A review of RMB internationalisation, investment and financial products with assessment of past trends and discussion of likely future developments

Since 2002 and the start of the Qualified Foreign Institutional Investor (QFII) programme, the Chinese renminbi (RMB) has come a long way. In just a few years, the RMB has been accepted as a major international currency for international trades and payments. It was the fifth most used currency for payments in September 2015 and the second most used currency for trades, being recently included in the International Monetary Fund’s (IMF’s) Special Drawing Reserve (SDR) basket. Although market adoption is real, the RMB remains not freely usable or convertible, which has been compensated by the implementation of a variety of investment channels. Among these are the quotas schemes, Stock Connect, mutual funds recognition between China and Hong Kong as well as the issuance of bonds. On all these markets, convergence can be expected. While much has been done by China already to internationalise its currency and enable easier access to Chinese securities for foreign investors, some additional structural adjustments could still be required, especially providing greater capital account flexibility and developing deeper offshore markets. China’s next challenge might very well be to develop new products in a controlled economy.