An Economist Intelligence Unit report,
commissioned by State Street, and published this week examines the future
development and internationalisation of China's currency -- the renminbi - - and
the pace, process and likelihood of financial reform in the country. It compares
the views of institutional investors headquartered in mainland China (excluding
Hong Kong and Taiwan) with those based elsewhere. The report is based on a
survey of 200 senior executives from institutional investors (IIs) with
knowledge of their exposure to renminbi assets.
Key findings include:
- A majority of institutional investors (IIs)
think the renminbi will one day surpass the US dollar as the world’s major
reserve currency. Within China there is more optimism: 62% of IIs see a
redback world on the horizon, compared to 43% of those outside China;
- Two-thirds of IIs expect China to complete
its financial liberalisation within ten years, with a majority expecting
major reforms within five. But there is uncertainty about the direction and
urgency of short-term reforms towards this goal;
- Foreign investors expect China to privatise
its banking system sooner rather than later. Nearly half (47%) of
foreign-headquartered IIs expect China to privatise its banking system
within three years, compared to just 19% of domestic respondents with the
- Chinese IIs expect offshore renminbi trading
to expand at home. While IIs agree that Hong Kong will continue to dominate
trading over the next three years, Chinese IIs rank Shanghai and other
onshore free trade zones as the second place where renminbi portfolio
trading is likely to see rapid growth, while non-Chinese IIs think Singapore
is a more likely growth area.
China’s currency, introduced in 1949 on the
founding of the Communist People’s Republic of China, is officially known as
renminbi. However, it is denominated in units known as yuan. The dual name for
the currency is similar to the terms sterling (renminbi) and pound (yuan) for
the British currency.
Renminbi is roughly translated from Mandarin as ‘people’s currency’.
The word yuan dates back to around the 16th century and was the local term for
the Spanish silver dollar that was used for centuries by foreign merchants
trading in China.
Report in English [pdf]
Report in Mandarin [pdf]
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