New research shows that many expect European offshore centres to have a key impact on global liquidity for the renminbi (Rmb) in the future.
More than half (61%) of 24 respondent firms surveyed in Clearstream and Aite Group’s new report Offshore Centres and Renminbi: Weaving a Web for the Redback, believe Europe’s highly developed financial infrastructure is the primary appeal of the region and will be essential to clearing offshore Rmb-denominated products.
The research suggests many industry participants see 2020 as a turning point for the Rmb as an international currency: the point at which full convertibility at a global level is likely.
“Many of those we have spoken to believe Europe as a whole will eventually co-operate to foster offshore liquidity in Rmb, while only the minority now predicts Europe will fail to garner enough liquidity,” says institutional securities and investments senior analyst at Aite Group, Virginie O’Shea.
The percentage of global trade settled in Rmb rose from 1.9% in January 2012 to 8.7% in October 2013, making the currency now the second most used for trade finance worldwide. The Chinese government’s 2012 decision to lift the remaining restrictions on importing and exporting firms regarding trade settlement in Rmb is thought to have increased the currency’s influence.
Operational issues remain the biggest barrier to Rmb in trade finance and payments, according to the report. 32% of respondents are concerned with translation issues while 32% foresee a lack of clearing broker readiness for operating in the currency.
“It will be a long road and there are still questions about whether full convertibility of the currency is a prerequisite for further significant progress to be made,” says O’Shea.