Introduction
ASEAN Countries have close economic and trade exchanges with China. In recent years, regional connectivity has been continuously developing, further increasing the cross-border payment demand of RMB, and providing new opportunities for the use of RMB in the region. In the future, with the advancement of financial infrastructure construction and transaction facilitation measures, we must continue to tap the potential of local currency use, develop the local currency bond market, and explore the possibility of digital RMB pilot in cross-border use of RMB.
Author: Gao Haihong
Director of the International Finance Research Center of the Institute of World Economics and Politics, Chinese Academy of Social Sciences
Researcher of the National Global Strategy Think Tank
After years of development, the RMB has been spontaneously used in the early border trade to later mutual promotion of policy support and market-driven, and its international use has been continuously improved. ASEAN countries have close economic and trade exchanges with China, especially in recent years, regional connectivity has been continuously developed. , the , the of the , was launched last year, and the China-Thailand high-speed railway has begun to be built. Recently, China and Vietnam signed a statement to launch railway convergence. This series of substantive measures further increase the demand for cross-border payment of RMB and provide new opportunities for the use of RMB in ASEAN countries.
The "2022 RMB Internationalization Report" released by the People's Bank of China shows that as of the end of 2021, the cross-border RMB collection and payment amount reached 36.6 trillion yuan, a record high. Cross-border RMB collection and payment between China and ASEAN countries also showed a steady growth momentum. According to the statistics of the "2022 RMB ASEAN Countries Use Report", in 2021, the cross-border RMB collection and payment amount between China and ASEAN countries reached 4.82 trillion yuan, and increased by 16% year-on-year. Among them, the total amount of RMB cross-border payments under direct investment in ASEAN countries was 609.42 billion yuan, an increase of 43.5% year-on-year.
As a reserve currency, in 2022, the weight of the RMB in the International Monetary Fund (IMF) Special Draw Rights basket currencies has been increased for the first time since October 2016. At the same time, the proportion of RMB holding among IMF members has now reached 2.9%. Malaysia , Singapore, Thailand, Indonesia , Cambodia and Philippines 6 ASEAN countries have included the RMB in foreign exchange reserve . As the world's third largest foreign exchange trading center, offshore RMB foreign exchange futures trading on Singapore exchange has also attracted the participation of government, international financial institutions and private investors, and the transaction volume continues to increase.
Image source: Xinhua News Agency
RMB The use of RMB ASEAN countries is constantly increasing, thanks to the construction of a convenient RMB clearing system. The People's Bank of China early built a RMB clearing system and deployed clearing bank globally, laying the foundation for overseas clearing of RMB. Currently, Singapore, Malaysia, Thailand and the Philippines have all set up RMB clearing bank arrangements. The RMB cross-border payment system (CIPS) has also achieved full coverage of ASEAN countries. In 2021, ASEAN countries added 16 new financial institutions to become indirect participants in CIPS. CIPS handled 5.2609 million cross-border RMB business in China-ASEAN , with an amount of 3.3 trillion yuan.
Cooperation between central banks and has played an important role in promoting bilateral monetary relations. As of the end of 2021, the People's Bank of China signed a bilateral local currency swap agreement with central banks or monetary authorities in 40 countries and regions including Malaysia, Indonesia, Singapore, Thailand and Laos , with a total amount exceeding 4.02 trillion yuan and an effective amount of 3.54 trillion yuan. The bilateral local currency swap agreement provides liquidity support to the financial system of both parties and meets the needs of enterprises and financial institutions on both sides to use RMB in cross-border trade and investment. Recently, the People's Bank of China and the Bank of International Settlements (BIS) signed an agreement on the RMB Liquidity Arrangement (RMBLA). The first parties include Indonesia, Malaysia, the central bank of Chile and Hong Kong, the Monetary Authority of Singapore . This agreement aims to provide RMB liquidity support and is another measure to cooperate between the central bank and to build a global financial security network.
ASEAN countries have made new attempts in exploring bilateral settlement models.For example, in March 2021, the People's Bank of China and the State Bank of Cambodia signed a bilateral local currency cooperation agreement, expanding the scope of local currency settlement to all regular and capital transactions that the two countries have liberalized, and allowing non-Chinese overseas banks to participate in regional interbank market transactions. This is the first case in the country. For example, in September 2021, the People's Bank of China and Indonesian Bank launched the China- Indonesian local currency settlement (LCS) cooperation framework, and simultaneously launched regional transactions of RMB/Indonesian Rupee interbank market. Under the LCS framework, Chinese and Indonesian companies can use their local currencies or the other party’s currencies to conduct cross-border payments, especially Indonesian companies can freely use the RMB for their settlement with third-party trading partners. This is a new attempt for the RMB to play the role of third-party currency in trade settlement.
Image source: Xinhua News Agency
The above measures for financial infrastructure construction and transaction facilitation have reduced the transaction costs of RMB in overseas markets, increased the willingness of market entities to use RMB, and reflected the benign interaction between policy support and market-driven. These measures can greatly improve the basic environment for cross-border use of the RMB and enhance the attractiveness of the use of the RMB market.
Southeast Asia is the region with the most real demand for RMB use. According to customs statistics, in the first 10 months of this year, China's total trade with ASEAN reached US$5.26 trillion, accounting for 15.2% of China's total foreign trade, and ASEAN is China's largest trading partner.
China's central position in the regional industrial chain also helps the RMB to play its trade and investment pricing functions. At the same time, with the help of regional cooperation institutional arrangements, such as the " Regional Comprehensive Economic Partnership Agreement " (RCEP) and the Chiang Mai Initiative Multilateral Mechanism (CMIM), the use of local currencies, including the RMB, can be enhanced. The improvement of regional use of the local currency will in turn further promote the development of regional trade and financial integration.
Image source: Visual China
Developing the local currency bond market is an effective way to promote regional use of local currency. According to statistics from Asian Development Bank , in the first quarter of 2022, the outstanding amount of RMB bond , including government bonds and corporate bonds in mainland China, was US$18.755 trillion, accounting for 79.9% of the total outstanding amount of in emerging economies in Asia. It has become a consensus among Asian countries to encourage local currencies to be used for intra-regional trade, investment and crisis relief, improve regional resource mismatch, promote the effective conversion of savings into intra-regional investment, make up for regional investment gaps, and improve regional economic growth potential. In this regard, the RMB will play a core role. At present, A shares have been included in the Morgan Stanley International Capital (MSCI) index, and RMB bonds have been included in the Bloomberg Barclays Global Comprehensive Index; the RMB bond market is ranked second in the world; the issuance of RMB green bonds has a global leading role. These will help the market development of RMB bonds, which will bring new asset allocation opportunities to the Asian region and form a benign interaction with the use of RMB. The application of the digital RMB pilot in the cross-border circulation of RMB is also worth exploring. The People's Bank of China is in the world's leading position in the research and development and practice of central bank digital currency . Internationally, the central banks and the international financial organization have also actively explored international cooperation in the field of cross-border payments of digital currency . Although cross-border use is not the original intention of digital RMB research and development, with the expansion of payment channels, it is reasonable to extend the use of currency to other functions.
Image source: China Daily
The English version of this article is titled "Overseas pay way"
Editor: Song Ping Xin Xin
Editor: Zhang Zhao
Source: Tencent WeChat
