The RMB needs a little less conversation
GlobalCapital, is part of the Delinian Group, DELINIAN (GLOBALCAPITAL) LIMITED, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 15236213
Copyright © DELINIAN (GLOBALCAPITAL) LIMITED and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement
Asia

The RMB needs a little less conversation

Silent_Man_230px

Swift’s decision not to publish its monthly RMB tracker with any additional commentary about the long term prospects of the renminbi is refreshing. Other renminbi loyalists should follow suit, and stop trying to gloss over disappointing data.

Since Swift started publishing its RMB tracker in November 2011, the financial services messaging provider has mostly accompanied the data, be it good or bad, with a series of positive comments about the long term potential of the renminbi.

The comments are usually in a press release and also the report. And it tends to go like this — payments may have increased or declined, but the currency remains under-utilised globally and has the potential to develop into a top international currency.

The logic is easy to see. The renminbi was all the rage following China’s decision to end its fixed dollar peg in July 2005, which effectively made it a one-way appreciation bet for close to a decade.

But as it so happens, markets have changed. The renminbi’s appreciation trend started to wobble in 2014 before it shifted to a full reversal following the August 2015 FX reforms. Yet, Swift and a host of other reports, trackers and indices, such as Bank of China’s Cross-Border Renminbi Internationalisation Index and Standard Chartered’s Renminbi Globalisation Index (RGI), have stuck rigidly to the bull case for the currency.

For close to one and a half years after the 2015 reforms, the markets are still hearing about how payments, transaction volumes and issuance might be down, but the renminbi’s long term prospects remain bright.

Everyone in the market gets it — so it’s time to stop with such commentary. A broken clock may be right twice a day, but that does not make it useful. When it comes to the renminbi, the long term prospects of the currency may be bright, but what would surely be more informative would be to focus on the reforms and concrete actions needed to help it reach its potential.

Broad, general comments that many love to make, such as to focus efforts on improving the tradability, usability and convertibility of the RMB, do not count. What really matters in the slowing down of renminbi internationalisation is the Chinese authorities and their use of capital controls. If anything, it is Beijing that is looking to restrict cross-border money movements.

So if there really isn’t any good news for the renminbi evangelists to pick up, then perhaps it would be sensible to follow Swift’s approach to its latest RMB tracker released this week, which is brief and to the point. Swift had not responded to questions from GlobalRMB at the time of writing. 

Swift has also decided not to release a monthly press release regarding the RMB tracker anymore. Other staunch supporters of the renminbi should take note.

Gift this article