A very interesting line up of topics at RMB conference organised by the Asian Banker at the Ritz Carlton in Pudong kicked off to a controversial start with Former Japanese Vice Minister Euseke Sakakibara stating that “Japan will never accept the RMB” as an international currency. He went on to say question why a country would want to internationalise their currency and mentioned it was never Japan’s intention to have the Yen used outside its country. My own thoughts on his statements came out in the form of an article which the Singapore Strait Times graciously published. Read more here
The other interesting themes of the conference touched on topics such as the building of the offshore RMB hubs, the Shanghai Free Trade Zone, the Shanghai-HK connect, the move to liberalise capital controls and the creation of the Asian Infrastructure Investment Bank.
After spending 5 days in Shanghai, it is admirable to me how strategic the Chinese are in planning and implementing. There is no rush nor a frenzy to meet quarterly result which we often see with institutions in the west. The approach is off a chess grandmaster placing all the pieces in the right position in a deliberate and methodical manner.
One of the examples of their strategic approach can be exemplified in how they are building their offshore RMB hubs in key locations in the region and globally. Once the infrastructure is in place, the flows will come. In my view the order will be the following: trade flows will come first and this is already taking place with RMB as a trade currency now in second position after the USD. Following this we will see a move towards RMB used both as an investment currency and a reserve currency. The latter even adopted by the ECB even though the quota is rather small. Finally we should see a move towards using offshore RMB as collateral for major regional OTC transactions. That is yet to come but logically should be the next step as the Chinese move away from the traditional use of USD and US Treasuries as collateral.
with Mr.Sakakibara after the conference