Source: Li Jianqiu’s world (id:lijianqiudeshijie)
There are two news about RMB in these two days, which are as follows:
On June 27, the people’s Bank of China and the bank for International Settlements (BIS) signed an agreement to participate in the RMB liquidity arrangement (rmbla). The RMB liquidity arrangement is a financial institutional arrangement initiated and designed by the bank for International Settlements, which aims to provide liquidity support to the central banks participating in the arrangement when the financial market fluctuates by building a reserve fund pool.
The people’s Bank of China actively participated in the design of the arrangement. Other first participants include the Central Bank of Indonesia, the Central Bank of Malaysia, the Hong Kong Monetary Authority, the monetary authority of Singapore and the Central Bank of Chile. The RMB liquidity arrangement is jointly funded by all participants, and the paid in capital of each party is not less than 15billion yuan or the equivalent US dollars. When there is a liquidity demand, participants can not only withdraw their contribution, but also borrow short-term funds from the reserve pool with qualified collateral.
Another is: on Wednesday, June 29, India’s largest cement manufacturer, chaoke group, purchased coal worth about 172 million yuan from Russia’s Siberian coal energy company. This transaction was paid in RMB.
We used to think that the internationalization of RMB is a domestic thing, but now, the internationalization of RMB is not a thing for China, but a thing that many countries want China to do. Let’s analyze these two news:
The first is the agreement on RMB liquidity arrangement. During the Asian financial crisis in 1997, countries had liquidity problems, but it was the dollar problem at the beginning. For many countries, especially small countries, liquidity has always been the sword of Damocles, and I don’t know when it will fall. Sometimes it’s not even a national problem.
Taking the Asian financial crisis as an example, the reason is actually that there is something wrong with the Japanese economy. In 1995, the US dollar was exchanged for about 80 yen, and then the yen continued to depreciate, all the way down to 148. Such a sharp depreciation led to the devaluation of Asian currencies, which attracted wolves. Soros and others began to attack the Thai baht, which depreciated significantly, and then attacked a large number of Southeast Asian countries, including the Indonesian rupiah, The ringgit in Malaysia caused the bankruptcy of South Korea, a large amount of dollars returned to the United States, and the accumulated wealth of Asian countries for decades was looted.
97 the Asian financial crisis did not happen suddenly, but the yen devalued all the way from 1995, and finally the situation got out of control. Later, China came forward, promised not to devalue the RMB, resisted, and finally stabilized the entire Asian currency.
During this period of time, we have also seen that it is the continuous depreciation of the yen, so some people are very worried about whether this depreciation of the yen will make Asia suffer a tragedy again. At present, the depreciation of the yen has caused dissatisfaction among Asian countries, but now Asian countries will be different from that in 1997. Countries have a large amount of foreign exchange reserves, and have taken precautions early. The most important thing is, Japan’s share of the Asian economy in 1997 is completely different from that of today.
The probability of another Asian financial crisis is not high.
But there are several problems with the yen. Let’s talk about them separately:
First, the problem of yen arbitrage. Due to the low interest rate and relatively free finance in Japan, many people borrow cheap yen to exchange for dollars, and then invest in the assets of other countries for arbitrage. In addition, it will also add the factors of yen depreciation to make more money.
For example, at present, the interest rate in Japan is very low. I first borrow 100million yen and change it into US dollars. Assuming that the exchange rate is 1:115 at this time, I make profits by investing in financial products in other countries. After a period of time, I change US dollars into Japanese yen. At this time, the exchange rate is already 1:135. I not only make profits in financial products, but also earn 20 yen for every US dollar in the exchange rate.
In the past, these arbitrage people were generally Japanese housewives, and the financial industry gave them a nickname: Mrs. Watanabe. Later, more and more arbitrage, and a large number of institutions also participated in arbitrage.
However, once the Bank of Japan suddenly turns hawk, the yen will appreciate significantly. At this time, the whole arbitrage will reverse. It is necessary to immediately abandon the financial products in hand and exchange the US dollar for yen to repay the debt. When selling financial products, it will lead to a substantial depreciation of financial products and trigger global financial shocks.
The second is that the Bank of Japan allows the yen to depreciate regardless, which will make the institutions shorting yen and Japanese bonds all over the world intensify their shorting efforts. If the yen depreciates to a certain extent, or even out of order, it does not rule out that Japan’s local institutions lose confidence in yen and Japanese bonds and join the ranks of shorting yen and Japanese bonds. At that time, it is hard to say whether it will cause the credit crisis of the Japanese government.
And once Japan goes wrong, it is self-evident how much impact it will have on the whole Asia. Asia must have a mountain to withstand the risks brought by Japan, just like the 1997 Asian financial crisis in that year. If Japan has credit problems, for many small countries, even if their own finance is perfect, they may not be able to withstand this impact.
Therefore, it is not only the will of China to go out, participate in the RMB liquidity arrangement and expand the use of RMB, but also beneficial to all Asia and many of China’s trading partners. When the financial crisis strikes again and the vultures on Wall Street come out again, the RMB can act as a sea God, just like the 1997 Asian financial crisis.
The second is about circumventing sanctions.
It is self-evident why Indian cement manufacturers use RMB to settle their purchases of Russian coal. At present, Russia’s energy products and food products are still very popular internationally, but Russia has been kicked out of swift, so Russia must find another way to pay.
Finance is essentially based on trust. The exchange rate of both the Russian ruble and the Indian rupee is not very stable, especially the Indian rupee. This time, Indian cement merchants’ RMB payment has been scolded in India, but what can cement merchants do? Both rupees and rubles are jumping up and down, and unstable currencies are taboo for cross-border trade, especially the rupee, which has hit a new low continuously.
At present, in the non US dollar system, the RMB exchange rate is the most stable, even more stable than the euro, and cement manufacturers have a compelling reason to use RMB for settlement.
The credit problem has been solved, and the rest are technical problems. The so-called international systems such as swift are not great. There are no route obstacles at the technical level, but the factors of settlement currency recognition and self built system participation may restrict the development of international trade business.
Explain the principle of international collection and payment clearing, which is actually not complicated. It is divided into two parts:
The first part is fund settlement, which is the international settlement system established by various countries, such as chips system in the United States and CIPS system in China
The second part is the information transmission system, that is, the so-called swift.
International collection and payment clearing is: capital flow transfer + information flow transfer.
It is roughly as follows:
Therefore, the core problem is not the problem of capital flow, but the problem of information flow.
At present, swift is in a strong position, which makes it difficult to establish the same system to fight with swift. At present, swift has changed from a neutral system to a sanctions tool of the United States and Europe. Russia is not the first to be sanctioned, and Iran was also involved in the past, but Swift is not invincible.
Although there are some substitutes at present, such as ripo payment network, it is difficult to promote due to regulatory constraints. The more feasible is the blockchain network based on official digital currency.
With the support of the Hong Kong Innovation Center of the bank for International Settlements, the digital currency Institute of the people’s Bank of China, the Hong Kong Monetary Authority, the Central Bank of Thailand and the United Arab Emirates jointly launched the research project of the digital currency bridge of multilateral central banks, aiming to explore the use of distributed ledger technology to realize the round the clock synchronous settlement of central bank digital currencies for cross-border transactions
According to the research results, all participants will evaluate the feasibility of the application of the multilateral central bank digital currency bridge in cross-border fund allocation, international trade settlement and foreign exchange transactions. Through this information, we can see that a cross-border payment and settlement network led by central banks of many countries and based on the digital currency of central banks has taken shape. This network can be roughly regarded as an alliance chain composed of banks under the approval of central banks. Participating banks can use distributed ledger technology to complete decentralized cross-border transaction settlement of digital currency
More actively participate in the construction of the digital currency bridge of multilateral central banks, and strive to involve more central banks in the joint research of the payment network, so as to improve the cross-border payment capacity of the financial infrastructure, so as to solve the problems of low efficiency, high cost and low transparency in cross-border payment. Once the network is finally formed, cross-border payment and settlement can no longer be controlled by a single center like swift, and the security of cross-border transactions will also be effectively guaranteed.
No country will willingly hand over its financial security to other countries. After the frequent use of financial sanctions by the United States, all countries will realize that the security and convenience of their foreign exchange reserves are threatened, and international trade is threatened.
Create a system outside the US dollar and unite countries to build a system. The main reason why the internationalization of RMB did not go fast in the past was demand. In the past, there was little demand, but now the demand is coming. Strike while the iron is hot, and seize the time to become the largest currency in the non US financial system.