SMM News: Dai Xianglong, former governor of the people's Bank of China, said that "Belt and Road Initiative" will become a breakthrough in the internationalization of the RMB. It is necessary to constantly give full play to the various international monetary functions of the RMB in the construction of "Belt and Road Initiative," and realize that by 2035, the RMB will become the second largest international currency after the US dollar.
On the evening of 14 May, Dai Xianglong, as a special guest of the China Financial 40 people Forum (CF40), said at the seminar on "Building a New Investment and financing system of 'Belt and Road Initiative'," that there are mainly three kinds of market forecasts for the internationalization of the RMB. First, to become the "Belt and Road Initiative" regional currency; The second is to become the second largest international currency after the US dollar; the third is to become the third largest currency after the US dollar and the euro.
Dai Xianglong said that he believes that it is impossible to achieve the first goal, the third goal is too conservative, and the second goal is positive and prudent. He suggested that the internationalization of RMB should be promoted from two aspects of the market and the central bank, and put forward five specific plans.
First, give full play to the role of RMB as a pricing and settlement currency in "Belt and Road Initiative" trade. Dai Xianglong said that the currency used for pricing depends on both suppliers and marketers and the influence of the currency, while pricing in RMB is the basis for settlement in RMB. He believes that, first of all, it can improve the pricing function of the renminbi in "Belt and Road Initiative" commodities. In 2016, China purchased 15% of the world's oil, 50% of iron ore and 70% of soybeans, the world's largest consumer of gold. From this point of view, there are conditions to gradually play the pricing role of RMB in oil, iron ore, soybeans, gold and other commodities, so as to create conditions for settlement in RMB.
The second is to increase the degree of free convertibility of RMB in accordance with the law and give full play to the monetary function of RMB trading. He believes that in the process of promoting the convertibility of RMB, on the one hand, it is necessary to amend the laws and regulations, and on the other hand, it is necessary to supervise the implementation of the laws and regulations. This includes supervising the implementation of the staff of the foreign exchange control department and the relevant banking workers. In addition, it is necessary to strengthen communication and cooperation with the central banks of the countries concerned, continuously expand the free convertibility of the RMB and the currencies of the countries concerned, and increase the volume of currency transactions.
Third, we should build a new investment and financing system for "Belt and Road Initiative" and enhance the function of RMB investment, including formulating special "Belt and Road Initiative" loan rules, expanding "Belt and Road Initiative" RMB loans, and trying to lower the interest rate of RMB loans. Dai Xianglong said that the loan rules should clarify the purpose, duration, interest rate, risk prevention and other contents of the loan. For example, the investment in the "Belt and Road Initiative" special loan and the "Silk Road Fund" issued by the China Development Bank and the Import and Export Bank should be standardized through special measures. With regard to the loans issued by commercial banks in "Belt and Road Initiative", we should gradually standardize the management from the individual management, and formulate the "loan guidelines" of "Belt and Road Initiative" of commercial banks in China after five years.
In addition, the interest rate of RMB loans is much higher than that of the US dollar, the euro and the Japanese yen, which is the biggest obstacle to restricting RMB overseas loans. Dai Xianglong believes that the interest rate of RMB overseas loans can be reduced by the following means: the central bank lowers the benchmark interest rate for deposits and loans of financial institutions, and increases the interest rate of deposit reserves paid by the central bank to commercial banks to ensure deposit capital preservation of commercial banks. To promote the host banking system, reduce enterprise reserve deposits and reduce enterprise interest expenses; The central bank and policy banks issue "Belt and Road Initiative" construction loans with national credit, lend them to major commercial banks, promote the comprehensive operation of large commercial banks, and reduce comprehensive costs.
Fourth, we will expand cooperation between the central bank and the "Belt and Road Initiative" state central bank to enhance the function of RMB reserves.
Fifth, it is necessary to expand the offshore business of "Belt and Road Initiative" RMB. "the offshore RMB business of 'Belt and Road Initiative' should be promoted step by step from east to west." Dai Xianglong said that while focusing on the development of offshore RMB business centers in Hong Kong, Singapore and London, we should choose cities with influence in South Asia and the Middle East and set up Chinese-funded or Sino-foreign joint ventures and various funds. We will promote the establishment of an offshore RMB business network.