Home / Metal News / Increasing Countries Join "De-Dollarisation" amid Currency Settlement Diversification, Here are Their Various Policies, RMB Internationalisation is Accelerating

Increasing Countries Join "De-Dollarisation" amid Currency Settlement Diversification, Here are Their Various Policies, RMB Internationalisation is Accelerating

iconApr 27, 2023 17:04
With the sound development of China's economy, the international status of RMB has become increasingly prominent. The process of RMB internationalisation has been accelerated. At the same time, because the Federal Reserve’s aggressive interest rate hikes, banking crises and economic recession risks continue to amplify the risk of US dollar credit overdrafts. Many countries have to accelerate measures to deal with the impact of US financial risk spillovers on other countries. More and more countries choose to join the team of "de-dollar", and now the international currency settlement is increasingly showing a trend of diversification. The diversification of currency settlement also provides impetus for the orderly advancement of RMB internationalisation.

With the sound development of China's economy, the international status of RMB has become increasingly prominent. The process of RMB internationalisation has been accelerated. At the same time, because the Federal Reserve’s aggressive interest rate hikes, banking crises and economic recession risks continue to amplify the risk of US dollar credit overdrafts. Many countries have to accelerate measures to deal with the impact of US financial risk spillovers on other countries. More and more countries choose to join the team of "de-dollar", and now the international currency settlement is increasingly showing a trend of diversification. The diversification of currency settlement also provides impetus for the orderly advancement of RMB internationalisation.

Russian energy transactions will abandon the US dollar and the euro

Russian Deputy Prime Minister Alexander Novak said in an interview with Russian media on April 22 local time that reducing the use of US dollars and euros has become a new trend. In the future, Russia and other countries intend to abandon the use of US dollars and euros in energy transactions, but choose the currencies of relevant countries. Novak also said that the current energy transactions between Russia and China have been settled in RMB and rubles. Transactions in RMB, Turkish Lira and Russian Ruble are increasing and are already common in the market.

Russian Foreign Minister Sergey Viktorovich Lavrov recently stated that the trend of abandoning the use of US dollars for settlement in international trade and switching to domestic currency is irreversible. The divergence against the dollar has already started, not so fast yet but certainly accelerating. The Americans' use of the dollar's dominance to manage international finance and the entire world economy has seriously jeopardised their position. As emerging economies, oil-producing countries in the Middle East and even Europe try to innovate cross-border payment and settlement mechanisms, sign bilateral currency agreements, and promote the diversification of foreign exchange reserves, the pace of global "de-dollarisation" is accelerating.

India and Bangladesh are gradually abandoning the US dollar in trade and will use local currencies

According to RT News Network on April 22, India and Bangladesh are gradually abandoning the use of U.S. dollars in bilateral trade and switching to their own currencies for transactions. RT news network quoted Bangladeshi media "Business Standard" as reporting that India and Bangladesh have reached an agreement that some trade will be conducted in the two countries' national currencies, the rupee and the taka, a move that the two countries have been discussing for months. It is expected that Bangladesh's exports to India will be completely shifted to rupees and taka, while India's exports to Bangladesh worth about $2 billion will be traded in rupees and the rest in US dollars.

Indonesia promotes "de-dollarisation” and starts trade transaction and investment settlement currency diversification

According to Indonesia's "KOMPAS" news network reported on April 20, Perry Vajiyo, Governor of the Bank of Indonesia, said that Indonesia has started trade transactions and is in the process of diversifying settlement currencies in investment, currencies other than the US dollar can be used. According to KOMPAS, Indonesia is continuing its efforts to promote the "de-dollarisation" process. And this is reflected in a cooperation between the Bank Indonesia and the Bank of Korea planned in May to use the currencies of the two countries for settlement in trade transactions and investments.

Brazilian President called on the BRICS countries to settle in local currency Brazilian President Luiz Inácio Lula da Silva visited the headquarters of New Development Bank during his visit to Shanghai on April 13. Lula said in his speech, "When I was the President of Brazil (2003-2010), I was very honoured to have participated in the summits of organisations such as the Group of Twenty (G20) many times, and also cooperated with Russia, India, China and South Africa held many closed-door meetings. At that time we wanted to set up our own development bank. I think about a question every night, why do all countries use US dollars for settlement? Why can't the RMB or other currencies become the international settlement currency? " "Why can't (BRICS countries) settle in their own currencies? In this regard, we are patient, and the Chinese know what patience is. " "Why can't the BRICS Bank provide loans in the currencies of its member countries? I know everyone is used to using dollars, but in the 21st century we can do things differently. "

Share of RMB hit new high in Russian foreign exchange transactions in March  The Central Bank of Russian Federation released a comprehensive report on the risks of the Russian financial market in March on April 10, local time. The report pointed out that the share of RMB in Russian foreign exchange transactions hit a new high in March. The share of transactions between the RMB and the ruble in Russia's foreign exchange market reached 39%, while the share of transactions between the dollar and the ruble fell to 34%, the lowest in recent years.

India and Malaysia agree to trade settlement in Indian rupees

The Indian Ministry of Foreign Affairs announced that India and Malaysia have agreed to use Indian rupees for trade settlement. India's foreign ministry said that trade between India and Malaysia can now be settled in Indian rupees, in addition to other existing currency settlement modes. "The Hindu" said that the background of the Indian Ministry of Foreign Affairs' announcement was that officials were working hard to protect Indian trade from the impact of the Ukraine crisis. The U.S. dollar has been the main reserve currency in international trade so far, and the shift away from the U.S. dollar is significant, showing that India is willing to take concrete steps to de-dollarise international trade.

RMB surpasses Euro to become Brazil's second largest foreign exchange reserve currency

According to a report released by the Central Bank of Brazil on March 31 local time, the RMB has replaced the euro as the second most important currency in Brazil's foreign exchange reserves. Some analysts pointed out that this reflects the deepening economic ties between Brazil and China. As of the end of 2022, the RMB accounted for 5.37% of Brazil's total foreign exchange reserves, surpassing the 4.74% accounted for by the euro, and the US dollar continued to dominate at 80.42%.

ASEAN countries began to discuss reducing the dependence of financial transactions on the U.S. dollar and shifting to the use of local currencies for settlement

The ASEAN Briefing website published an article on March 29 that on March 28, the official meeting of ASEAN finance ministers and central bank governors opened in Indonesia. Topping the agenda at the meeting was a discussion on how to reduce reliance on the dollar, euro, yen and pound for financial transactions and move to settlement in local currencies. The meeting discussed efforts to reduce dependence on major currencies through the Local Currency Transaction (LCT) scheme. This is an extension of the LCS scheme that has previously begun to be implemented among ASEAN members. This means that the ASEAN cross-border digital payment system will be further expanded and allow ASEAN countries to use local currencies for trade.

Ministry of Foreign Affairs: The establishment of RMB clearing arrangement in Brazil is beneficial to enterprises and financial institutions in China and Brazil

At the regular press conference of the Ministry of Foreign Affairs held on March 30, a reporter asked that the Brazilian government stated on Wednesday that Brazil and China reached an agreement that in the future, trade can be conducted in local currencies, without necessarily using the US dollar as an intermediate currency. In response, Foreign Ministry spokesperson Mao Ning said that China and Brazil signed the Memorandum of Cooperation on the Establishment of RMB Clearing Arrangements in Brazil earlier this year. She said that we believe that the establishment of the RMB clearing arrangement between China and Brazil is conducive to the use of RMB by enterprises and financial institutions in China and Brazil for cross-border transactions, and to promote bilateral trade and investment facilitation.

India-Russia oil deals weaken dollar's dominance

According to a Reuters report on March 8, sanctions against Russia by countries led by the United States have begun to weaken the dollar's decades-long dominance in international oil trade, as most oil transactions in Russia and India are already settled in other countries' currencies. According to reports, Europe has stopped importing Russian oil since the Russia-Ukraine conflict. At the same time, India's import of Russian oil has increased significantly. Russia has now become India's main oil supplier.

UAE and India Discuss Settlement of Non-Oil Trade in Rupees

United Arab Emirates Foreign Trade Minister Dr Thani Al Zeyoudi said on Thursday that the United Arab Emirates is in preliminary discussions with India on trading non-oil commodities in Indian rupees. Other countries, including China, have also raised the issue of settling non-oil trade payments in local currencies, the minister said. He added that the UAE hoped to conclude a trade agreement with Cambodia in the first quarter.

Russia intends to strengthen oil and gas cooperation with Venezuela

Russian Deputy Prime Minister Alexander Novak said that Russia and Venezuela are interested in cooperating in the field of oil and gas. Russia and Venezuela are jointly implementing five oil projects, and Russia and Venezuela are also discussing Settlement in national currency.

Musk says US policy is too tough and other countries want to abandon the dollar

Recently, some countries have announced or planned to settle trade in their own currencies. This phenomenon, called "de-dollarisation" by the media, has attracted attention. On March 30, American entrepreneur Elon Musk shared his views on this issue on Twitter. He said: "This is a serious problem. The US policy is too tough, and it makes other countries want to abandon the dollar." Musk made the remarks while commenting on a series of tweets by a Twitter user on the issue of "de-dollarisation." He added: "Excessive government spending forces other countries to absorb a large part of our inflation."

Trump says the dollar is collapsing and will soon cease to be the "world standard"

Former US President Trump said in his last speech at the National Rifle Association annual meeting in Indiana on April 14, local time, that he would turn the topic to The U.S. dollar also said that the U.S. dollar is collapsing and will soon no longer be the "world standard." If this happens, it will become the "biggest failure in 200 years" of the United States.

Scale of RMB settlement soars, internationalisation process is accelerating

PBOC: The scale of cross-border RMB settlement in goods trade last year increased by 37% year-on-year

Jin Zhongxia, director of the International Department of the People's Bank of China, introduced on April 23 that the People's Bank of China has taken many measures to provide financial support and stabilise foreign trade. First of all, the measures we have taken are to reduce the financing cost of the real economy. In 2022, the weighted average interest rate of corporate loans in China dropped by 34 basis points year-on-year to only 4.17%, which is a relatively low level in history. Second, we guide financial institutions to increase support for small and micro enterprises and private foreign trade enterprises. As of the end of 2022, the balance of inclusive small and micro loans will increase by 24% year-on-year, reaching 24 trillion yuan. Third, we guide financial institutions to provide exchange rate risk management services for foreign trade enterprises, and reduce or exempt foreign exchange transaction fees related to banks serving small, medium and micro enterprises. In the whole of last year, the hedging ratio of enterprises increased by 2.4 percentage points compared with the previous year, reaching 24%. The ability of small and medium enterprises to avoid the risk of exchange rate fluctuations has been further improved. Fourth, we have continued to optimise the RMB settlement environment for cross-border trade and improve the level of cross-border trade facilitation. Last year, the scale of cross-border RMB settlement in goods trade increased by 37% year-on-year, accounting for 19%, an increase of 2.2 percentage points from 2021.

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China aims to achieve high interconnection with Hong Kong financial market by 2025

The opinions of the five departments including the People's Bank of China on financial support for the comprehensive deepening of reform and opening up of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone pointed out that by 2025, a policy system and management system focusing on the expansion of the financial industry and the internationalisation of the RMB will be established and improved, and a high level of interconnection with the Hong Kong financial market will be basically realised. The supporting role of the development of the district is increasingly evident. By 2035, a higher level of financial opening based on the negative list will be achieved, cross-border funds will flow efficiently and conveniently. Meanwhile, a financial rule system in line with international standards will be basically established, and the financial environment will reach the world's advanced level, which will play a role in expanding the opening up of the national financial industry.

Internationalization of the RMB is currently facing a better environment and opportunities, governor says

On the morning of March 3, Pan Gongsheng, vice-governor of the People's Bank of China and director of the State Administration of Foreign Exchange, said in an answer to a reporter's question that the RMB has initially had a network effect for international use. Enterprises are more willing to use RMB in cross-border trade, investment and financing to avoid the risk of currency mismatch. With the recovery of my country's economic growth momentum and the further opening up of the financial market, the RMB's investment and risk-avoiding functions have gradually increased. The development of the international monetary system has also become more diversified.

CME launches offshore RMB options contract

On April 3, the Chicago Mercantile Exchange officially launched an option contract based on the existing US dollar/offshore RMB (USD/CNH) futures. CME Group believes that the offshore yuan is already widely traded in the over-the-counter market. The launch of options on USD/CNH futures is expected to increase trading volumes while giving investors exposure to a wider range of financial output. According to statistics from the Bank for International Settlements, the RMB accounted for 7% of all foreign exchange transactions in the world in 2022, surpassing the Australian dollar, Canadian dollar and Swiss franc to become the fifth largest trading currency in the world.

Scale of RMB investment in cross-border financing in 2023 will reach 500 billion yuan minimum

According to the "Today's CCB" WeChat public account, recently, China Construction Bank officially launched the Action Plan to Support the Expansion of the Cross-border Use of RMB to Promote Trade and Investment Facilitation. A series of specific work measures have been introduced, and it is proposed that the scale of RMB investment in cross-border financing in 2023 will not be less than 500 billion yuan, continue to comprehensively promote the development of RMB internationalisation business, and help promote the development of domestic and international dual cycles and expand opening up to the outside world.

Deutsche Bank: RMB cross-border payments to increase 15% in 2023

 Liu Linan, head of macro strategy for Greater China at Deutsche Bank, pointed out in a January research report that with the wide application of RMB in trade settlement and the access to China's financial market, the degree of liberalisation of China's financial market access has increased, and the economic and trade cooperation with countries along the Belt and Road and RCEP partner countries has deepened. In this scenario, the internationalisation of the RMB will be steadily promoted in the next few years. It is estimated that the RMB cross-border payment scale will increase by 15% in 2023. In the next five years, the RMB settlement volume is expected to increase by an average of 10-15% per year.

China Net financial accounts will increase, Galaxy Securities says

China Galaxy Securities' research report stated that since 2022, global geopolitical conflicts have intensified, and financial sanctions have become tools. The huge impact on the financial market and economic operation has led to a significant increase in the international community's demand for currency diversification, and the internationalisation of the RMB has ushered in new opportunities. At present, commodity pricing, bilateral trade settlement in local currency, and new cross-border payment systems (such as multilateral central bank digital currency bridges) may be the focus of development. The degree of RMB internationalisation can be analysed from the three indicators of cross-border revenue and expenditure function, reserve function and investment and financing function. At present, the proportion of RMB in global trade settlement, reserves, investment and financing is still limited, but the growth rate is obvious. According to SWIFT data, the RMB’s share of global payments rose from 0.1% in 2009 to 2.42% in 2021. The 2022 RMB Internationalisation Report shows that the total amount of RMB cross-border receipts and payments in 2021 was 36.61 trillion yuan, a year-on-year increase of 29.0%. According to IMF data, in 2022, global central banks held a total of $11 trillion in foreign exchange reserves, of which RMB was $298.435 billion, accounting for 2.49%, which is 1.60 percentage points higher than when it first joined the SDR in 2016, ranking fifth among major currencies. By the end of 2022, Chinese bonds have been included in the three major international bond indexes. In terms of financing, foreign issuers have issued a total of 630 billion yuan of panda bonds in China's bond market. In terms of direct investment, China's foreign investment increased by 51% from 2012 to 2022, while the RMB cross-border settlement volume of foreign direct investment grew by 4151%. In 2022, China's foreign non-financial direct investment reached $116.85 billion, of which the RMB settlement part was 123.95 billion yuan, accounting for about 15.6% of the total investment.

Macro economy

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