Simon Williams (right) addressing the audience yesterday. (Salim Matramkot)
DOHA: Chinese currency Renminbi or RMB is set to emerge as the anchoring currency of global economy in longer-term. As the world economy continue to change, the role of dollar will diminish and the RMB will improve, Simon Williams, Chief Economist for HSBC in Mena said yesterday.
“Of course, dollar is still the most liquid currency. But this is a cliff phase for dollar… and Renminbi will be the anchoring currency of global economy”, Simon said while speaking on the rising importance of the RMB as a trade currency to a select audience.
Customers in Qatar, as well as in the UAE, Bahrain, Kuwait and Lebanon are able to conduct RMB cross-border payments for settlement of trade transactions, and to place remunerative Term Deposits in RMB.
Globally, the use of RMB has been increasing since 2009, when China launched a pilot programme to internationalise its currency by allowing the RMB to be used to settle cross-border trade. Since then, China’s trading partners have increasingly been able to use the RMB when paying for imports or receiving payments for exports.
This process of the growth of the RMB has been accelerating principally from the growth in trade settlement. In 2012, 12 percent of China’s total trade (imports and exports) was paid for in RMB, up from three percent in 2010. By 2015, HSBC expects that around 30 percent of China’s total trade — equivalent to around $2 trillion — will be settled in RMB.
There are more than 30 markets worldwide conducting over 10 percent of their business with China in RMB, and the RMB cross-border capital flows have also taken off. RMB FDI almost tripled in 2012, and RMB ODI surged by 50 percent. In parallel, RMB investment opportunities are opening up all around the world — supported by thriving offshore markets that are expanding offshore hedging, fundraising and other financing needs denominated in RMB.
The RMB internationalisation trend reflects China’s status as a global economic power, and will support its growing trade and investment relationships around the world. Here in the Middle East, the region is becoming a leading beneficiary of that growth. Trade between China and 16 of the largest Arab states grew from $13.5bn in 2001 to $182bn in 2011.The longer-term perspective is that in five years’ time, using the RMB is going to be a requirement for any Middle East firm serious about developing its trading links with China.
Simon reassured that the global growth is no longer led by the West but East and noted what we are seeing in China is not a cyclical growth but a structural shift in terms of growth. “This is the start of a permanent shift of investment and market operations. Its clear that the global economy is not led by the US but China”, he said
There is a whiff of optimism in the global economy and a perception that financial crisis is nearly over and global equity market has become stronger at the pre-2008 crisis level. It betrays reality.
“There is improvement in the US economic data. But what we are seeing in the US is just a cyclical pick-up. The improved numbers must be seen in context. The recovery is much weaker. It is not business as usual in the US.”
The Peninsula
