The world’s largest free-trade agreement involving China and 14 other Asia-Pacific countries sets the stage for greater yuan internationalisation, according to a top banking executive, who says Hong Kong can play “super connector” role among members for yuan-related financial activity.
Li Haiying, managing director of renminbi business at the Bank of China (Hong Kong), said the Regional Comprehensive Economic Partnership (RCEP) had enhanced economic ties between China and other members.
“RCEP has lowered the entry threshold for financial markets, which helps expand the use of the renminbi,” Li told the South China Morning Post, using the official name of China’s currency.
The RCEP free-trade agreement covers nearly a third of the global population and about 30 per cent of global gross domestic product, though this is expected to rise to 50 per cent by 2030. 10 Association of Southeast Asian Nations (Asean) members plus Australia, China, Japan, New Zealand and South Korea have signed onto the deal.
Since it came into effect at the start of the year, Li said some RCEP members have increased their yuan reserves, while others have established bilateral swap arrangements, like the one launched between China and Indonesia in September.
China has for years sought to increase global use of the yuan and has trillions of dollars worth of yuan currency swap deals in place. The issue of yuan internationalisation has taken on more urgency amid the threat of financial decoupling from the United States, a potential risk highlighted by Western sanctions on Russia for its invasion of Ukraine.
Li’s comments on yuan internationalisation come after the Ministry of Finance held its largest offshore yuan sovereign bond sale in six years last month, auctioning off 7.5 billion yuan (US$1.1 billion) worth of debt in Hong Kong.
The offering was a test of market appetite at a time when foreign investors have been cutting exposure to Chinese assets, amid unpredictable regulatory campaigns and economic pain caused by Beijing’s zero-Covid policy.
Under RCEP and the Belt and Road Initiative, Li said Hong Kong can play a “super connector” role for yuan-related financial activities.