Treasury Markets and Operations

CHAPTER 8 RMB Payments and Settlements

  Learning  objectives  

After studying this chapter, you should be able to:

1. Understand and explain the evolution of the use of the Renminbi in trade end investment in Hong Kong.
2. Discuss the operations of the RMB Real Time Gross Settlement (RTGS) system and how it has evolved.
3. Explain the role of Hong Kong as a gateway for the RMB on international markets.

Introduction

After adopting a managed floating exchange rate regime in 2005, China is taking significant steps to internationalize its currency: the renminbi. Hong Kong has emerged as the beachhead of this push to turn the RMB from a heavily controlled and strictly domestic currency into one used in international trade. At the end of 2012, there were more than 7,000 enterprises from Mainland China and overseas that leveraged the city’s unique connection to Mainland China to streamline their businesses. Almost a third of China’s trade is intermediated through Hong Kong as offshore trade or re-exports.

Although at the time of writing the RMB still accounts for a small fraction of international trade, the growth in the use of the RMB is nothing short of spectacular, one that matches China’s economic growth. China’s GDP jumped from USD400 billion in 1990 to more than USD7 trillion in 2011. By 2017, China should account for about a third of total global economic growth, according to the International Monetary Fund. So the RMB is increasingly used in trade and investment on the international ...