US RMB Yuan Trading, Clearing Advocates Rally the Need

US RMB Yuan Trading, Clearing Advocates Rally the Need

US RMB Yuan Trading, Clearing Advocates Rally the Need

The US market’s USD-centric approach is changing with the RMB Yuan becoming more internationalized.

The heads of a US working group formed to push use of the Chinese currency in the United States claim that expanding RMB trading and clearing there will help both the Chinese and US economies.

Mary Schapiro, vice chair of the Working Group on US RMB Trading and Clearing, said in an interview Saturday that demand for RMB in the United States is on the rise.

Chinese and US leaders agreed in Washington in September that the 2 countries should strengthen financial cooperation and facilitate RMB trading and clearing in the United States.

Shortly afterward, former New York Mayor Michael Bloomberg led the formation of the working group from senior members of the private sector.

Co-Chaired by former US Treasury Secretary Timothy Geithner, former Secretary of the Treasury Henry Paulson, as well as President/CEO of the US Chamber of Commerce Thomas Donohue, the group has 22 members including leading international financial institutions, 5 Chinese banks and the US Chamber of Commerce.

“Having trading and clearing of the RMB in the United States will enhance the competitiveness of US companies, lower transaction costs and increase efficiency,” Ms. Schapiro said.

“It can help them build stronger trading relationships and business partnerships with China and should encourage more bilateral trade and investment.”

The working group has surveyed US companies and traders on current and potential RMB Yuan demand and released initial observations in early April.

“Right now, the demand for RMB in the United States is not as high as we expected, but we think there is tremendous potential for demand to increase,” Ms. Schapiro said.

In January, the RMB Yuan was the 5th most active currency for global payments by value and accounted for 2.45% of global payments, a slight increase from 2.31% in December 2015, according to data from the Society for Worldwide Interbank Financial Telecommunication, a global financial data provider.

The US market’s USD-centric approach is changing with the RMB Yuan becoming more internationalized.

He said the working group is preparing for a multi-currency world which would include the RMB Yuan.

Everyone agrees that the future importance of the RMB Yuan is going forward, and thus needs to provide trading centers to convert that.

China has set up offshore RMB trading hubs in Hong Kong, London and Toronto so far.

“We keep talking about hubs and spokes and wheels, but we are not reinventing the wheel entirely in the United States,” Ms. Schapiro said. “We hope the experience that China had with different hubs allows us to move more quickly.”

She characterized financial institutions in the United States as more diversified than in other locations. That adds complexity to the mechanism.

The working group is aiming to produce a final report to regulators in June that would lay out a road-map for how to strengthen access to RMB Yuan in the United States.

China has been aggressively pushing for the RMB Yuan’s global use, as the Chinese economy is becoming increasingly intertwined with the rest of the world.

In November, the International Monetary Fund (IMF) approved the inclusion of RMB Yuan into the Special Drawing Rights (SDR) basket, recognizing its position as an international reserve currency.

Although the RMB Yuan has gained more popularity, its activity share remains small compared with the USD, the Euro, the GBP, and the Japanese Yen.

By Mu Xueqan

Paul Ebeling, Editor

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