China: Strong Renminbi policy taking shape - Standard Chartered

China's leaders see a strong RMB as the core of the financially strong nation they aim to build. China will likely focus on productivity growth, maintain prudent macro policy to gain trust in RMB. The authorities are likely to become more proactive in widening the use of RMB internationally, Standard Chartered's economists report.

Promoting the RMB as a credible alternative

"China's leaders had pledged to speed up the construction of a financially strong nation at the Central Financial Work Conference (CFWC) in 2023. Early this year, President Xi elaborated on the key features of a financially strong nation, highlighting a strong Renminbi (RMB) as its core. Since then, the authorities have become more explicit about their ambition to make the RMB one of the world's leading currencies to reduce reliance on the USD amid the global search for alternative safe assets. We expect policies to be actively aligned to promote the RMB's global status, aiming to offer a viable back-up rather than challenge USD dominance in the international monetary system." 

"Policy makers are likely to prioritise productivity growth by facilitating innovation as they seek to lay the foundation for a strong currency. We also expect them to practice prudent macro policy making to support the RMB's purchasing power and improve its acceptance globally, reducing the likelihood of implementing ultra-loose monetary policy. The authorities are likely to become more proactive in building an ecosystem to broaden the use of RMB in international trade, investment and financing, and develop an RMB-based cross-border payments system."

"As with the 'strong dollar' policy, the adoption of supportive RMB policy does not mean policy makers intend to engineer RMB appreciation, in our view. However, policies supporting the RMB agenda could generally help keep its value buoyant."