A bank employee counts Chinese renminbi, or yuan, notes next to US dollar bills at Kasikorn Bank in Bangkok, Thailand, January 26, 2023.
Athit Perawongmitha | Reuters
Dalian, China – For China yuan In order to be used more globally, the currency needs more “applications” such as stocks and bonds, Bonnie Chan, chief executive of Hong Kong Exchange and Clearing Limited, told a committee on Tuesday.
Beijing has long touted its ambitions to increase global use of the Chinese yuan – also known as the “renminbi” or “renminbi” – in an international financial market where U.S. dollar It is the dominant currency. US sanctions on Russia have also increased pressure on some countries to obtain alternatives to the US currency.
Speaking at the World Economic Forum's Summer Davos meeting in Dalian, China, Chan noted that people hold currency for trade, or more importantly, as a store of wealth.
“We won't just keep a bunch of renminbi and put it in this bank account,” she said. “You want to have bonds, you want to have stocks, etc.”
“One of our strategic imperatives has changed to ensure that we continue to produce more RMB-denominated security products, so that investors around the world can see more applications of the RMB and be able to use it,” Chan said. “That is a way to store wealth in the form of renminbi.”
Last year, the Hong Kong Stock Exchange announced a “dual counter” program that allows investors to trade Hong Kong-listed securities in Hong Kong dollars or Chinese yuan.
In an important step towards the internationalization of the yuan, the International Monetary Fund announced in 2015 that it would add the yuan to the basket of reserve currencies the following year.
The yuan was the fourth most active currency for global payments by value in May, accounting for nearly 4.5% of such transactions, according to the SWIFT interbank messaging network. The share of the US dollar was approximately 48%.
In trade finance, the yuan ranked third at about 5.1% in May, according to SWIFT. the euro The data showed a slight increase at 5.6%, while the US dollar dominated with a share of approximately 85%.
Fred Ho, founder, chairman and CEO of Primavera Capital, said at the same panel on Tuesday that the internationalization of the yuan would likely take longer than many expect, despite the increased volume of announcements from Beijing.
While China is the largest trading nation and has major financial centers, “we are not as large and deep as the United States,” Hu said. “Besides, our capital account is also closed, it is not fully convertible, which in a way also hinders the internationalization of the renminbi.”
Mature financial market
Developing more RMB-denominated investment products also requires the maturity of the domestic financial sector. Part of that involves having a more sophisticated investor base.
During the annual Lujiazui Financial Forum in Shanghai last week, nearly every conversation with senior leaders included the term “patient investment,” Chan said.
This phrase appeared in official publications to encourage long-term investment over short-term speculation.
“Patience comes from learning through market volatility,” Kenny Lam, CEO of Two Sigma Asia Pacific, said during the same seminar on Tuesday.
Policymakers are thinking more about making their policies more stable and consistent, he said.
Waiting for more Chinese IPOs
Chinese companies have long sought to tap US financial markets for the greater market prestige and liquidity they offer, but increasing regulatory scrutiny by both Beijing and Washington, D.C., has slowed such listings dramatically in the past three years.
“I think IPOs are essential to attract investors back into the market,” Jonathan Krane, founder and CEO of KraneShares, said in a panel discussion. “All the stories around them show that there is a lot of progress happening.” Tuesday.
“In the United States, we see all this innovation, artificial intelligence and all these companies going public and doing well, and then in China, the same industry is happening, the same innovations are happening and these stories have to be told through the IPO market,” Crane said. We hear that the IPO market will “start to return.”
Last week, Chinese authorities announced a new effort to support initial public offerings, especially in Hong Kong.
So far this year, the Hong Kong Stock Exchange has received 73 new listing applications, an increase of 50% compared to the second half of last year, Chan said. “The pipeline is developing nicely,” she said, noting that about 110 IPOs in total are in the pipeline. “All we need is a combination of good market conditions for these things to launch and be priced well,” she added.
