KUALA LUMPUR: The renminbi is on the road to becoming an international currency and countries in Asia, including Malaysia must be ready for this transition, warned Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz.
Its potential role as a global reserve currency will have significant global implications.
â€œThe renminbi is no longer an Asian story, but it has now become a global story,â€ she told HSBC Reminbi Forum â€œRenminbi and Chinaâ€™s Global Futureâ€, she told The New Straits Times this morning.
It reflects Chinaâ€™s importance and influence in the changing contour of the global economic and financial landscape, and the steps that have been taken to enhance its international role.
Malaysia was one of the earliest countries to recognise the potential role of the greater cross-border use of renminbi.
â€œGiven Chinaâ€™s significance as Malaysiaâ€™s largest trading partner, the settlement of trade and investment in renminbi significantly lowers costs and promotes greater cross-border trade and investment activity.
â€œFund-raising activity in renminbi has become a means for Malaysia to utilise the renminbi liquidity obtained through trade settlements.
â€œMalaysia has a comparative advantage in this area, as the largest debt securities market in Southeast Asia and as a leading centre for sukuk issuance.
â€œBank Negara was the first Asean central bank to sign a currency swap agreement with the Peopleâ€™s Bank of China (PBC) in 2009 and also went on to be the first Asian central bank to become a QFII investor and among the first wave of foreign investors in CIBM (China Interbank Bond Market). The ringgit is also among the first emerging currency to be directly traded with the renminbi in the China Foreign Exchange Trading System (CFETS). This year the Bank of China Malaysia was appointed as the renminbi clearing bank in January 2015.
â€œGoing forward, Bank Negara will work towards further enhancing financial co-operation with PBC in the area of Renminbi Qualified Foreign Institutional Investor (RQFII) to provide an alternative avenue for Malaysian investors to invest in onshore Chinese financial markets,â€ Zeti said.
She said the use of renminbi in Malaysia has grown rapidly, with the daily size of renminbi foreign exchange volume at 6.7 billion renminbi. Malaysian institutions and corporations such as Khazanah, Cagamas, Axiata and Maybank have issued renminbi bonds.
With the various renminbi financial infrastructure that has been put in place to support trade, investment and financial flows between Malaysia and China, this trend is expected to increase.
â€œMalaysian entities with large regional network should consider using Malaysia as the centre for their regional renminbi transactions and thus contribute towards greater economies of scale over time,â€ she said.