China capital controls
Renminbi in retreat as international payment currency
Swift data show drop of 30% last year as capital controls and dollar strength bite
6 HOURS AGOby: Tom Mitchell in Beijing
International use of the renminbi dropped sharply in 2016 as capital controls
and dollar strength reduced the attractiveness of China’s currency, according to
new payments data released on Thursday.
The Society for Worldwide Interbank Financial Telecommunication (Swift) said
the value of international renminbi payments fell 29.5 per cent compared with
2015.
The renminbi was only the sixth most used currency in 2016 despite its formal
recognition in October by the International Monetary Fund as a global reserve
currency (http://next.ft.com/content/2baa6fec-86d2-11e6-bcfc-debbef66f80e),
alongside the dollar, euro, yen and sterling.
The renminbi, which had ranked fifth in 2015, was overtaken by the Canadian
The Swift rankings are the latest sign that Beijing’s global ambitions for the
renminbi have been put on hold
(http://next.ft.com/content/e480fd92-bc6a-11e6-8b45-b8b81dd5d080) as the People’s Bank of China focuses instead on
stemming both the redback’s fall against the dollar and steady erosion of the
country’s foreign exchange reserves, which have declined 25 per cent to $3tn
since 2014.
“The PBoC’s short-term focus has shifted from internationalisation of the
renminbi to stabilise renminbi outflows and the exchange rate,” said Ming
Zhang at the Chinese Academy of Social Sciences. “I expect continued capital
controls and slow depreciation against the dollar in 2017.”
Over recent months the central bank has implemented a stricter vetting regime
for Chinese companies’ overseas acquisitions as well as individuals’ foreign
exchange purchases
(http://next.ft.com/content/02746f74-d182-11e6-9341-7393bb2e1b51). Dividend payments and other remittances by foreign investors
More recently, regulators have turned their attention to renminbi outflows,
which surged as companies and investors found it more difficult to obtain and
remit foreign currencies.
This month the PBoC ordered banks in Shanghai to balance renminbi outflows
(http://next.ft.com/content/c9f7d320-dee7-11e6-9d7c-be108f1c1dce) with
inflows. Banks in China’s financial capital had previously been allowed to remit
Rmb160 overseas on behalf of their clients for every Rmb100 that was brought
back into China.
International usage of the renminbi declined more rapidly in December, as
capital controls began to take effect. China’s currency accounted for just 1.7 per
cent of all transactions tracked by Swift that month, compared with 2.3 per cent
in December 2015.
The renminbi fell more than 6 per cent against the dollar last year and almost
broke through Rmb7 against the US currency before rebounding in recent
weeks.
Michael Moon, Swift’s Asia head of payments markets, also attributed the fall-
in international usage of the renminbi to slower economic growth in China.
Output increased 6.7 per cent last year, the lowest annual rate for a quarter of a
century.
However, Mr Moon predicted that use of the renminbi would rebound as more
offshore clearing centres for the renminbi are established. Chinese regulators
have also said that recently introduced capital controls are temporary
measures.
Additional reporting by Liu Xinning
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