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Obstacles and risks remain, say business leaders

(Global Times)

13:33, October 31, 2011

Banking leaders said over the weekend that internationalization of the renminbi would be an "inexorable trend," but that it should not be hurried amid the sluggish growth in Western countries' economies.

"Renminbi internationalization should and must be an inexorable trend, but some steps, including signing currency swap agreements with more countries, should be taken first," Yang Zaiping, deputy director with the China Banking Association, told the Global Times Sunday.

Bankers and financial experts gathered together in Beijing over the weekend for the 2011 International Chamber of Commerce Banking Commission Meeting.

"The renminbi has the potential to emerge as an international currency. But the country has to modernize its monetary system, and launch more investment products to attract foreign renminbi holders," said Murtaza Syed, China resident representative for the International Monetary Fund.

"Just a few months ago, some foreign bankers came to us to enquire about the cross- border renminbi transaction business. They told me that China was seen as a country with stable investment returns, as Europe is facing a sovereign debt crisis and the US is having difficulties in its economic recovery," Feng Shenjiang, general manager of the international business department with China Merchants Bank, said at the meeting.

"One of the major obstacles for the development of renminbi offshore markets is the slow process of yuan interest rate marketization," Feng told the Global Times at the meeting.

Feng also suggested the renminbi could be a currency for fixing the international price of commodities, like the US dollar, because of its stability in the world economy at the moment.

"Providing more channels for offshore Chinese currency to flow back to the mainland market would also be a necessary step for internationalization of the renminbi," said Yang Zaiping of the China Banking Association.

The country has formulized a rule to allow foreign direct investment in renminbi obtained legally overseas, a step aimed at promoting trade and investment by expanding cross-border use of the Chinese currency, the central bank said in a statement published on its website October 17.

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