China is making rapid progress to internationalize its currency, the Renminbi (RMB) as highlighted in a new research commissioned by The Depository Trust & Clearing Corporation (DTCC), and published by Celent, a division of Oliver Wyman.
With the RMB attaining fourth position among all currencies in payments and eighth spot in the foreign exchange market, China is now aiming to gain wider traction as an international investment and reserve currency. As it continues to accelerate economic reforms by internationalizing its currency through progressive relaxation of controls, there are several questions that come to mind for global investors keen to access China’s capital market:
- What are the regional and global developments involving RMB Internationalization?
- What opportunities does RMB Internationalization present to the financial services industry?
- What are the implications of RMB Internationalization for capital market firms?
While RMB internationalization does present opportunities to capital market participants, there are operational hurdles specific to China’s capital markets, including:
- The need to adjust processes and systems to account for the differences between local and global trade processes
- Navigating local complexities
- The accurate interpretation of evolving regulations
According to Celent, establishing industry-wide standards and frameworks to strike a balance between global and local practices will be crucial in solving the operational challenges for capital market firms. Developing internal systems and capabilities to overcome local nuances will likely be operationally difficult and expensive for individual firms; specialist external providers can help them navigate the complexities in a timely and cost-effective way.
Download White Paper: RMB Internationalization: Integrating the Great Wall with Global Capital Markets
News release: Tax and Regulatory Differences, Operational Complexities Remain Challenges for RMB Internationalization