Renminbi (RMB)/Yuan Appreciation & Internationalization

Wrought said:

PBOC + various state bureaus + Shanghai local gov announced a plan boost cross-border RMB settlement from the World Financial Center. Lists 18 efforts across 5 categories. Mentions support for banks and enhancing CIPS.

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Major Russian banks have set up a netting payments system dubbed "China Track" for transactions with China aiming to reduce visibility to Western regulators... Bilateral trade hit a record $245B last yr despite payment problems & commissions as high as 12%"

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W20 said:

SWIFT, communication, can be replaced by Gmail

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CHIPS, clearing house, core of the Treasury Departament despotic Power

CIPS, communication and clearing house

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With SWIFT you can send a message to CIPS. But SWIFT is not required to use CIPS.

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Wrought said:

I've mentioned the difference between trade settlement and capital markets before. Significantly more progress on the former than the latter, both as a deliberate choice and as a comparative advantage. Politically speaking, the first is more defensive (less vulnerability to external sanctions) whereas the second is more offensive (you are the one imposing external sanctions).

https://twitter.com/i/web/status/1918797637743985001

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But I think the argument of the paper is China's goal is not to dethrone the dollar. If that is the metric that you're looking at, that's the wrong metric. What China wants to do is to be robust and resilient to sanctions and to a financial attack. To do that, China only needs robust capital controls, substantial foreign exchange reserves, so the national team can come in and save the day if they have to and enough of these back channels and bridges, which could be CIPs, it could be MBridge, it could be Pakistani banks acting as a secret backdoor to the U.S. dollar system. It just needs a little bit of help from foreign partners using these new technologies to enable it to violate sanctions in that worst-case scenario.

As long as China is moving in this direction, the RMB doesn't have to be a major share of international payments, major central banks don't have to be holding lots of it on their balance sheets, but stealthily under the surface, China has built enough of an alternative plumbing for international payments that if we sanction them, it won't actually be as effective as we think. This is why I think it's a national security threat, it should be on our agenda, and we should take seriously what they say about the perceptions of their own vulnerabilities and strengths.

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Wrought said:

I've mentioned the difference between trade settlement and capital markets before. Significantly more progress on the former than the latter, both as a deliberate choice and as a comparative advantage. Politically speaking, the first is more defensive (less vulnerability to external sanctions) whereas the second is more offensive (you are the one imposing external sanctions).

https://twitter.com/i/web/status/1918797637743985001

Click to expand...