Renminbi (RMB)/Yuan Appreciation & Internationalization

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pbd456

Junior Member
Registered Member
Wrought said:
Apparently the IMF and World Bank came in with an assist on the Kenyan loan conversions from USD to RMB.



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What are the risk that CNY appreciate over time when other countries are converting USD debt into RMB debt? China has promised these countries that RMB will not have substantial appreciation?
 
Wrought

Wrought

Captain
Registered Member
Cross-border transactions were up 14% in H12025, to 35 trillion RMB. Favorable interest rates have boosted adoption esp. in BRI countries.

In the first six months of the year, the use of the yuan in cross-border payments totalled 35 trillion yuan (US$4.9 trillion), up 14 per cent from a year earlier, according to the People's Bank of China.

Yang said the willingness of the company's non-Chinese clients to settle in yuan was highest among countries involved in the Belt and Road Initiative, such as Pakistan, Thailand and Malaysia, Saudi Arabia, Uzbekistan and Kazakhstan. "Renminbi internationalisation is advancing quickly," he said. "As more Chinese firms go global, the use of renminbi will naturally rise. The renminbi offers notably competitive interest rates right now, which is a major factor in reducing our financing costs."

China held its one-year loan prime rate, the benchmark for lending to companies, at 3 per cent and five-year rates at 3.5 per cent for the fifth consecutive month in October, while US dollar borrowing costs hover around 4 per cent.
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jli88

Junior Member
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RMB seriously needs to appreciate by 5% a year for the next 5 years.

Good FT Piece:
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My thoughts:
  • Trade frictions are inevitable at the level of trade surplus China is currently running. This year it's going to be 1.2 trillion in Goods alone. Almost every week, some country is imposing tariffs on Chinese imports, including friendly or neutral countries like Brazil, Indonesia, etc.​
  • RMB strength will lead to boost in consumer confidence because the value of Chinese savings in real terms would increase a lot, will also lead to further boost in disposable incomes. It is a way to drive wage growth when nominal wage growth in yuan terms is flatlining.​
  • Will lead to retention of science talent that China still continues to lose because of lower wages to US/Europe etc.​
  • Will create the creative destruction that is required in an economy. China already has a labor shortage in lower end segments. Unless the sector is critical like shipbuilding laborers, you don't need to manufacture at the lower end stuff like apparel, lower end toys, or low end plastic crap. There is far more than enough space left to be occupied for growth in aerospace, semiconductors, AI, medicine, medical equipment, you name it.​
  • All your USD/Euro assets will be frozen literally the moment a major crisis (say over Taiwan erupts). So why still continue to buy USD assets at such a large scale.​
  • RMB internationalization would increase, everyone wants to hold an appreciating asset.​
 
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