China Review News (CRN) recently published a commentary in which it attempted to summarize the core accomplishments of the effort to internationalize the Chinese currency, the RMB. First, as an important element of the overall effort, marketization of the domestic interest rate made significant progress. This is one aspect of the market that had a high expectation. However the reform is still incomplete; for example, there is a lack of personal savings insurance. Second, the RMB exchange rate is having a bigger floating range (against US Dollar) and is more market-oriented. Offshore RMB exchange and trading centers are being established in addition to that in Hong Kong. Competitors include London, Paris, Taiwan and Singapore. Third, capital account openness reforms are also under way, though slowly. This is a major step towards a fully exchangeable currency. It also exposes a weaknesses of the Chinese financial system to the external world. China does not have a complete law and enforcement system for that matter. Lastly, China has signed multiple nation-to-nation currency exchange and settlement agreements with some key countries such as the BRICS countries and Australia.
Source: China Review News, February 22, 2013