Five years after the last round of evaluation, the IMF finally approved RMB to enter SDR.
Lagarde, managing director of the International Monetary Fund, said at a news conference: "RMB's entry into SDR will be an important milestone for China's economic integration into the global financial system, which is also a recognition of the progress made by the China administration in the reform of the monetary and financial systems in the past few years."
According to the latest report released by IMF, the existing SDR currency basket will be maintained until September 30th, 20 16, and the new SDR currency basket containing RMB will be launched on October 30th, 20 16. This is to make SDR users have more certainty and predictability, and make technical adjustments by using interval time.
In an exclusive interview with China Business News, Lagarde said, "The China government understands that RMB joining SDR is not for temporary self-promotion, it is a process." Although RMB still has a long way to go to become a truly global reserve currency, joining SDR is undoubtedly a new starting point for RMB and China's financial market to enter the international stage.
Long-term foreign exchange reserves or flows to RMB
Undeniably, RMB's entry into the WTO will not immediately trigger the flow of funds to RMB. At present, central banks around the world hold about $282 billion in SDR units in their foreign exchange reserves. If RMB is included in SDR, the most direct significance is that RMB is also an acceptable currency if IMF members decide to exchange SDR units with another member.
However, the mainstream view is that obtaining the qualification of "international reserve currency" means that foreign exchange reserves will flow to RMB in the medium and long term. At present, the RMB accounts for a small proportion of global foreign exchange reserves, accounting for only about 1.3 trillion US dollars of global reserve assets. UBS predicts that if the share of RMB rises to 5% by 2020, it may mean that about $80-1000 billion of capital will flow into RMB every year in the next five years.
Desmond Fu, an analyst with Western Asset, an asset management company, told China Business News: "The entry of RMB into SDR marks the IMF's recognition of the rising status of RMB in the global financial market. In the long run, global central banks may further increase their holdings of RMB assets. In addition, in order to strengthen regional financial stability, bilateral swap arrangements between RMB and other countries' currencies will be further increased to avoid excessive dependence on the US dollar, and partial' de-dollarization' is also an effective way to isolate exchange rate risks. "
The RMB will not depreciate sharply in the future.
Recently, the offshore RMB has been devalued continuously, which makes the exchange rate trend attract attention from all walks of life again. Many institutions believe that the RMB will not depreciate sharply after entering SDR, but it may weaken moderately against the US dollar in the short to medium term due to the Fed's interest rate hike, but it is generally controllable.
Sheng Songcheng, director of the Survey and Statistics Department of the People's Bank of China, wrote in an article on June 26th 165438+, "In the last decade, China has never let the RMB appreciate, and most of the time, the RMB is undervalued. Even if there is depreciation pressure in the short term, the depreciation will not be too great. "
In Sheng Songcheng's view, the long-term appreciation trend of China's exchange rate has not changed. "At present, the interest rate in China is much higher than that in the United States, and the spread between China and the United States will still exist in the future." Under the condition that the long-term appreciation trend of RMB has not changed, the internationalization prospect of RMB is broad. Sheng Songcheng suggested increasing the scope of RMB use, and it is necessary to further expand the RMB financial market.
Deutsche Bank believes that the China government will not allow the RMB to depreciate sharply this year. As the market expects the Federal Reserve to raise interest rates in June 5438+February this year, the devaluation of RMB may trigger financial market shocks, which will adversely affect China's economy.
"Before taking the next exchange rate measures, the Bank of China will wait and see the impact of the Fed's interest rate hike and consider the possible risks in emerging markets." Deutsche Bank said.
As far as investment is concerned, UBS maintains a cautious view of the RMB against the US dollar. "With the strong support of the US economy, the Fed may raise interest rates for the first time since 2006 in 65438+February. On the contrary, the Bank of China is expected to continue to cut interest rates to boost the slowing economy. In view of the differences in macroeconomic and monetary policy prospects between the two countries, we estimate that the target prices of the US dollar against the RMB in the next 3, 6 and 12 months are 6.5, 6.6 and 6.8 respectively. "
China's bond market still needs to be further opened.
From the recent measures taken by Bank of China to relax the entry of overseas financial institutions into the bond market, it can be seen that the opening of the bond market is an important step in the internationalization of RMB.
Deutsche Bank believes that the next challenge facing China is how to make the domestic bond market more attractive to foreign investors. "The RMB bond market needs to show higher liquidity and transparency, so that RMB assets can become a realistic choice for global central bank reserve management. We should strengthen the infrastructure construction of the bond market to help foreign investors participate. Although the improvement of market infrastructure has a long way to go, RMB joining SDR will play a catalytic role and accelerate this process. "
It is worth noting that the internationalization of the bond market requires both "going out" and "please come in". Overseas RMB dim sum bonds have been a key step to "go global", and encouraging more overseas institutions to issue "panda bonds" in China is also a key link to "please come in". When the financing channels of overseas institutions continue to expand, more institutions are willing to participate in bond market transactions, which is conducive to promoting the opening up of the market.
Ji Mo, Asia Chief Economist of Asset Management Company of Credit Suisse Oriental, also told China Business News that "RMB's entry into SDR will also accelerate the opening process of domestic bond market, and China's national debt is attractive in terms of absolute returns and arbitrage space. China's bond market is about 40 trillion yuan, with foreign investment accounting for only 2.4%, which is far from India (4.8%), South Korea (6.6%), Thailand (8.5%), Malaysia (19.7%) and Indonesia (36%). Increasing the openness of the domestic bond market will also promote the dim sum bond market in Hong Kong and may ease the pressure of capital outflow. "
A RMB bond fund managed by Andy Seaman, a partner and fund manager of Stratton Street Capital in London, has recorded a return of 65,438+065,438+00% since its establishment in 2007. He told China Business News: "With the increasing demand of China investors for asset allocation, global bond funds will allocate more RMB-denominated assets. Compared with the importance of China in the global economy, the current international allocation is obviously far from enough. China officials may also respond to the desire of international investors to enter the China bond market. At the same time, RMB's participation in SDR will form an open reversal mechanism, promote China's opening of the bond market and increase the use of RMB. "
Long-term or enhance the attractiveness of the China stock market
What attracts people's attention is whether RMB joining SDR can enhance the attractiveness of China stock market to foreign investment.
According to Luo Yi, chief analyst of Huatai Securities, RMB internationalization can be described as a "catalyst" in the capital market. "The internationalization of RMB represents the promotion of the status of the whole financial system and the increase of opportunities to make money on behalf of the financial system. As foreign capital continues to enter China, it means that the equity market will be continuously allocated. "
However, the words of Kevin Gardiner, global investment strategist of Rothschild Wealth Management Company, almost represent the attitude of most foreign investors towards A shares. He told China Business News: "SDR is more symbolic. In the long run, it will stimulate investors' interest in the A-share market, but it may not have an immediate effect in the short term, and everything is gradual. "
"I am optimistic about China's economy, but I am still cautiously optimistic about A shares. Because A-shares set price limits, liquidity is difficult to control, and funds cannot be withdrawn in time; In addition, although the market has stabilized at present, A shares have been adjusted back by about 30% from the high level, but I still think that the valuation of A shares is expensive, and offshore markets such as Europe and the United States may be more attractive to foreign investment. " Kevin Gardner said.
It can be seen that the establishment of a truly international and mature A-share market depends not only on the endorsement of SDR, but also on whether A-shares and even the whole China financial system can further improve their own mechanisms and increase their openness, which is also related to whether A-shares can be included in MSCI Emerging Markets Index in the future.