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Steps outlined as renminbi creeps towards convertibility

Date: 25 Feb 2010

China has liberalised its currency cautiously in recent years, but as its economy grows, pressure to allow the renminbi to become fully convertible will rise quickly. Chris Wright reports.

Keywords (click to search): [renminbi] [convertibility] [Wensheng Peng] [Barclays Capital] [Callum Henderson] [Standard Chartered] [Tao Wang] [UBS] [Shen Minggao]

The year is 2030 and the renminbi is one of the world’s major reserve currencies. Since becoming fully convertible several years earlier, it has been embraced by central banks the world over and is on track to rival the US dollar as the reserve of choice, with China’s economy now approaching the size of that of the United States.

It is a scenario that seems distant today, given that the renminbi is not even convertible. But that will change. Every trend of the past five years suggests that Beijing will continue to make its currency more compliant. And as that occurs, it is almost inevitable that its use by world investors, institutions and central banks will increase dramatically.

“A small economy…will never have an international currency,” says Wensheng Peng, head of China research at Barclays Capital and a former China specialist at the Hong Kong Monetary Authority (HKMA)....

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