RMB internationalization benefits whole world

BEIJING - The internationalization process of China's currency has made a new stride forward during the ongoing World Economic Forum annual meeting, with Beijing and Bern inking a deal to expand financial cooperation.

Under the agreement, signed Wednesday in the Swiss ski resort of Davos, China gives Switzerland an $8 billion investment quota under its Qualified Foreign Institutional Investor program, and the two sides plan to open a Chinese bank in Zurich for future renminbi clearance.

With China having become a leading economy and trading power, the renminbi's cross-border settlement has been surging. Official figures show that the volume shot up from an equivalent of 580 million dollars in 2009 to 1.3 trillion dollars in the first 10 months of 2014.

A report released last November by Belgium-based global payment services company SWIFT ranked the renminbi as the seventh payments currency in the world. In 2011 it ranked the 21st.

China is moving steadily along the path of renminbi internationalization, following a strategy described as "crossing the river by feeling the stones." So far 12 cities, including Hong Kong, London, Paris and Sydney, have officially announced the establishment of an offshore renminbi center.

The benefits are clear. For Chinese banks, the process provides a strategic opportunity to follow their clients abroad and develop their international payments clearing business.

Chinese companies, especially small- and medium-sized ones, can use the renminbi for cross-border trade instead of a foreign currency, thus reducing its foreign exchange costs and risks.

For foreign companies, the process will facilitate their business with more Chinese enterprises, helping increase the overall size of trade, diversify their assets, and hedge against depreciation of one currency.

Analysts described the path of the renminbi internationalization as a three-phase process: using the currency first for trade, then for investment and in the longer term as a reserve currency.