Renminbi Internationalisation: The Road Ahead
The internationalisation of the renminbi has made significant strides，thanks in large part to the policies，programmes and infrastructure introduced by China over the years to promote the widespread usage of the currency.
Further inroads could be made as the world’s second-largest economy continues to press ahead with renminbi internationalisation，supported by external factors such as rising interest rates and the diversification of currency reserves. As demand for renminbi use picks up pace，forward-thinking companies should position themselves to capitalise on the opportunities as they arise.
Attractive Financing Costs in Renminbi
Amid elevated interest rates，the renminbi is proving to be a significantly cost-effective option for financing compared to the USD. We have observed financial institutions (FIs) pivot towards the renminbi for financing and bond issuances，while corporate clients are also turning to the renminbi for their financing needs.
Recently，we have successfully closed a number of renminbi trade financing deals in Malaysia，Singapore and Indonesia for multinational corporations (MNCs)，local companies and China-headquartered corporates.
Meanwhile，the issuance of offshore CNY bonds – dubbed dim sum bonds – tripled in 2022 on the back of lower financing costs as well as increased demand from Chinese investors via the Southbound Bond Connect.
FIs and corporates seeking to raise funds may also want to consider Panda bonds – onshore CNY debt securities - as a financing option following the recent easing of regulations around Panda bond issuances，especially since issuers are allowed to deploy the proceeds outside of China. The funding costs of Panda bonds is lower than offshore CNY bonds.
Currency Diversification
The renminbi is now among the top five currencies for trade settlements. Last year，RMB42.1 trillion worth of the country’s cross-border payments and receipts were settled in the redback，up by 15% year-on-year in the fifth consecutive year of growth.
At the same time，geopolitical tensions and market volatility are prompting a growing list of countries to consider alternatives to reduce their exposure to the USD. In particular，the redback is proving to be a popular option among nations that have strong bilateral trade flows with China.
That list of countries includes Latin America’s largest economy，Brazil，which counts China as its biggest trading partner. The two countries reached an agreement to trade in their own currencies，eschewing the US dollar. Argentina has also announced that it would begin paying for Chinese imports in renminbi，while Iraq will accept renminbi to settle trade – aside from commodities – with China.
We expect more corporates that do business with China to explore settling cross-border trades in renminbi，to better manage their foreign exchange risks，target cost savings，improve trade efficiencies and tap a wider network of suppliers. A number of government-led initiatives are already paving the path for the corporate sector to ramp up renminbi usage，which in turn is giving renminbi internationalisation a boost.
In March this year，the Export-Import Bank of China sealed its first renminbi-denominated loan with the Saudi National Bank to fund China-Saudi Arabia trade projects. That same month，Chinese national oil and gas company，CNOOC，closed its first renminbi-settled liquified natural gas (LNG) purchase for 65,000 tonnes of LNG imported from the United Arab Emirates (UAE). Meanwhile，the world’s largest producer of hardwood pulp，Brazil-based Suzano，is considering selling its products to China in renminbi. China is Suzano’s largest market and accounts for nearly half of its global sales. Presently，the renminbi’s share of total cross-border transactions remains relatively low，at around 2% of China’s share of total trade，according to the International Monetary Fund (IMF). However，coupled with improvements to the ecosystem for overseas use of the currency，this suggests that the renminbi is poised to play a bigger role on the global stage.