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The internationalisation of RMB: challenges and opportunities

by Agnes Vargas, Regional Head Greater China & ASEAN, Commerzbank

Since the launch of the cross-border trade settlement scheme in 2009, the liberalisation of the Chinese currency, the renminbi (RMB), has been a hot topic for the financial industry. This liberalisation has been an evolutionary process, although one executed at a clip that is both impressive and a concern for treasurers perhaps caught unaware by the changes. And, given that there is little sign of a relaxation in the speed of progress, the need for corporate treasurers – as well as the banks that service them – to stay abreast is becoming more acute than ever.

That said, thus far corporates have responded well to the liberalisation. Many observers now expect around 20% of Chinese trade to be settled in the local currency by 2015, a figure unimaginable at the beginning of the liberalisation process (given historically-stringent regulations). And then there is the fact that daily RMB trade has tripled to US$120 billion in the past three years.

Certainly, the RMB’s internationalisation now appears to be irreversible. New reforms are emerging regularly, with fresh regulations and pilot schemes being announced almost on a monthly basis. And while these are obviously strong opportunities for companies able to take advantage of the reforms, they also present adoption and operational issues for corporate treasurers.

Proactivity is the key. Corporate treasurers need to be on top of the changes, and even predicting (and preparing for) the reforms to come. In this respect, working with a strong banking partner – well aware of the changes and how they impact trading and investing companies – will be crucial. In this respect, RMB internationalisation offers a potentially major shift in the global financial markets, forcing banks to re-establish their market positions with services and products that can help corporates make the most of the burgeoning opportunities. And for the most innovative and forward-thinking banks, this shift will provide a huge opportunity to grab market share – at the expense of those that fail to plan ahead.