influence of these countries in the international financial markets and give them more say in the fields of trade, investment and finance. At the same time, it will also help the mainland stabilize the RMB exchange rate in the global financial market and promote the internationalization of the RMB.
The continent has always occupied an important position in the global trading system, especially in foreign trade and exports, but in recent years, the political fragmentation of global trade has become more and more serious, and this trend has begun to spread to the field of payment systems.
China's foreign trade
Some analysts believe that this situation may have a far-reaching impact on the economic and financial stability of Asia and other regions in the next few years.
In the current international trade environment, some countries led by the United States have adopted unilateralist and protectionist policies for political purposes and exerted trade pressure on other countries, especially the mainland, which has led to challenges to the international trade order and affected payment systems.
Because the payment system is an important infrastructure for international trade, political interference is likely to affect the normal operation of global trade.
The payment system is the cornerstone of the global financial system, involving cross-border payments, currency exchange and other aspects, when the payment system is affected by political factors, it may lead to the blockage of capital flow and exacerbate the volatility of financial markets.
In Asia in particular, many countries have imperfect financial systems that are more vulnerable to external shocks: if a payment system fails, it can trigger regional financial risks, even global repercussions.
The influence of the continent in the Asian region
In the context of economic globalization, regional integration has become an important strategy for the development of all countries, but the fragmentation of the payment system has made the process of regional integration more difficult. For example, in the Asian region, some countries are actively promoting regional financial integration, but due to the political influence of the payment system, this process is constrained, which in turn affects the overall development of the Asian economy.
In the face of this challenge, the mainland should actively respond to it, safeguard its own interests, strengthen communication and cooperation with other countries, jointly resist trade protectionism, and safeguard the international trade order. On the other hand, it is necessary to accelerate the process of internationalization of the renminbi and enhance the mainland's position in the global payment system.
In addition, it is necessary to strengthen the construction of the domestic financial system and improve the ability to prevent financial risks.
In short, in the context of the spread of global trade politics into the payment system, which could have far-reaching implications for Asia and beyond, countries should work together to maintain the international trade order and financial stability, and promote the process of economic integration. The mainland should also actively respond to the situation, safeguard its own interests, and contribute to the healthy development of global trade.
Family, what do you think?
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