The internationalization of the RMB: a perspective vis a vis East Asian economic and financial integration

Abstract

The People’s Republic of China has achieved remarkable progress in the internationalization of the RMB by introducing a number of concrete measures to boost the RMB’s status on the world stage since 2009. The ongoing RMB internationalization is being promoted under the background of deepening economic and financial integration in East Asia. In this article, we attempt to analyse RMB internationalization from the perspective of East Asian regional integration. We hypothesize that East Asian regional integration lays a broad foundation for China to push RMB internationalization forward. An internationalized RMB, we argue, will play more important roles in the process of East Asian regionalization. Thus, RMB regionalization could be an important and necessary step of internationalization. The Chinese authorities should not only push the RMB toward internationalization under China’s framework of domestic financial system reform, but they should also integrate RMB internationalization into the process of East Asian economic and financial integration. Therefore, a win–win strategy of RMB internationalization for both China and East Asian countries is needed.

Keywords:

• China
• East Asia
• integration
• PRC
• regionalization
• RMB

Notes

1. Dim Sum bond is the RMB-denominated bond issued in the Hong Kong SAR; Panda bond is the Chinese RMB-denominated bond from the non-Chinese issuer, sold in Mainland China.

2. There are five currencies in the SDR’s basket: the US dollar (41.73%), the euro (30.93%), the RMB (10.92%), Japanese yen (8.33%) and the pound sterling (8.09%).

3. On 11 August 2015, the PBoC announced they would improve the quotation of the central parity of the RMB against the US dollar for the purpose of enhancing the market-orientation and benchmark status of central parity.

4. ASEAN + 3 includes 10 ASEAN countries: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam, and China, Japan and Korea.

5. EMEAP, the Executives’ Meeting of East Asia-Pacific Central Banks, is a cooperative organization of central banks and monetary authorities. It includes Reserve Bank of Australia, People’s Bank of China, HKMA, Bank Indonesia, Bank of Japan, Bank of Korea, Bank Negara Malaysia, Reserve Bank of New Zealand, Bangko Sentral ng Pilipinas, Monetary Authority of Singapore and Bank of Thailand.

6. The RMB exchange rate policy was mentioned at the 2016 China Central Economic Work Conference held on 16 December 2016. Its stated purpose was: ‘to increase exchange rate flexibility while maintaining RMB exchange rate stability at an appropriate equilibrium level’.