For Beijing, a long, slow path in bid to internationalise the RMB

July 16, 2020

HONG KONG -- As Chinese officials step up their rhetoric towards reducing USD reliance, some positive developments can be detected in the international use of RMB, global financial group Natixis says in a new research report.

It says RMB settlements have seen a slight pick-up after a reversal since 2015, and that this is particularly true for trade in services, more than for trade in goods and for investment.

"The least use is for outward FDI."

Natixis says onshore RMB assets held by overseas investors have rebounded, but official reserves in RMB remain very limited.

"Higher RMB equity and bond assets held by non-residents are driving up total RMB asset holdings as China continues to open up its financial markets and enters international investment indices," the Natixis report says.

"However, RMB loans and deposits held by overseas institutions remain minimal.

"The international use of the RMB as a unit of account remains very limited except for RMB-denominated oil futures, which have maintained resilient market share.

"Offshore corporate bonds denominated in RMB continued to grow steadily, from a very low base, in 2019, but have slowed in 2020 due to the pandemic shock.

"Offshore Government bonds have also stabilised in early 2020.

"(But) only Hong Kong, from all existing RMB offshore centres, has slightly increased its CNH deposits." (ATI).