This country that has not established diplomatic ties with China will give the renminbi a “title”.

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This country that has not established diplomatic ties with China will give the renminbi a “title”.

2018-06-08 00:25:16 126 ℃

Writing Authors | Zhao Meng Editors | Dong Xin

The official website of the China-Africa Cooperation Forum recently quoted foreign media sources as saying that China is in Africa. The economic influence is growing day by day. The Central Bank of Zimbabwe recommends that southern and eastern African countries use the renminbi as a reserve currency.

This is the case.

From May 29th to 30th, the Eastern and Southern African Institute of Macroeconomics and Financial Management (MEFMI) organized a seminar on “National Foreign Exchange Reserve Management” in Harare, Zimbabwe. At the meeting, officials from the Central Bank of the 14 African countries and the Ministry of Finance discussed the feasibility of using RMB as reserve currency in the region.

So what can this account explain? Is it a good thing for African countries to use the renminbi as a reserve currency for China? What does it mean for the dollar?

14 countries including unsettled Swaziland

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First talk about these 14 countries.

MEFMI, the organizer of this seminar, has 14 member countries, including Angola, Botswana, Burundi, Kenya, Lesotho, Malawi, Mozambique, Namibia, Rwanda and Swazi. Lan, Tanzania, Uganda, Zambia and Zimbabwe.

Is there a country looking a bit familiar?

Yes, you read it right, that is, Swaziland, the only one on the African continent that did not establish diplomatic ties with China and had just been called by Foreign Minister Wang Yi a few days ago. The king will go next week.” Visits to "Taiwan's countries also participated in the discussion.

Dr Swazi King of Swaziland III

The story of this country is available The chance to say it again.

Back to MEFMI, the Institute for Macroeconomics and Financial Management in Eastern and Southern Africa, with the exception of Swaziland,Among its members are also countries with close cooperation with China and people familiar with it, such as Tanzania, Zambia, Kenya, and Zimbabwe.

MEFMI spokesperson Gladys Sevela-Jadaggu said that most countries in MEFMI have loans or donations from China, so for them, using RMB to pay off debt has an economic significance.

Moreover, Gladys Sievera-Jadadgu also said that the Chinese renminbi has become a "common currency" in trade with Africa.

From "common currency" to "reserve currency"

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What is a common currency?

Intuitively, the euro is a typical common currency, and it is a common currency used by 19 countries in Europe, including Germany, France, and Italy.

For example, in 2016, the use of RMB payments in South Africa increased by 65%. In Zimbabwe and Angola, they also recognized the renminbi as the legal currency.

Why are these African countries using the renminbi as the country's "reserve currency"?

The word reserve currency sounds a bit professional, and the government should first explain its definition.

The reserve currency is the currency that countries use as foreign exchange reserves. It must be a freely convertible currency and is widely used internationally for pricing and payment settlement. Such as the dollar, pound sterling. You can also think of reserve currency as "hard currency."

As for the role of the reserve currency, Zhengqiu (Weixin ID: upolitics) specifically consulted Xiong Aizong, an assistant researcher at the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.

He said that one of the roles of the reserve currency is to intervene in the foreign exchange market to maintain the stability of the exchange rate of the national currency; the reserve currency can also make up for the balance of payments deficit and adjust the balance of payments imbalance; in addition, the reserve currency can be paid Domestic foreign debt is the basis and guarantee for a country’s external borrowing and repayment.

The just-mentioned MEFMI spokesperson Gladys Sevela-Jadaggu said that of the 14 member countries, most foreign exchange reserve currencies are based on U.S. dollars, butSuch foreign exchange reserves cannot keep up with the current trend of world economic development.

She said that China is the largest trading partner in more than 130 countries. Now, the main challenge facing African countries is how Benefit from the new international trade pattern.

What is the role of RMB in Africa?

Actually, for these 14 countries, this is not the first time they have considered renminbi as their own reserve. currency.

Dongji (Weixin ID: upolitics) noticed that the UN magazine "Africa renewal" reported on the phenomenon of "RMB" entering Africa in 2014. The article pointed out that the growing trade between China and Africa has provided abundant soil and demand for cross-border settlement of RMB. Even though the use of the renminbi in Africa is still limited, the renminbi is indeed gradually entering the African market.

As for the specific performance of the renminbi's entry into Africa, the Economic Daily has also made relevant reports.

According to reports, the South African Reserve Bank began investing in RMB bonds as early as 2013. Eight African countries, including South Africa, Nigeria, Kenya, and other major economies have included the renminbi in their foreign exchange reserves. For example, in Tanzania, the renminbi accounts for 5% of its foreign exchange reserves.

At the African Central Bank Summit in the past two years, the central banks of various countries have also expressed their keen interest in using renminbi investment and financing.

△On July 13, 2016, at the Standard Bank Kenya Branch headquarters in Nairobi, Kenya, the then Chinese resident in Kenya Ambassador Liu Xianfa (left) and the president of Standard Bank Kenya Branch Philip Audra (right) attend the ceremony for the free exchange of Renminbi cash.

There is Zimbabwe which has just been repeatedly mentioned by Zheng Lizhi (weixin ID: upolitics).

When it comes to this matter, the 14 African countries discussed together to consider the “RMB” as a reserve currency. What does this mean for Africa and China?

Executive chairman of the MEFMI Research Institute, Kellebe Fontaine, said several days ago that more African countries will include RMB in reserve currencies in the future, which will provide more business contacts between African countries and China. convenient.

Vanessa Rossi, an analyst at Oxford Analytics, told the Russian Satellite News Agency that the rise in the popularity of the renminbi as a reserve currency was due to the weakening and uncertainty of the traditional currency, and China’s economic growth in the world economy. Dominated in trade.

Rossi believes that Africa's "climbing" of the renminbi is following the trend of the world and increasing the weight of the renminbi in their foreign exchange reserves. However, this does not mean that the Chinese people "occupy" Africa. The renminbi will not completely replace the US dollar and become the key reserve currency for African countries.

Although Zimbabwe is still an example, although the renminbi is also a currency in circulation and the supply of US dollars has been reduced locally, at least so far, the U.S. dollar remains the most widely traded foreign currency in Zimbabwe.

Internationalization of RMB

After talking about Africa, look back at ourselves.

Liu Dongmin, director of the International Finance Research Office of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, told the government that (Weixin ID: upolitics) this move by 14 African countries is undoubtedly a good thing for China. .

Why?

This has to mention the old-fashioned question of "internationalization of the renminbi."

Although the process of internationalization of the renminbi began in the 1990s, the reference to the official level was from 2008.Beginning of the year.

“A series of experiences and lessons learned after the outbreak of the global financial crisis in 2008 made the Chinese government aware of the economic risks and political dilemmas that it is highly dependent on the US dollar in its foreign economic activities. Since then, the Chinese government has begun The process of internationalization of the renminbi was formally initiated,” said Xiang Anbo, a researcher at the Development Research Center of the State Council, in a paper.

  • Since 2009, the People's Bank of China has established and improved a policy framework and infrastructure to facilitate the cross-border and international use of the renminbi, and the international use of the renminbi has steadily expanded.

  • On October 1, 2016, the official inclusion of the RMB in the IMF SDR currency basket was an important milestone in the internationalization of the RMB.

  • Since 2018, the renminbi cross-border use policy has been further optimized, related infrastructure has continued to improve, and the internationalization of the renminbi has made new progress.

Key to the 2016 event.

In June last year, the European Central Bank has increased its equivalent foreign exchange reserve of 500 million euros through open market operations. Earlier, the German central bank also stated that it plans to hold part of its foreign exchange reserves in the form of renminbi assets. Earlier this year, France also stated that it has already held some RMB foreign exchange reserves. This time, Africa is also discussing the inclusion of the renminbi in the reserve currency.

Is this series of changes related to the renminbi's inclusion in the SDR currency basket?

Xiong Aizong said that there is no causal relationship between the yuan's "taking into the basket" and being used as a reserve currency by related countries. However, other countries' use of the renminbi as a reserve currency can be said to be a chain reaction of the yuan's entry into the basket. In addition to being a reserve asset, the renminbi will also play a greater role in pricing units and trading media in the future.

Over 60 countries have included RMB in "Forex Reserves"

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Take a look at the current internationalization of RMBshape.

The “Central China’s Monetary Policy Implementation Report for the First Quarter of 2018” published by the Central Bank last month showed that, according to the statistics of the Global Banking Finance and Telecommunications Association (SWIFT), the RMB was at the end of January 2018 The fifth largest payment currency in the world, with a market share of 1.66%.

In addition, according to incomplete statistics, more than 60 overseas central banks or monetary authorities have included the RMB in official foreign exchange reserves.

Then the question is coming. In the future, will the renminbi replace the status of the dollar?

Xiong Aizong said that the renminbi is not intended to replace the US dollar, but it is intended to use this to promote international currency diversification and further promote the stability of the international monetary system. At present, there is still a large gap between the renminbi and the U.S. dollar. The internationalization of the renminbi provides an extra choice for the world, especially emerging and developing countries.

However, the rise of the renminbi and other currencies has indeed brought about some pressure on the US dollar and can urge the US dollar to implement a more responsible international monetary policy, thus enhancing the stability of the international monetary system.

Information | People's Bank of China, Ministry of Commerce Website, Ministry of Foreign Affairs Website, Xinhua News Agency, UN Website, Russian Satellite News Agency

Correcting|Li Wei >