RMB becomes more powerful in regional finance system
Chinese central bank announced on Tuesday that the amount of swapped currency included in the bilateral currency swap agreement between China and Indonesia has increased to about 4 billion US dollars, doubling the previous figure. Analysts say this shows that China has played a more important role in maintaining the stability of the regional finance system. It is expected that Renminbi will become a more powerful currency in regional finance system in future.
In December 2003, China and Indonesia signed a bilateral currency swap arrangement, and the total amount of swapped currency included in that agreement was 1 billion US dollars. In October 2005, when the two countries re-signed the agreement, the amount of swapped currency had increased to 2 billion US dollars.
Economists have suggested that Asian countries should establish a regional financial cooperative scheme possibly in four ways: The first is to establish a regional currency fund system; the second is to set up an exchange rate administrative system in the Asian region; the third is to set up a regional trade settlement system. Some experts also suggest that a regional currency system should be set up that takes a specific currency as the core currency in the system. Under this system, most people think that Japanese yen and Chinese yuan are the two most probable currencies to take the role.
Previously, when talking about the basket of currencies to which Renminbi refers, Chinese central bank governor Zhou Xiaochuan encouraged businesspeople to use more local currencies, not US dollar, for bilateral trade settlement.
Pushed by the central banks of China and Russia, the two countries started to use local currencies for bilateral trade settlement since January 1, 2005. Previously, China and Russia had only accepted US dollar for their bilateral trade deals.
At present, Renminbi has already become the major currency for border trade deals in countries such as Mongolia, Vietnam, Myanmar, Nepal, etc.
When Renminbi is greatly needed by neighboring countries, its influence in Asia is also greatly increased.