Tuesday, 25th September 2012
The Connecting Dots of China’s Renminbi Strategy: London and Hong Kong
Source: Chatham House
China’s attempts to internationalize the renminbi (RMB) have significant implications for the international monetary system and for economies across the world.
China’s RMB strategy is based on two tracks: the use of the RMB in cross-border trade settlement and the creation of an RMB offshore market.
A series of policy measures has been introduced since 2009 to facilitate the expansion of the nascent RMB offshore market and to overcome the constraints of the currency’s limited convertibility.
Development of the offshore market depends on the supply of liquidity provided by Beijing. At present this market is limited in both size and scope, and funds flow from and to the Mainland mainly through the intermediation of Hong Kong.
Hong Kong benefits from being the first mover and from being part of China, but with a separate legal and institutional system. For the time being it will continue to be the main conduit to the onshore market.
Offshore centres such as Hong Kong and offshore hubs such as London and Singapore are both complementary and essential to China’s RMB strategy. They are the connecting dots in the expanding RMB offshore market.
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By Adrian Janes
Having begun his career in academic libraries, Adrian Janes has subsequently worked extensively in public libraries, chiefly in enquiry work as an Information Services librarian. In this role he has had particular responsibility for information from both the UK Government and the European Union. He wrote a detailed report on sources for the latter which was published by FreePint in 2007, and has contributed articles to FreePint and ResourceShelf. He is involved in training in information literacy and the use of online reference resources.
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