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With closer China-ASEAN economic cooperation, Guangxi Zhuang Autonomous Region, the gate of China to the ASEAN countries and a border pilot zone for comprehensive financial reforms, has been in full swing to promote the cross-border use of Renminbi (RMB), and usher in a model for better advancing overall RMB internationalization and capital flow for China's "Belt and Road" initiative.
-- Guangxi pilot zone effectively promotes RMB use in ASEAN region The Yunnan-Guangxi border pilot zone for comprehensive financial reforms was approved by the People's Bank of China, the central bank, in 2013. It includes six cities in Guangxi and nine cities in Yunnan province, covering an area of 317,700 square kilometers with a population of 44 million.
Since its establishment, the pilot zone has effectively pushed forward the opening up of capital market and RMB has been increasingly used in business and trade between China and ASEAN countries.
Peng Qinghua, secretary of the Guangxi CPC committee, said at a sideline forum on China-ASEAN financial cooperation held during the 12th China-ASEAN Expo, Guangxi has currently launched a mechanism to accommodate listed trading of nine ASEAN currencies.
Peng said that foreign banks including the Development Bank of Singapore has set up branches in Nanning and Chinese financial institutions also have established currency clearing and settlement centers in Nanning, the capital city of Guangxi.
Li Zhengyou, vice director of the Directorate Office for Financial Affairs of Guangxi, said in an interview with Xinhua, the ten ASEAN countries have all launched cross-border RMB settlement business in Guangxi, and the scale is the largest among the 12 provinces or regions in western China and the eight provinces or regions along the border of the country. In Guangxi's cross-border trade settlement, RMB has taken the place of the U.S. dollar to be the first currency, with total amount of 156.1 billion yuan in 2014, growing 54 percent on a yearly basis.
The trend of the RMB internationalization not only plays an important role in regional economy but also in the world economy, said Chea Chanto, Governor of the National Bank of Cambodia.
Chea Chanto said the weak world economy would affect central bank reserves anda more diversified portfolio was necessary to reduce risks.
He believed including the RMB in the reserves would help avoid risk and receive more investment returns. He also welcomed China to develop the financial market in Cambodia. More and more people are trading with the RMB outside China now, and Thai government is also promoting use of RMB as have cooperated with China's central bank to improve RMB's liquidity, Amporn Sangmanee, senior director of Reserve Management Department of Bank of Thailand.
-- Guangxi to promote two-way flow of RMB China has picked up several special areas to promote RMB internationalization including the four pilot free trade zones and the border pilot zones, and Guangxi will take its own geographic advantage to carry out more measures to build channels for two-way flow of RMB.
As a milestone of Guangxi border pilot zone development, Guangxi Directorate Office for Financial Affairs, China Construction Bank, Guangxi Beibu Gulf International Port Group, China Construction Bank International signed an agreement to set up a RMB international Investment and loan fund on September 19. Li introduced that the investment and loan fund, which has raised 2 billion yuan, was the third of its kind in China, aiming at supporting Guangxi enterprises to do business overseas.
Special features of the fund are that it raises RMB capital, the fund could be directly invested in ASEAN countries and it could either be investment or loans.
Guangxi will also develop channels for two-way cross-border RMB loans and cross-border equity investment. Moreover, Peng said Guangxi would take out a series of measures to expand operations of the pilot zone, including enhancing cooperation of financial market participants, encouraging ASEAN financial institutions to establish branches in Guangxi to conduct investment and develop financial services with Guangxi financial institutions and companies; establishing cross-border financial service center and information service center; encouraging financial institutions and companies to issue bonds in ASEAN countries; building communication and regulation mechanisms in the pilot zone with ASEAN countries and strengthening crackdown of financial criminal activities to create a favorable environment for financial cooperation.
--Guangxi experience important to overall RMB internationalization Although Guangxi's financial industry only takes up about two percent of China's total financial assets, it has made significant progress in exploring model for financial reforms since the border pilot zone's establishment, and it's believed that Guangxi's experience is important for overall RMB internationalization and promoting capital flow in China's "Belt and Road" initiative. "Guangxi made breakthrough first in establishing RMB-Vietnamese dong exchange rate formation mechanism," said Li.
With supports from China's major banks and local banks, the mechanism is now recognized by the China Foreign Exchange Trade System (CFETS) and the exchange rate quote is widely used in the country. In 2015, Guangxi started to spread the mechanism to other non-convertible ASEAN currencies and formed direct listed trading recognized by the CFETS, said Li.
Zhang Jiashou, director of Faculty of Economics of Guangxi Administrative College, said that top Chinese banks have all introduced currency swaps and established currency exchange centers, which provides new model and experience for "Belt and Road" financing.
Zhang also suggested China expand the scale of currency swaps with neighboring countries based on experience of Guangxi border pilot zone, further open capital market and financial market, promote healthy operation of financial institutions, jointly advance construction of the Asian Infrastructure Investment Bank with other countries and recruit more financial support.
