The UK government has issued the western world’s first 3 billion sovereign bond in China’s renminbi (RMB), becoming the largest ever RMB bond issuer in foreign countries.

George Osborne, Chancellor of the Exchequer in Britain observed that they have taken the step in making London - already the global centre for finance - a major global centre for trading and investing in the Chinese currency too.

Chinese Premier Li Keqiang signed a package of agreements on RMB trade and currency cooperation with Germany, Russia and Italy. Furthermore, Li said on Oct.11 that China supports the establishment of an offshore RMB market in Luxembourg when he met Prime Minister of Luxemburg Xavier Bettel.

Firstly, it is a sign that the market is in need of RMB. With the continuing growth of China's comprehensive national power and the refinement of the exchange rate formation mechanism, both the Chinese market and the international market are in growing need of RMB.

In April 2014, RMB became the seventh currency for intenational payments, following U.S. dollars, Euros, British pounds, Japanese yen, Canadian dollars and Australian dollars. It is worth noting that the payment scale in RMB increased by 327 per cent in the U.S. last year, making America the fifth laregest market of RMB payment in the world, following Chinese mainland, Hong Kong, Singapore and Britain.

With the help of the Shanghai-Hong Kong stock trading linkage, the expansion of QFII and RQFII, and free exchange between RMB accounts in the Shanghai Free Trade Zone, market demand will be satisfied in respect of trade settlement and investment reservation.

Secondly, the international community has confidence in the RMB. The Peterson Institute for International Economics (PIIE), a U.S. think tank, released a report last year saying that the RMB has gradually become a dominant reference currency as Europe and the U.S. are being dragged down by financial crisis. Currencies in South Korea, Indonesia, Malaysia, Singapore and Thailand are more closely connected with the RMB than America.

Whether a country is strong not only depends on national economic scale and power, but also on international confidence in its currency. The world has every reason to be confident in the RMB due to Chinese political stability, sustainable economic development, and effective control of monetary aggregates in China.

Thirdly, fundamentally, the international community has confidence in the Chinese economy. Since the beginning of 2014, influenced by numerous elements including the U.S. dollar regaining its value due to America's curb on QE, and the slowdown in the transformation of economic structure in China, there has been a decrease in China's economy and the RMB has depreciated. Some commentators have expressed negative expectations towards China's economy.

Actually, there has been no degradation in China's economy. The slowdown of economic growth is a normal effect of economic structural transformation and the improvement of the quality of economic growth in China. China's foreign trade is increasing steadily and China maintains a balance in international payments. There is no basis for RMB depreciation. Therefore, there is no likelihood of long-term depreciation. China is more than capable of managing its economy and withstanding any risks. Although facing numerous uncertainties, China will keep its economy on the rise.

The article is edited and translated from《世界有理由对人民币有信心（望海楼）》, source: People's Daily Overseas Edition, author: Shi Jianxun, Director of the Institute of Finance and Economics at the Shanghai-based Tongji University.