Chinese reform: Renminbi moves to a sweeter spot
For a nation known to take its time to do anything progressive on foreign exchange, China has been in a mighty hurry: liberalization measures have created a new offshore deliverable FX market, prompted a new bond market and transformed trade settlement. Chris Wright reports.
INTERNATIONAL BANKS ACTIVE in Hong Kong and China have been delighted with recent foreign exchange liberalization moves from the Chinese government – particularly those that had hoped for change and invested a lot in getting ready for it. "We’ve been predicting this for about four years and we’ve built a cash and trade system with renminbi [RMB] settlement capabilities that is now in every country in Asia," says Mike Rees, group executive director and chief executive of wholesale banking at Standard Chartered. "We’re very relieved something’s happened. We’d have looked a bit stupid otherwise."
Standard Chartered and others spent the money to get ready for these developments because of a deep belief at the highest level of these institutions that the changes, when they came, could be transformative. "The potential is going to be huge," says Rees, arguably the second most senior person in his bank worldwide. "If you believe in economic power in the east and the power of the Chinese, then you therefore believe the RMB as an offshore tradable currency is a very big thing – potentially one of the biggest things that will happen in this region over the next 10 years."