RMB goes global, SDR entry milestone

In an article published last week on the flagship People's Daily which mainly reflects views from the leadership, central bank governor Zhou Xiaochuan pledged to make the RMB a convertible, freely usable currency when expounding China's financial reform agenda in the next five years.

The senior policy maker, however, warned in the same article against any possible financial attacks or sanctions from overseas in some extreme circumstances.

He expected the share of RMB use in cross-border trade settlement will exceed one third by 2020, and the yuan will become an international currency by that time.

As the regulator grants wider access for foreign financial institutions to the domestic interbank bond market and the onshore interbank foreign exchange market, China also encourages more domestic funds to invest overseas by trying out the scheme of qualified domestic individual investors II (QDII) in big hubs such as Shanghai.

In a press conference on Tuesday, PBOC Vice Governor Yi Gang said the yuan's SDR entry is not the end of the story, adding that China is committed to cementing the yuan's position as a global currency.

Key Efforts in 2015

On July 14, the central bank granted access for foreign central banks, sovereign wealth funds and international financial institutions to the domestic interbank bond market and further opened the onshore interbank foreign exchange market to such institutions on Sept. 30.

On Aug 11, the PBOC reformed the country's exchange rate formation mechanism to allow the central parity rate of the yuan to better reflect the market rate.

On Oct 8, the first phase of the Cross-border Interbank Payment System (CIPS), which provides capital settlement and clearing services for cross-border yuan transactions for financial institutions, was launched in Shanghai, promoting the global use of the Chinese currency.

On Oct 20, the PBOC extended an agreement on a reciprocal currency swap scheme with the Bank of England to promote London as an offshore RMB center. Meanwhile, the PBOC also issued its first offshore RMB note in London.

On Oct 24, the central bank scraped the ceiling limits on all deposit interest rates, marking the completion of interest rate liberalization.