The move comes after the renminbi became the fifth currency last year to join the International Monetary Fund’s Special Drawing Right (SDR) basket, which is a collection of reserve currencies that serve as an alternative to the US dollar.
The inclusion underscored China’s increasing prominence in the global financial landscape, and reflected policies aimed at making the currency more freely tradable internationally.
Mr Dombret said: “The notable development from the European point of view over the past few years has been the growing international role of the RMB in global financial markets.”
Last week, the People’s Bank of China decided to drop a mechanism it recently created to support the renminbi and safeguard it against capital flight, in a sign of rising confidence in the currency. Mr Dombret said the move was “something which we welcome very much”.
Speaking at the same conference, Stuart Gulliver, chief executive of HSBC, said that the internationalisation of the RMB would gain further support from the belt and road trade initiative, which calls for building infrastructure links to bind China more closely with central and Southeast Asia, the Middle East, Europe and Africa, and the development of the green bond market in Asia.
Mr Gulliver said: “Both of these initiatives will fuel the internationalisation of the RMB. The RMB . . . already has some momentum in terms of its inclusion within the SDR. As we continue to see the belt and road develop, and as we continue to see green finance develop, a lot of this will be done in RMB and this will increase the usage of RMB even further.”
But the internationalisation of China’s currency still faces significant headwinds.
“The level of RMB reserves, however, is still small compared to USD or EU,” Mr Dombret said. “It proceeds in a number of small steps, but some of those small steps include a few steps backwards. More recently, the RMB internationalisation process seems to have lost a little bit of momentum.”
Measures over the past year and a half to restrict capital outflows from China have been among factors hindering the currency’s internationalisation.
Mr Dombret added that the exchange rate framework underpinning RMB lacked transparency while some observers, also from the EU, had the impression that it was dominated by discrete policy interventions from China.
The onshore renminbi, which is permitted to trade 2 per cent either side of a daily fix set by the People’s Bank of China, was as much as 0.7 per cent stronger against the dollar on Monday at Rmb6.4186, while the offshore renminbi, which is not restricted by the trading band, was 0.5 per cent stronger at Rmb6.4260, levels not seen since late 2015.
