Trade and Investment: New Opportunities for RMB
In recent six months, the continuous appreciation of RMB has brought exchange rate cost pressure to foreign trade enterprises. Following the trend, RMB settlement, as a fundamental measure to reduce the exchange rate risk of enterprises, is accelerating. Since February 4, the Notice on Further Optimizing the Cross border RMB Policy to Support the Stabilization of Foreign Trade and Foreign Investment jointly issued by the People's Bank of China and the Ministry of Commerce and other six departments will be officially implemented, promoting the facilitation of RMB settlement for higher level trade and investment, and further simplifying the cross-border RMB settlement process. RMB settlement accelerated
In recent six months, the continuous appreciation of RMB has brought exchange rate cost pressure to foreign trade enterprises. Following the trend, RMB settlement, as a fundamental measure to reduce the exchange rate risk of enterprises, is accelerating. Since February 4, the Notice on Further Optimizing the Cross border RMB Policy to Support the Stabilization of Foreign Trade and Foreign Investment jointly issued by the People's Bank of China and the Ministry of Commerce and other six departments will be officially implemented, promoting the facilitation of RMB settlement for higher level trade and investment, and further simplifying the cross-border RMB settlement process.
RMB settlement accelerated
In 2020, the RMB exchange rate will keep rising. Sun Guofeng, Director of the Monetary Policy Department of the People's Bank of China, introduced on January 15 that by the end of 2020, the exchange rate of RMB against the US dollar had appreciated 6.9% compared with the end of the previous year, and the appreciation of RMB against a basket of currencies was about 4%.
"The continuous appreciation of the RMB, together with the rising prices of raw materials and the soaring sea freight, is eating into the profits of foreign trade enterprises." Shi Minxue, deputy general manager of the Export Department of Ningbo Ruyi Co., Ltd., said so in an interview with the International Business Daily.
In the face of this situation, the pace of guiding RMB settlement at the national and local levels is accelerating.
By the end of 2020, the amount of cross-border RMB settlement was 4.12 trillion yuan, a year-on-year increase of 26.2%, accounting for 40.1% of local and foreign currencies... This is the economic and financial data of Guangdong in 2020 released by Guangzhou Branch of the People's Bank of China on January 14. Guangzhou Branch has expanded the cross-border RMB higher level facilitation pilot from the Free Trade Zone to Dawan District. By the end of 2020, 563 Guangdong enterprises excluding Shenzhen had been included in the list. In 2020, RMB will become the second largest cross-border settlement currency in Guangdong, and surpass the US dollar to become the first largest cross-border settlement currency in the Guangdong Hong Kong Macao Greater Bay Area.
As a major foreign trade province, it is of great significance for RMB to become the largest cross-border settlement currency in Guangdong. From the national perspective, since 2011, the domestic geographical scope of cross-border trade RMB settlement has expanded to the whole country, RMB cross-border settlement has been on the fast track, which has brought benefits for enterprises to avoid exchange rate risks.
Especially this year, RMB cross-border settlement was "accelerated" again on the fast track. On January 4, the Notice on Further Optimizing the Cross border RMB Policy to Support Stabilizing Foreign Trade and Foreign Investment was released; On January 5, the People's Bank of China and the State Administration of Foreign Exchange decided to raise the macro prudential adjustment coefficient of overseas loans by domestic enterprises from 0.3 to 0.5, and the upper limit of overseas loans by domestic enterprises was raised accordingly.
Industry insiders believe that at the moment when China is vigorously promoting the internationalization of RMB, convenient cross-border RMB settlement policies can effectively promote the use of cross-border RMB in more scenarios. Foreign trade enterprises welcome a favorable opportunity to promote the use of RMB settlement, which will further enhance the willingness of foreign customers to use RMB settlement.
According to the 2020 RMB Internationalization Report released by the People's Bank of China, in 2019, the amount of cross-border receipts and payments of RMB by banks on behalf of customers totaled 19.67 trillion yuan, up 24.1% year on year, which means that the cross-border use of RMB continues to grow rapidly against the trend, and the amount of receipts and payments hit a record high. The RMB ranks fifth among the major international payment currencies, with a market share of 1.76%.
In addition to the favorable policy environment, there is another favorable factor for China to promote RMB settlement: the global willingness to hold RMB and RMB assets continues to rise. The latest Offshore RMB Index (ORI) released by the Bank of China in the first quarter of 2020 shows that, thanks to relatively stable exchange rate performance, relatively attractive asset returns and relatively stable capital market, the intention of holding RMB assets overseas has further improved. At the end of the first quarter of 2020, the balance of RMB deposits in most offshore RMB markets increased. The scale of RMB assets included in official reserve assets by overseas central banks was equivalent to US $221.5 billion, a record high.
New business types are concerned
A closer look at the Notice jointly issued by the six departments shows that there are many highlights, including support for cross-border RMB settlement of new trade formats.
Under the impact of the COVID-19, cross-border e-commerce and other new businesses have developed rapidly. The latest statistical data released by the General Administration of Customs shows that in 2020, new forms of foreign trade will flourish. The import and export of cross-border e-commerce throughout the year will reach 1.69 trillion yuan, an increase of 31.1%, becoming an important force to stabilize foreign trade. It is also more urgent for relevant enterprises to reduce exchange costs through RMB settlement.
Lin Zhiyong, president of Xinguang Digital Trade Research Institute, said in an interview with the International Business Daily that at present, cross-border retail platforms mainly collect money through third-party payment platforms' credit cards, and then conduct foreign exchange settlement and domestic collection services in China. The new policy is conducive to the cross-border e-commerce platform to carry out RMB settlement business.
At the same time, Lin Zhiyong said frankly that at present, cross-border RMB payment mainly meets the needs of bulk trade. With the rapid development of new business formats, more attention should be paid to the RMB settlement of cross-border e-commerce. At present, the main difficulties for cross-border e-commerce platforms to use RMB for settlement are that it is difficult to use RMB for pricing and foreign payment companies have not yet used RMB extensively for settlement. To solve these problems, relevant departments need to launch a package of cross-border RMB payment solutions, such as actively promoting China's payment tools abroad, and encouraging foreign payment platforms to open cross-border RMB payment functions.