The internationalization of the Chinese yuan RMB needs more ‘applications’, HKEX CEO said

DALIAN, China – For China yuan To be used globally, the currency needs more “applications” such as for stocks and bonds, Bonnie Chan, CEO of Hong Kong Exchanges and Clearing Limited, said at a panel on Tuesday.

Beijing has long touted its ambitions to expand the global use of the Chinese yuan – also known as the “renminbi” or “RMB” – in an international financial market where the U.S. dollar is the dominant currency. US sanctions on Russia have also increased pressure on some countries to have alternatives to the dollar.

Chan noted at the World Economic Forum’s “Summer Davos” meeting in Dalian, China, that people own currency for trade or, more importantly, as a store of wealth.

“We’re not just going to hold a bunch of RMB and put it in this bank account,” she said. “You want to have bonds, you want to have stocks, etc.”

‘One of our strategic imperatives [has] A lot has changed to ensure that we continue to produce more RMB-denominated security products,” Chan said, “so that investors around the world can actually see more applications of the RMB and use it as a medium to store wealth in the economy. form of the RMB.”

Last year the HKEX announced one Program “Dual-Counter”. which allows investors to trade Hong Kong-listed securities in Hong Kong dollars or Chinese yuan.

In a major step toward the internationalization of the yuan, the International Monetary Fund announced in 2015 that it would add the yuan to its basket of reserve currencies the following year.

According to interbank messaging network SWIFT, the yuan was the fourth most active currency by value for global payments in May, accounting for almost 4.5% of such transactions. The US dollar had a share of almost 48%.

In trade finance, the yuan ranked third in May with around 5.1%, according to SWIFT. The euros was slightly higher at 5.6%, while the US dollar dominated with a share of almost 85%, the data showed.

Fred Hu, founder, chairman and CEO of Primavera Capital, said at the same panel on Tuesday that the internationalization of the yuan will likely take longer than many expect, despite an increasing number of statements from Beijing.

Although China is the largest trading nation and has major financial centers, “we are not as big and deep as the US,” Hu said. “In addition, our capital account is also closed, it is not fully convertible, [which] somehow too [is] hindering the internationalization of the renminbi.”

Developing more Chinese yuan-denominated investment products also requires maturing the local financial sector. Part of that includes having a more sophisticated investor base.

Chan said that at the annual Lujiazui Financial Forum in Shanghai last week, almost every conversation with top leaders included the term “patient investing.”

The term has appeared in official publications to encourage long-term investment rather than short-term speculation.

“Patience comes from learning through market volatility,” Kenny Lam, CEO of Two Sigma Asia-Pacific, said during the same panel on Tuesday.

He said policymakers have paid more attention to making their policies more stable and consistent.

Chinese companies have long sought to tap U.S. financial markets for the prestige and greater market liquidity they offer, but increased scrutiny from both Beijing and Washington DC has dramatically slowed such listings over the past three years.

“I think IPOs are essential to attract investors to come back to the market. All the stories around it show that a lot of progress is being made,” said Jonathan Krane, the founder and CEO of KraneShares, also on the panel on Tuesday .

“In the US we see all this innovation, AI and all these companies going public and doing well, and in China we see the same industry, the same innovations happening and those stories should be told through the IPO market,” said Crane. hears that the IPO market will “come back.”

Chinese authorities last week announced a new effort to support IPOs, especially in Hong Kong.

Chan said the Hong Kong stock exchange has received 73 new stock market applications so far this year – a 50% increase from the second half of last year, she said. “The pipeline is building nicely,” she said, noting that a total of about 110 IPOs are in the pipeline. “All we need are good market conditions so that these things can come to market and be priced right,” she added.