China Securities Journal:

With the continuous opening-up of China's financial industry, we can see that the international status of the renminbi has greatly improved, and it has remained among the world's major currencies. My questions are, what are the achievements in promoting the internationalization of the renminbi? In 2023, what are the considerations of the PBC in promoting the internationalization of the renminbi? Thank you.

Pan Gongsheng:

Thank you for your questions. The process of renminbi internationalization has gone through more than a decade. With the growth of the Chinese economy and the increase in openness, renminbi's functions as an international currency in cross-border payments, investment and financing, reserves, and pricing, have been comprehensively enhanced. The international status of renminbi has also greatly improved, manifested in the following aspects:

First, renminbi accounts for about 50% of the country's total cross-border receipts and payments. In 2022, China's cross-border receipts and payments settled in renminbi totaled 42 trillion yuan, an increase of 3.4 times compared to 2017.

Second, renminbi's weighting in the IMF's Special Drawing Rights (SDR) ranks third currently. More than 80 countries and economies around the world have included renminbi in their reserve currencies, making it the fifth major reserve currency in the world.

Third, the use of renminbi in financial transactions continues to expand. China's bonds have been included in the three major international bond indices. By the end of last year, the balance of foreign entities holding renminbi assets in China was 9.6 trillion yuan, an increase of 1.2 times from 2017. The scale of stocks and bonds held by foreign entities was 3.2 trillion yuan and 3.5 trillion yuan, respectively. Overseas issuers have issued a cumulative total of 630 billion yuan in Panda bonds in China's bond market.

Fourth, the PBC has signed bilateral currency swap agreements with central banks or monetary authorities of 40 countries and regions, with a total amount of more than 4 trillion yuan. Last year, the PBC and the Hong Kong Monetary Authority upgraded the currency swap agreement to a long-standing one, increasing the swap size to 800 billion yuan. Moreover, we have expanded the arrangement of offshore renminbi clearing banks. Currently, 31 renminbi clearing banks have been authorized in 29 countries and regions, covering major international financial centers around the world.

The above is about the progress in RMB internationalization. We believe that we are currently facing a relatively favorable environment and opportunities in advancing RMB internationalization. First, over more than ten years of development, with the establishment of RMB clearing banks and local currency swap networks, the growth of the offshore RMB market, the opening-up of the domestic financial market, and the continuous improvement of the overseas layout of Chinese-invested financial institutions, we believe that the RMB has preliminarily shown the network effect of its international use. Second, as we deepen the reform of the RMB exchange rate formation mechanism, the RMB exchange rate has become more flexible, and enterprises are more willing to use the RMB in cross-border trade, investment and financing to avoid the risk of currency mismatch. Third, as China's economy gains growth momentum and its financial market further opens up, the investment and risk-hedging functions of RMB assets have been gradually enhanced. Fourth, the international monetary system is more diversified with the change in the global geopolitical and economic development environment. Therefore, we can conclude from these factors that RMB internationalization still faces a better environment and opportunities.

Next, we will earnestly implement the guiding principles of the 20th CPC National Congress, coordinate development and security based on the market-driven operations and independent choices of enterprises, and promote the internationalization of the RMB in an orderly manner. Our main work priorities are as follows: First, we will focus on trade and investment facilitation, improve the fundamental systems for RMB settlements in cross-border investment and financing transactions, improve cross-border RMB infrastructure, and expand the clearing bank network. Second, we will accelerate the institutional opening-up of the financial market, enhance the opening-up of China's foreign exchange and financial market and ensure better access to it, in a bid to build a more friendly and convenient investment and financing environment. Third, we will support and promote the healthy development of the offshore RMB market, improve the supply mechanism of RMB liquidity in the offshore market, and enrich RMB product systems in the offshore market to promote a virtuous cycle of the onshore and offshore RMB markets. Fourth, we will enhance the management, risk prevention and control capabilities of cross-border capital flow based on a broader opening-up environment. We will also establish and improve an integrated macro-prudential management framework for the cross-border capital flow of local and foreign currencies to guard against risks related to cross-border capital flow.

That's all about the current progress, situation and our next plan.

Yi Gang:

I fully agree with Mr. Pan's answer; please continue.