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RMB Internationalisation: Can the Belt and Road Revitalize the RMB?

Core Content

The document discusses the internationalisation of the renminbi (RMB) and highlights five key enablers that support its global adoption. Despite a reported slowdown in the use of RMB for international payments, the RMB continues to gain traction in certain regions and through specific mechanisms.

Key Enablers of RMB Internationalisation

1. The Belt and Road Initiative (BRI)

   • The BRI is a significant driver of RMB internationalisation by promoting trade and investment between China and participating countries.
   • It facilitates the use of RMB in cross-border transactions, especially in South East Asian countries along the Maritime Silk Road.

2. China's Cross-border Interbank Payments System (CIPS)

   • CIPS is designed to support RMB payments between Chinese and foreign financial institutions.
   • It enhances the efficiency and security of cross-border RMB transactions, contributing to broader connectivity.

3. Hong Kong's Role as an Essential RMB Intermediary

   • Hong Kong plays a crucial role in RMB internationalisation, acting as a major hub for RMB transactions.
   • In 2017, 49.4% of all RMB payments transited through Hong Kong, with its share of RMB activity reaching 76%.

4. Relaxation of Capital Market Controls

   • China has gradually relaxed its capital market controls, which has encouraged foreign investment and increased the attractiveness of the RMB as an international currency.

5. FinTech's Contribution to RMB Connectivity

   • Financial technology innovations are playing a vital role in improving the last-mile connectivity of RMB transactions.
   • These innovations support faster and more transparent cross-border payments, enhancing the RMB's usability globally.

Key Statistics

• RMB Usage in International Payments: In June 2017, the RMB ranked #6 among global payment currencies, with its share of international currency payments falling from 2.09% in June 2015 to 1.98% in June 2017.
• Number of Financial Institutions Using RMB: Over 1,900 financial institutions worldwide used the RMB for payments as of June 2017.
• Institutional Growth: Nearly 1,300 of these institutions made RMB international payments with China or Hong Kong, representing a 16% increase from June 2015.
• US Dollar Dominance: Despite RMB's growth, the US dollar remains the dominant currency for payments to China, with 98% of payments from the US to China being in USD.
• RMB Share in Other Countries: The RMB's share of international payments is generally low (1–2%) in most countries, except Taiwan, where it reached 15%.

SWIFT's Role in RMB Internationalisation

• SWIFT Support: Since 2010, SWIFT has actively supported the internationalisation of the RMB through publications, reports, and collaboration with financial institutions.
• RMB Tracker: The SWIFT RMB Tracker provides insights into RMB usage trends, offering data on customer-initiated payments and institutional transfers.
• Technology and Services: SWIFT supports RMB transactions through its messaging platform, enabling the use of Chinese characters in financial messages.
• SWIFT gpi Service: Major Chinese banks are investing in SWIFT gpi, which offers a same-day payment experience globally. Over 110 banks are part of the initiative, with 16 in China.

Conclusion

While the RMB's usage in international payments has slowed, the five key enablers—BRI, CIPS, Hong Kong's intermediary role, relaxed capital controls, and FinTech innovation—continue to support its internationalisation. SWIFT plays a pivotal role in facilitating this process by providing secure messaging services and business intelligence, enabling Chinese financial institutions and corporations to connect with the global economy more effectively.