US Fed's QE2 affects RMB's internationalization

08:43, December 02, 2010      

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RMB may face a roadblock on its way to internationalization. Since the US Federal Reserve's second round of quantitative easing, the US dollar has been on the fast track to depreciation this month. And it's not just the greenback going down.

After the Federal Reserve decided to essentially print money in QE2, many currencies have strengthened against the greenback. Its effect on the value of the Chinese yuan hasn't been especially great, but it has been affected in other ways.

Experts say quantitative easing will complicate the internationalization of RMB. Confronted with greater fluctuations in the international FX market, Chinese experts are giving advice on how to avoid risks.

Zhong Wei, Professor of Beijing Normal University said "Judging from US economic growth over the past two quarters, and expectations for next year... I'm suggesting that Chinese investors focus more in yuan-denominated assets. I think it is more profitable than foreign-denominated investments. "

Given the uncertainties in the global market, the Chinese economy has been very stable. Although the RMB is not a freely convertible currency, it is starting to be accepted by companies and people in Southeastern Asia. Therefore, the internationalization of RMB has again, become the center of attention.

Zhong Wei said "During the 12th five year plan, or 10 years ahead, I believe the internationalization of RMB will be accelerated. It will be a natural result if the Chinese economy remains stable."

Even though China's Central Bank has not fully opened the interbank market to foreign investors, it has enacted rules allowing foreign entities to open bank accounts that can be used to accept and make payments in RMB. The new measure is expected to further expand the investment channels of the RMB abroad, and lay a solid foundation for the internationalization of RMB.



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