Speech Summary Australia's RMB Policies and Future Direction
Introductory Remarks at the RMB Internationalisation Roundtable
The speech outlines the internationalisation of the renminbi (RMB), with a particular focus on the currency's impact and progress in Australia. It highlights the importance of the currency's internationalisation and the accompanying process of capital account liberalisation in China. The suggestion that this process could be one of the ‘seismic events’ in global capital markets over the coming years is reiterated. The speech then outlines the work that is being done in Australia to support the development of RMB business and suggests that for this market to flourish, Australian corporates must identify a clear business case for paying, receiving, lending, borrowing and investing in RMB.
From an Australian perspective, the speech remarks that more businesses are showing interest in having trade invoiced in RMB and that some common misconceptions are being eroded. However, it acknowledges that there is still significant potential for growth in RMB trade invoicing by both international and Australian firms.
Consideration is then given to the Bank's work in this area. Its focus on better understanding how the RMB markets operate is outlined. On the increased foreign currency reserves that the Bank invests in RMB, the speech suggests that this reflects the broadening financial relationship between China and Australia. Discussion also focuses on the bilateral local currency swap agreement between the Bank and the People's Bank of China (PBC). The key benefits of this swap are explained and the speech underlines that the swap is not meant to provide a ‘cheap’ source of RMB funding to the Australian market in normal times.
The speech then outlines future RMB clearing and settlement arrangements that the Bank and PBC are progressing. Consideration is given to the establishment of an ‘official RMB clearing bank’ in Australia. The role of clearing banks more widely is discussed, with an explanation that the differences between an official RMB clearing bank and existing channels are quite subtle. The speech suggests that the establishment of a clearing bank here would help to ensure Australia is well positioned to participate in the next stages in the process of RMB internationalisation. It then explains that work is underway to obtain a quota for Australian-based financial institutions to invest in mainland China under the Renminbi Qualified Foreign Institutional Investors scheme. It is noted that this would represent an important next step in facilitating cross-border RMB-denominated investment transactions between the two economies.
The speech concludes by noting that the Bank has focused on reducing potential impediments to the development of RMB business in Australia and that once such impediments have been removed, the development of the market will be up to the private sector.