17 February 2020

RMB fully convertible by 2017, HSBC says

HSBC Holdings Plc. (00005.HK) said the renminbi could be fully convertible in the next two to three years, ahead of market expectation.

“No one doubts that the renminbi will be fully convertible. It is just a question when,” chief executive Stuart Gulliver told a forum Thursday in Hong Kong.

He said HSBC expects the currency to be fully convertible by 2018 but the fast face of financial reform in China could speed up the process, enabling the Chinese unit to achieve the milestone by 2017.

China will play an increasingly prominent role in global finance, particularly as the renminbi becomes more international and the offshore market grows deeper and broader, he said.

“Cross-border capital flows are expected to double in the first three years of full convertibility”.

Meanwhile, Bank of England and the People’s Bank of China are expected to sign a memorandum of understanding on renminbi clearing in London on March 31, the British Treasury said Wednesday.

Gulliver said a recent decision to double the renminbi’s trading band will boost the two-way flow of the currency.

“Many central banks already hold renminbi although on a small scale. The Chinese currency will continue to grow in stature as a trade and investment currency and its appeal as a reserve currency will increase,” he said.

However, it is unlikely the renminbi will usurp the the US dollar in the short to medium term, he said.

It took almost two decades for the US dollar to match the British pound’s share of global reserves after the US became the world’s largest economy at the turn of the past century.

– Contact HKEJ at [email protected]