Chan Kung, chief researcher at leading Chinese private think tank Anbound, tells GlobalRMB that the excessive caution of onshore authorities has made the pace of RMB internationalization far from ideal.
By Paolo Danese
How do you assess the progress of the RMB internationalization agenda?
The internationalization of the renminbi was suggested by Anbound, as far back as the end of the last century and around the time when China entered the WTO.
We wrote in the Economic Daily on December 4, 1998: "Recently, the debate of whether the RMB should be internationalized is very fierce. Some officials pointed out that there is no timetable for the internationalization of the RMB. But Anbound analysts believe whether the RMB can be or should be internationalized is not the focus of the debates at all. [The] renminbi must be internationalized, and it must be unswervingly so. How can a big country exert its influence without an internationalized currency? How can it enjoy the benefits of international influence?"
However, over the years, the progress has been very slow. RMB internationalization was used as an excuse to support other policies, or otherwise ignored.
As a result, the internationalization of the RMB is not making the desired progress. In 2001, when China joined the WTO, China's total import and export volume was $509.8bn and by 2017 it reached $4.4tr. However, if we compare China's foreign trade development with RMB internationalization, it is clear there has been very little progress. The policy remains conservative, with regulators approaching the RMB internationalization agenda with worry and caution. So the pace has been far from ideal.
What are the prospects for the further opening up of the Chinese capital markets?
Prospects for the further opening of China's capital market remain uncertain.
On the one hand, China wants further openness, from the opening up of the manufacturing sector to the capital markets. It is an inevitable process to require a large amount of foreign capital [to be] injected to help stabilize the RMB exchange rate, so this need is essential in reality.
On the other hand, China is now facing greater external pressures. The US-China trade friction has been affecting the injection of foreign capital and brings uncertainty. Foreign investors will adopt a cautious attitude in the coming months, but they will gradually enter China's capital markets nonetheless.
How crucial was the launch of Bond Connect to the opening of the Chinese capital markets?
This trading channel has become increasingly popular and scaled-up as it has improved the ease of trading compared to other methods. For Hong Kong, the bond market is a great addition to the existing money market, which has consolidated its position as one of the top financial centres. And for China, the internationalization of the bond market is conducive to stabilizing and improving China's financial structure.
What about Panda bonds?
Normally, Panda bonds are attractive for Chinese investors as China is actually in a state of excess capital. However, the relationship between Panda bonds and other Chinese bonds is complicated. Due to China's current financial clean-up, industry rectification and issues around bond defaults, I do not expect the growth of the Panda bond market to accelerate significantly in the short-term.
Media link: https://www.globalcapital.com/article/b195yy1thg36y6/qampa-with-anbound-rmbi-is-falling-behind
