RMB internationalisation: key developments over the next 12 months

Andrew Malcolm, Hong Kong partner and Head of Linklaters' Capital Markets Group in Asia, was a guest speaker at the RMB Forum organised by Luxembourg for Finance, where he shared his insights on the Financial Reform in China.

When asked about key developments to be expected over the coming 12 months regarding the internationalisation of the renminbi, Andrew Malcolm identified the two following as "potential game-changers":

1. The launch of the China International Payments System (CIPS)

First announced in 2012, the latest news – in March 2015 - indicated that the system could be rolled out before the end of the year. According to Andrew, "CIPS should establish the settlement of offshore renminbi as safe and routine, putting it alongside such familiar systems as TARGET for the euro and Fedwire or CHIPS for the US dollar. It will in time replace the current use of offshore settlement banks – Hong Kong is still the major offshore settlement centre, but there are now some 14 designated offshore renminbi settlement banks across the world”.

2. The realisation of a 'convertible' renminbi

This implies, explains Andrew, the "relaxation of capital controls so that the renminbi will no longer be thought of as 'tightly controlled', and the distinction between the offshore and the domestic currency will be much reduced”.

Taking these developments together, Andrew finds that "there is the potential to transform the place of the renminbi in the world financial system by greatly increasing both its ease of use and settlement and the uses to which it can be put.” Perhaps the most important point, however, for banks and businesses is that these developments are imminent.