Rani Jarkas — Renminbi to Rise as a Major International Currency
So many signs have been pointing to the fact that renminbi (RMB) is all set to become a globalized currency.
Rani Jarkas, Chairman of Cedrus Investments, a global boutique investment firm headquartered in Hong Kong, believes that the rise of the renminbi as a major international currency will be a great achievement for China in several ways. However, RMB still continues to struggle to reach its full potential. What’s the reason behind it?
Instead of asking why the renminbi (RMB) of China should become a global currency, it’s more of a question when, says a professor at the Chinese University of Hong Kong Business School.
Prof. Jason Yeh, associate professor at the Department of Finance, who’s researched the progress and prospects of RMB becoming a reliable globalized currency said, “People might have doubts as to the suitability of China’s currency, but internationalization of the RMB is an inevitable progression for an international economic power.”
He notes, China is the world’s largest exporter and manufacturer as well as its second largest economy. Yet its currency, which is still carefully managed by the Chinese government, has a market share well behind the U.S. Dolalr and the euro, and is barely traded on foreign exchange markets. But volumes are climbing steadily and all signs point towards the RMB gaining greature stature as a stable reserve currency.
Prof Yeh said, “According to data monitored by chief economists of investment banks in Hong Kong, who have examined the internationalization process, they believe the RMB will soon surpass the Japanese yen to become the fourth largest payment currency in 2020.”
China already began to break up its control over its financial markets and progressively open up access to its onshore markets. In 2007, the Chinese government began issuing RMB-denominated notes, bonds and funds, which are known as “dim sum bonds” in Hong Kong. Two years later, companies in Mainland China have been able to accomplish cross-border trade in RMB.
Rani Jarkas acknowledges that volumes of trade in RMB on foreign exchange markets at present are comparatively low. Investors would greatly reap benefits from a wider range of financial instruments.