News Feed Item

RMB to Be Key International Reserve Currency Within a Decade -- Centre for International Finance and Regulation

Major Changes Forecast for Chinese Bond and Equity Markets and Global Financial Flows

SYDNEY, AUSTRALIA -- (Marketwired) -- 03/25/14 -- The Centre for International Finance and Regulation (CIFR) today released a comprehensive academic research report into the internationalisation of the renminbi (RMB) and its implications for global financial markets.

Authored by Dr. Kathleen Walsh and Mr. Geoff Weir, both research fellows from CIFR, and Professor Barry Eichengreen from University of California Berkeley, the 125-page report includes in-depth analysis of the Chinese financial landscape as well as interviews with more than 100 Chinese companies. It concludes that in the near-to-medium term capital controls will be largely or completely lifted; borrowing and lending rates will be market-determined; the exchange rate will be market-determined and the RMB will become a significant international reserve asset.

Key insights from the report include:

  • RMB likely to become a major trade invoicing and settlement currency with implications for trade financing; FX markets and derivatives markets.
  • Chinese equity market likely to become the largest in the world within a decade, with a forecast market capitalisation of around US$30 trillion or almost 25% of projected world equity market capitalisation compared to a projected US$22 trillion (18%) for the US.
  • Chinese bond markets likely to become the second biggest in the world.
  • Capital inflows will surge as China becomes a core component of benchmark indices, as will capital outflows as Chinese domestic portfolios diversify.
  • RMB to be a significant global reserve currency, with RMB-denominated government securities likely to become the main alternative 'safe asset' to US Treasuries. This dual reserve asset future is projected to have a stabilising influence on global markets.

Geoff Weir said there would be winners and losers from the internationalisation of the renminbi:

"For example, markets that are already centres of offshore RMB expertise will experience strong growth in RMB-related financial flows and activity. On the flip side, as Chinese financial assets become major components of global equity and fixed income benchmark indices, they will do so at the expense of the assets of other countries -- in particular developed economies. Currencies and asset classes such as the Australian dollar and Australian resource stocks, which are used as 'proxy' trades to express views on China, will lose popularity."

Kathleen Walsh said that RMB trade invoicing offers many benefits for parties on both sides, but some constraints in both China and its trading partners identified in the survey they have conducted will need to be overcome.

"The costs of hedging foreign exchange risks would appear to be significantly higher in China than in many offshore financial centres, reflecting the greater liquidity and interbank connections offshore," she said. "This suggests that both parties can potentially benefit from RMB trade invoicing, but many markets have constraints that will need to be removed in order to reap the full benefits of greater RMB trade invoicing."

The report will be launched today at a Symposium in Sydney, where CIFR executives and research fellows will be joined by RMB experts from the Bank of China; the Reserve Bank of Australia; the Australian Treasury; Schrodersb; ANZ; the Australian Financial Markets Association; the Australian National University; the University of Auckland and the Chinese Academy of Social Sciences.

Company Logo

About the authors:
Geoff Weir
began his career in The Australian Treasury and the Reserve Bank of Australia. In 1991 he moved to the financial sector, working in London and Paris as a hedge fund strategist for Bankers Trust International and later for Moore Capital. In 1996 Geoff returned to Sydney to take up a position as Head of Global Fixed Income at BT Funds Management. In 2002 he moved to JBWere (now Goldman Sachs JBWere) where he worked as strategist on a global macro hedge fund. Geoff was appointed to the position of Director, Australian Financial Centre Forum, in September 2008. He has worked as a Research Fellow at CIFR since late 2012. Geoff has a First Class Honours degree in economics from Macquarie University in Sydney and a Master of Philosophy degree from New College, Oxford.

Dr Kathleen Walsh holds a PhD in Finance from the AGSM and a First Class Honours degree in Finance from Curtin University, WA. She has held senior finance academic positions at the University of New South Wales and the University of Sydney and currently holds an appointment as an Associate Professor of Finance at the Australian National University. Dr Walsh is well published in leading domestic and international journals and has been awarded several research prizes including the E. Yetton prize for best paper in the Australian Journal of Management. Dr Walsh has also been the recipient of several research grants including a large ARC linkage grant.

Barry Eichengreen is the George C. Pardee and Helen N. Pardee Professor of Economics and Professor of Political Science at the University of California, Berkeley, where he has taught since 1987. He is a Research Associate of the National Bureau of Economic Research (Cambridge, Massachusetts) and Research Fellow of the Centre for Economic Policy Research (London, England). In 1997-98 he was Senior Policy Advisor at the International Monetary Fund. He is a fellow of the American Academy of Arts and Sciences (class of 1997). Professor Eichengreen is the convener of the Bellagio Group of academics and economic officials and chair of the Academic Advisory Committee of the Peterson Institute of International Economics. He has held Guggenheim and Fulbright Fellowships and has been a fellow of the Center for Advanced Study in the Behavioral Sciences (Palo Alto) and the Institute for Advanced Study (Berlin). He is a regular monthly columnist for Project Syndicate. His books include Labor in the Era of Globalization, co-edited with Clair Brown and Michael Reich, Emerging Giants: China and India in the World Economy, co-edited with Poonam Gupta and Ranjiv Kumar, Fostering Monetary & Financial Cooperation in East Asia, co-edited with Duck-Koo Chung, What G20 Leaders Must Do to Stabilize Our Economy and Fix the Financial System, co-edited with Richard Baldwin, (e-book 2008), Rescuing Our Jobs and Savings: What G7/8 Leaders Can Do to Solve the Global Credit Crisis, co-edited with Richard Baldwin, (e-book 2008), Globalizing Capital: A History of the International Monetary System, Second Edition (2008), The European Economy since 1945: Coordinated Capitalism and Beyond (updated paperback edition) (2008), Bond Markets in Latin America: On the Verge of a Big Bang?, co-edited with Eduardo Borensztein, Kevin Cowan, and Ugo Panizza (2008), and China, Asia, and the New World Economy, co-edited with Charles Wyplosz and Yung Chul Park (2008).He was awarded the Economic History Association's Jonathan R.T. Hughes Prize for Excellence in Teaching in 2002 and the University of California at Berkeley Social Science Division's Distinguished Teaching Award in 2004. He is also the recipient of a doctor honoris causa from the American University in Paris.

About CIFR:
The Centre for International Finance and Regulation (CIFR) brings together leading Australian universities, research centres and financial organisations to assist the financial sector, government and regulators to meet emerging challenges and opportunities locally, regionally and internationally.

Supported by a consortium, including the Commonwealth and NSW Governments, CIFR provides a strategic link between academia, financial regulators, policy makers and industry. The Centre pursues a substantial agenda across three domains: world class research, policy input and engagement with industry.

Kristin Westlake
The Continuum Partner
Email: Email Contact
Tel: +61 416 219 358

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
SYS-CON Events announced today that Enzu will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Enzu’s mission is to be the leading provider of enterprise cloud solutions worldwide. Enzu enables online businesses to use its IT infrastructure to their competitive advantage. By offering a suite of proven hosting and management services, Enzu wants companies to focus on the core of their online busine...
In the next five to ten years, millions, if not billions of things will become smarter. This smartness goes beyond connected things in our homes like the fridge, thermostat and fancy lighting, and into heavily regulated industries including aerospace, pharmaceutical/medical devices and energy. “Smartness” will embed itself within individual products that are part of our daily lives. We will engage with smart products - learning from them, informing them, and communicating with them. Smart produc...
November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Penta Security is a leading vendor for data security solutions, including its encryption solution, D’Amo. By using FPE technology, D’Amo allows for the implementation of encryption technology to sensitive data fields without modification to schema in the database environment. With businesses having their data become increasingly more complicated in their mission-critical applications (such as ERP, CRM, HRM), continued ...
OnProcess Technology has announced it will be a featured speaker at @ThingsExpo, taking place November 1 - 3, 2016, in Santa Clara, California. Dan Gettens, OnProcess’ Chief Analytics Officer, will discuss how Internet of Things (IoT) data can be leveraged to predict product failures, improve uptime and slash costly inventory stock. @ThingsExpo is an annual gathering of IoT and cloud developers, practitioners and thought-leaders who exchange ideas and insights on topics ranging from Big Data in...
SYS-CON Events announced today that SoftNet Solutions will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. SoftNet Solutions specializes in Enterprise Solutions for Hadoop and Big Data. It offers customers the most open, robust, and value-conscious portfolio of solutions, services, and tools for the shortest route to success with Big Data. The unique differentiator is the ability to architect and ...
Join Impiger for their featured webinar: ‘Cloud Computing: A Roadmap to Modern Software Delivery’ on November 10, 2016, at 12:00 pm CST. Very few companies have not experienced some impact to their IT delivery due to the evolution of cloud computing. This webinar is not about deciding whether you should entertain moving some or all of your IT to the cloud, but rather, a detailed look under the hood to help IT professionals understand how cloud adoption has evolved and what trends will impact th...
SYS-CON Events announced today that Transparent Cloud Computing (T-Cloud) Consortium will exhibit at the 19th International Cloud Expo®, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. The Transparent Cloud Computing Consortium (T-Cloud Consortium) will conduct research activities into changes in the computing model as a result of collaboration between "device" and "cloud" and the creation of new value and markets through organic data proces...
SYS-CON Events announced today that Cloudbric, a leading website security provider, will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Cloudbric is an elite full service website protection solution specifically designed for IT novices, entrepreneurs, and small and medium businesses. First launched in 2015, Cloudbric is based on the enterprise level Web Application Firewall by Penta Security Sys...
In his session at 19th Cloud Expo, Nick Son, Vice President of Cyber Risk & Public Sector at Coalfire, will discuss the latest information on the FedRAMP Program. Topics will cover: FedRAMP Readiness Assessment Report (RAR). This new process is designed to streamline and accelerate the FedRAMP process from the traditional timeline by initially focusing on technical capability instead of documentation preparedness. FedRAMP for High-impact level systems. Early in 2016 FedRAMP officially publishe...
SYS-CON Events announced today that Roundee / LinearHub will exhibit at the WebRTC Summit at @ThingsExpo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. LinearHub provides Roundee Service, a smart platform for enterprise video conferencing with enhanced features such as automatic recording and transcription service. Slack users can integrate Roundee to their team via Slack’s App Directory, and '/roundee' command lets your video conference ...
Traditional on-premises data centers have long been the domain of modern data platforms like Apache Hadoop, meaning companies who build their business on public cloud were challenged to run Big Data processing and analytics at scale. But recent advancements in Hadoop performance, security, and most importantly cloud-native integrations, are giving organizations the ability to truly gain value from all their data. In his session at 19th Cloud Expo, David Tishgart, Director of Product Marketing ...
Kubernetes, Docker and containers are changing the world, and how companies are deploying their software and running their infrastructure. With the shift in how applications are built and deployed, new challenges must be solved. In his session at @DevOpsSummit at19th Cloud Expo, Sebastian Scheele, co-founder of Loodse, will discuss the implications of containerized applications/infrastructures and their impact on the enterprise. In a real world example based on Kubernetes, he will show how to ...
Successful digital transformation requires new organizational competencies and capabilities. Research tells us that the biggest impediment to successful transformation is human; consequently, the biggest enabler is a properly skilled and empowered workforce. In the digital age, new individual and collective competencies are required. In his session at 19th Cloud Expo, Bob Newhouse, CEO and founder of Agilitiv, will draw together recent research and lessons learned from emerging and established ...
SYS-CON Events announced today that Coalfire will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Coalfire is the trusted leader in cybersecurity risk management and compliance services. Coalfire integrates advisory and technical assessments and recommendations to the corporate directors, executives, boards, and IT organizations for global brands and organizations in the technology, cloud, health...
As ridesharing competitors and enhanced services increase, notable changes are occurring in the transportation model. Despite the cost-effective means and flexibility of ridesharing, both drivers and users will need to be aware of the connected environment and how it will impact the ridesharing experience. In his session at @ThingsExpo, Timothy Evavold, Executive Director Automotive at Covisint, will discuss key challenges and solutions to powering a ride sharing and/or multimodal model in the a...