Below is a very good video from the FT which outlines the growth of the Chinese currency – the Renminbi (RMB). It includes some excellent graphics including the value of the currency against the US$ from 2005 – 2015 (see graphic below)
- 1948 – RMB was put into circulation by the Communist party
- 1997 – RMB was pegged to the US$
- 2005 – Peg was removed
- 2009 – China allowed approved companies to settle trade payments with non-Chinese customers using the RMB
- 2015 – 20% of China foreign trade is settled in RMB compared to 3% in 2010
- 2015 – RMB the 5th most traded currency although it is a long way behind US$ and €
The Chinese authorities want to have the RMB included in the basket of currencies that make up the IMF’s special drawing rights. This would mean an official endorsement of the RMB as a reserve currency. However one of the conditions of the IMF of being a reserve currency is that it must be freely tradable. Although the Chinese government is reducing its interventionist approach it is not yet ready to give market forces complete free rein over its exchange rate.